Friday, January 14, 2011


Can You Define “Church” – Neither can the IRS. A church has several tax advantages over other types of publicly supported Section 501(c)(3) organizations. It is automatically tax-exempt without applying for exempt status on Form 1023 and is also exempt from filing any annual information return. In addition, a church can be audited by the IRS only in limited circumstance and only in accordance with specific procedures (IRC Sec. 7611). Finally, a church has 15 years, instead of 10 years for other organizations, to use debt-financed real property for expansion purposes before income is taxable under IRC Sec. 514.

Neither the Internal Revenue Code nor the regulations formally define church. Therefore, the IRS developed and uses a list of 14 criteria to determine whether a religious organization is a church. Those criteria are as follows:

1. Distinct legal existence
2. Recognized creed and form of worship
3. Definite and distinct ecclesiastical government
4. Formal Code of doctrine and discipline
5. Distinct religious history
6. Membership not associated with any other church or denomination
7. Organization of ordained ministers
8. Ordained ministers selected after completing prescribed course of study
9. Literature of its own
10. Established places of worship
11. Regular congregations
12. Regular religious services
13. Sunday schools for the religious instruction of the youth
14. Schools for the preparation of its members

The IRS generally uses a combination of these characteristics, together with other facts and circumstances, to determine whether an organization is considered a church for federal tax purposes. Moreover, the 14 criteria are not of equal importance and all of them need not be met for an organization to be deemed a church. According to the IRS there is not a bright-line test for determining whether a religious organization is a church or simply a religious organization. Rather the determination is made based upon the facts and circumstances in each case. So you might say that trying to define church for tax purposes is similar to trying to define “pass interference.” It’s difficult to describe but the IRS knows it when they see it.

For exempt organization purposes, the term church is applied generically as a place of worship that includes, for example, mosques and synagogues. One thing is clear, an organization’s religious beliefs have no bearing on whether it is a church – any inquiry into those beliefs could run afoul of First Amendment religious protections.

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