What’s the Difference Between a Church and a Ministry for the IRS?

By February 21, 2020 Church
What’s the Difference Between a Church and a Ministry for the IRS?

It may surprise many to learn that, where the Internal Revenue Service is concerned, there is a difference between how it classifies churches and ministries. It may be confusing on the surface but makes sense once you consider the differences in these two types of organizations.

It is vital that the proper legal form be chosen for a church or ministry. There are legal differences between churches and ministries that include the various duties and responsibilities required of the organization—such as IRS filing requirements, how the corporate identity is formed according to Arizona law, funding from donors, and even how to file for state exemptions.

In large part it depends on what the goals of the organization will be. In general not every ministry will qualify as a church and attempting to qualify as a church may jeopardize the ministry by classifying it as something it is not. Some ministries come in the form of leadership trainings or Bible institutes; some provide mentorship; some come in the form of conferences or retreats; and so on. Many are outwardly directed, having no set congregation, nor a regular meeting-time or space. Classifying these ministries as churches is like trying to fit a square peg in a round hole.

Churches, on the other hand, are generally defined as having both congregations and membership—as well as regular meetings in an established location.  In fact, the IRS looks at 18 different criteria to determine when an organization is a church.

While section 501(c)(3) of the Internal Revenue Code qualifies churches and other ministries as tax-exempt organizations, providing them with the same tax benefits afforded to other nonprofit organizations, there are certain differences between the duties imposed on churches and ministries under these provisions.

For one thing, when a religious nonprofit (including a ministry) is not a church, it must file for tax-exempt status with the IRS within 27 months of incorporation. Churches are not required to file in order to receive this benefit.

Religious nonprofits that are not churches are also required to annually file a Form 990. Again, churches are not required to make this filing.

When a church, ministry, or other nonprofit organization in Arizona needs advice about employee expenditures, Provident Law’s church and nonprofit attorneys are here to help. We recognize how essential these organizations are to society, and we provide broad transactional and general counsel services to keep them running smoothly. Contact us to learn more.