A “religious” purpose is one of the seven exempt purposes specified in Section 501(c)(3) of the Internal Revenue Code (the “Code”). However, unlike with the terms “charitable,” “educational,” and “scientific,” the term “religious” is not defined in the Treasury Regulations, in large part due to constitutional issues. IRS guidance explains “[u]nder the First Amendment, the Service cannot consider the content or sources of a doctrine alleged to constitute a particular religion, and cannot evaluate the content of a doctrine an organization claims is religious. This does not apply to rites or practices that violate federal, state or local law.”
501(c)(3) religious organizations include churches, conventions and associations of churches, integrated auxiliaries of churches, nondenominational ministries, interdenominational and ecumenical organizations, and other entities whose principal purpose is the study or advancement of religion. The IRS has recognized 501(c)(3) exemption for religious organizations conducting primarily the following activities:
- Publishing a newspaper primarily devoted to news, articles, and editorials relating to church and religious matters; and
Conducting weekend religious retreats, open to individuals of diverse Christian denominations, at a rural lakeshore site at which the participants may enjoy the recreational facilities in their limited amount of free time and that charges no fees.
Since 501(c)(3) of the Code requires that organizations must be organized and operated exclusively for one or more exempt purposes, religious organizations may be disqualified if they promote a substantial nonexempt purpose. For example, religious organizations conducting primarily the following activities have been held not to be exempt under 501(c)(3):
- Publishing literature having little connection to the religious beliefs of the organization and for profit motives; and
Operating a religious retreat facility where religious activities are not required and only incidental to recreational and social activities.
Because many activities may serve more than one purpose, an organization that is religious may also qualify as exempt under 501(c)(3) as an organization organized and operated primarily for charitable and/or educational purposes. (see: Starting a Nonprofit: What is “Charitable” under 501(c)(3)? and Starting a Nonprofit: What is “educational” under 501(c)(3)?).
Unlike other religious organizations, churches (including synagogues, temples, and mosques) that meet 501(c)(3) requirements are automatically considered tax-exempt without having to file Form 1023 for tax exemption. The IRS uses a variety of characteristics, facts, and circumstances to determine whether an organization is considered a “church” for federal tax purposes. These include: whether the organization has a distinct legal existence, recognized creed and form of worship, definite and distinct ecclesiastical government, distinct religious history, formal code of doctrine and discipline, membership not associated with any other church or denomination, established place of worship, regular congregations and religious services, organization of ordained ministers, schools for the preparation of its ministers, ordained ministers selected after completing prescribed courses of study, literature of its own, and Sunday schools for the religious instruction of the young. Additionally, court precedents have emphasized the associational test, which defines a church as an organization whose members meet regularly for organized worship. See Found. of Human Understanding v. United States, 614 F.3d 1383, 1387-88 (Fed. Cir. 2010). Although churches claiming exemption under 501(c)(3) are generally subject to all of the requirements under 501(c)(3) (e.g., no private inurement or private benefit, no substantial lobbying, no electioneering), they are also subject to special tax rules and are not required to file Form 990 returns.
IRS Tax Information for Churches and Religious Organizations
Religious Organization Loses Claim for “Church” Status, Don Kramer’s Nonprofit Issues