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Tuesday, July 17, 2007


Both churches and qualified religious organizations are exempt from income tax under Code Section 501(c)(3). However, there are advantages to being a "church" as compared to a "religious organization." These include reduced reporting requirements, enhanced charitable deductions for contributors, and the ability to obtain Section 501(c)(3) status without filing a Form 1023 with the IRS. Therefore, many organizations that would qualify as exempt religious organizations like to go the extra mile if possible and be qualified as a "church." In deciding whether an organization is a church, the IRS examines 14 criteria – the more that are present, the more likely a "church" exists. These criteria are:

1) a distinct legal existence;

2) a recognized creed and form of worship;

3) a definite and distinct ecclesiastical government;

4) a formal code of doctrine and discipline;

5) a distinct religious history;

6) a membership not associated with any other church or denomination;

7) an organization of ordained ministers;

8) ordained ministers selected after completing prescribed studies;

9) a literature of its own;

10) established places of worship;

11) regular congregations;

12) regular religious services;

13) Sunday schools for religious instruction of the young; and

14) schools for the preparation of its ministers.

What happens if an organization is involved in creating and establishing churches – is that enough to qualify that organization as a church? In a recent private letter ruling, despite having many of the above factors present, the organization was denied status as a church. The principal reasons for the denial were that the organization did not have a regular, established congregation of members of its own who meet together, as a church, for regular worship services and instruction of the young, and further did not ordain ministers, operate Sunday schools for religious instruction of the young, and did not have a code of discipline, a distinct ecclesiastical government, an established place of worship, or a membership not associated with other local churches or denominations.

While the churches established by the organization had these criteria, these churches were deemed to be independent of the founding organization, and thus those criteria could not be claimed by the founding organization itself. Perhaps if the founded churches were affiliated and/or controlled by the founding organization, a favorable finding as a church might have been issued.

PLR 200727021

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