IRS Exemptions

Where do Exemptions fit then?

An organization runs on instructions called "resolutions." It is just like a computer, you have to give it instructions. No one owns a religious organization - it owns itself. It has its own Employer's Identification Number (EIN), which separates it from any one individual. That number is used for all bank accounts and for all communications with the government. The EIN can be obtained by filing Form SS4 and that form can be requested from the IRS by telephone or by mail.

Sincerely religiously motivated individuals have every reason to anticipate the assistance of the IRS regarding which forms to file and what information is needed to be fully disclosed.

Belief-based human services programs have a much higher success rate than commercial or governmental programs. Because of the value to society that religious organizations and belief-based programs provide, the tax code has been legislated to promote and support such programs.

As an individual or group of individuals being sincerely religiously motivated and operating within an organization, it is to the benefit of society that such organizations receive favorable tax treatment. Making application for that tax-exempt status is to be guarded and prized.

Deciding upon whether the new organization is a ministry or church is difficult, and you should read and judge if your organization meets, or is attempting to meet, the 14 Points or as many of those points as a new organization can meet, and is being formed for the intent of being a church as commonly understood by that term.

If the organization does not meet many of the 14 Points, the new organization may still be eligible for exempt status, but it must apply for that tax-exempt status.

There is a user fee for making application for exempt status to the IRS of approximately $500. There is a provision for hardship for new organizations, reducing the fee to less than $200 if it is requested in a timely manner. These amounts may have changed, so it is important to request the appropriate forms and read them carefully. Both Forms 1023 and 1024 can be requested from the IRS, and the organizers of the new religious organization can judge what information needs to be disclosed and to disclose it fully. The current Church and Non-Profit Tax and Financial Guide will have the current rules and restrictions that must be followed, it is available through the ULC catalog. 

If the organization is classified as a religious organization it will usually be granted a two year exempt status so that it may operate. In two years the IRS can review how it operates and then make a final decision by issuing a Determination Letter indicating the classification and exempt status of the organization as long as it does not substantially change its manner of operation.

An organization that receives the classification of church may one day be reclassified as a religious organization, and conversely a religious organization may be reclassified as a church depending upon the operation of the organization.