According to the IRS, there are certain characteristics generally attributed to churches that have been developed by the IRS and court decisions. These include:
- Distinct legal existence
- Recognized creed and form of worship
- Definite and distinct ecclesiastical government
- Formal code of doctrine and discipline
- Distinct religious history
- Membership not associated with any other church or denomination
- Organization of ordained ministers
- Ordained ministers selected after completing prescribed courses of study
- Literature of its own
- Established places of worship
- Regular congregations
- Regular religious services
- Sunday schools for the religious instruction of the young
- 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.
Churches may also receive different treatment under federal and state laws in several areas, including:
Federal tax-exempt status. Churches are automatically recognized as exempt from federal income tax and do not need to file for an advanced determination of exemption from the IRS. However, many churches choose to file in order to receive a determination letter from the IRS that may be required by states for tax exemptions or to reassure donors that their donations are tax-deductible.
Annual IRS reporting. Unlike other 501(c)(3) tax-exempt organizations, churches are not required to file annual Form 990s to report their finances and activities.
Unemployment taxes. Churches are not required to pay federal and state unemployment taxes.
Religious liberty protections. Churches are typically subject to the provisions of the Affordable Care Act (ACA); however, those that object to covering contraceptive services on religious grounds may be exempt from the ACA’s mandate that covers these services. In addition, churches may be eligible for employment-related religious exemptions as well as exemptions from property and sales tax.
Provident’s nonprofit attorneys can help churches and religious organizations with risk management. We stand ready to counsel and serve churches, charities, and foundations, as well as private schools, colleges, universities, and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.