Do Churches Need to Be a 501c3?

The short answer is no; however, but let me explain.  

Per Internal Revenue Service Publication 1828 “Tax Guide for Churches & Religious Organizations” on page 2, Churches are granted automatic exemption under IRC Section 501(c)(3).  

Here is an excerpt from Publication 1828, page 2, “Churches that meet the requirements of IRC Section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS”.

Some Churches decide to go through the process of obtaining an official tax exempt determination from the Internal Revenue Service even though it is not required.  We have served several Churches who went through this process and for a wide variety of reasons.  

Some example reasons include; providing donors certainty that the Church is in fact tax exempt and that donations are tax deductible, grantors might require a 501(c)(3) determination letter before disbursing funds, uncertainty about what the IRS requires of Churches, etc.

What happens if a Church decides to submit Form 1023 to the IRS for an official tax exempt determination letter and is approved?

The IRS will mail a determination letter that indicates that your Church was found to be exempt from federal income taxes under Internal Revenue Code (IRC) 501(c)(3).  Since Churches are exempt from annual reporting requires under IRC 508(c)(1)(a), the determination letter will indicate that no annual Form 990/990-EZ/990-N is required.

Reference: Internal Revenue Service Publication 1828 “Tax Guide for Churches & Religious Organizations”