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Do Religious Organizations Need to Apply for Tax Exempt Status?

One might logically assume that the Religion Clauses provide the underlying basis for why churches and religious organizations are tax-exempt. However, churches in this great nation enjoyed tax exemptions even before the First Amendment was adopted.[i]

Many have challenged congressional enactments that specifically exempted church property from taxation as being unconstitutional. But as Chief Justice Burger stated, the legislative purpose of such exemptions is neither the advancement nor the inhibition of religion; it is neither sponsorship nor hostility.[ii] Such exemptions tend to complement and reinforce the desired separation between church and state, he added.[iii]

Furthermore, under the Michigan Constitution, any property owned and occupied by non-profit churches and used exclusively for religious purposes are exempt from real and personal property taxes.[iv]

The Long History of Tax Exemptions Invites A Critical Question:

Are churches and religious organizations required to seek recognition under section 501(c)(3) of the Internal Revenue Code to be exempt from federal income tax?

The answer is simply No. In fact, churches and religious organizations that meet the requirements of section 501(c)(3) are automatically considered tax exempt.[v]

Then Why Should Your Organization Seek Recognition?

It is important to note the related tax benefits of obtaining recognition, from the Internal Revenue Service, as being a 501(c)(3) tax-exempt organization. Being recognized as tax exempt assures contributors, members, and leaders of your organization, that their contributions are tax-deductible.[vi]

Even though many members of society do not expect a return on their contribution, everyone enjoys a deduction on their tax return.

Is Your Organization Qualified?

To qualify, a church or religious organization must be (1) organized, and (2) operating exclusively for religious purposes.[vii] The second requirement does not prevent the same organization from engaging in activities that, among other things, accomplish educational, scientific, or other charitable purposes.[viii]

Nevertheless, if “more than an insubstantial part” of the activities does not further an exempt purpose, the organization will not be regarded as operating exclusively within the meaning of section 501(c)(3).[ix]

What About Organized?

The church or religious organization must be organized as a trust, a corporation, or an association under the law of the state to allow the IRS to recognize an organization’s exemption.[x]

If the organization is in Michigan for example, Chapter 450 of the Michigan Compiled Laws provides information needed for filing articles of incorporation.

Any Other Requirements or Limitations?

Absolutely, many of which pertain to the organization’s purposes and activities. For instance, the organization must not provide a substantial benefit to private interests or attempt to influence legislation. Nor could its net earnings inure to any private shareholder or individual.[xi]

Is it a Church or Religious Organization?

Yes, the difference between the two could be critical. For example, there are special limitations on how and when the IRS may conduct civil tax inquiries and examinations on churches.[xii] Additionally, unlike other exempt organizations, churches and church-affiliated organizations are not required to file annual returns for their income provided they are within certain thresholds.[xiii]

Should you have questions about any of the issues addressed in this blog, contact the attorneys at Dalton & Tomich, PLC.


[i] Comm. For Pub. Ed. and Relig. Liberty v. Nyquist, 413 U.S. 756, 792 (1973).

[ii] Walz v. Tax Commn. of City of New York, 397 U.S. 664, 672 (1970)

[iii] Id. at 676.

[iv] Mich. Const. Art. 9, § 4.

[v] Tax Guide For Churches And Religious Organizations, Publication 1828 (Rev. 8-2015).

[vi] Id.

[vii] https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations

[viii] https://www.irs.gov/charities-non-profits/charitable-organizations/operational-test-internal-revenue-code-section-501c3

[ix] Id.

[x] https://www.irs.gov/charities-non-profits/application-process

[xi] https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations

[xii] https://www.irs.gov/charities-non-profits/churches-religious-organizations/special-rules-limiting-irs-authority-to-audit-a-church

[xiii] https://www.irs.gov/charities-non-profits/exempt-organizations-required-filings


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