We do not want 501c3 status!

by Freda
(Detroit)

My religious group is starting a church from a member's home based strictly off of biblical principles and do not want 501c3 status.

We believe that the rules that churches have to operate under to obtain 501c3 status goes against biblical principles, therefore we would rather pay taxes on our donations.

We give a significant portion of our funds to the homeless by giving donations to a homeless shelter and pass out food and blankets to the homeless people in the streets of our city on a regular basis.

The rest of our funds are utilized to pay singers/musicians that visit and to provide food to everyone (members and visitors) during our weekly gatherings.

My question is what do we file in order to pay taxes on our donations that still allows our members to claim their donations on their taxes?

I've been doing research online and have found inconsistent answers. We are small and only have four tithe paying members/donors which total up to less than 20,000/year.

Comments for We do not want 501c3 status!

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Sep 23, 2017

We do not want 501c3 status!
by: Anonymous - MN

I suspect that the only way donors will be able to deduct their giving from their taxes is giving to a Non-profit 501c3 organization.

Sep 27, 2017

For Profit or Non Profit You Must Pick one
by: Marcia

A basic rule to remember:
501C3 is a SECTION of the tax code that governs ALL nonprofits whether you have to file for recognition of nonprofit status or not.

By the very definition, if you are a church then you have 501c3 status by default.

A church DOES NOT HAVE TO INCORPORATE AND SUBMIT AN APPLICATION FOR TAX EXEMPT STATUS, BUT MUST STILL FOLLOW ALL THE RULES!

Thus if you are a for profit TAXABLE ENTITY, then NO DONATIONS are tax deductable.

There is no such thing as a taxable entity that takes tax deductable donations.

You will have to pick a status and operate accordingly.

Incorporate or
be an UNincorporated Association. Look up the Uniform Unincorporated Association Act for details.

It is possible to operate as a church without forming a corporation and submitting that corporation to the IRS for tax exempt status. BUT YOU STILL HAVE TO FOLLOW THOSE 501c3 RULES for things like:

substantiation
compensation
pastor's salary
contractor vs employees
donations to other nonprofits
mileage, housing allowances, etc

Hope this helps you decide or at least look a bit further into the legal ramifications of the actions you take.

Oct 01, 2017

Excellent Replies!
by: Vickey

Thank you Marcia and Anonymous - MN! Excellent replies!

Freda, please consider getting the advise of a knowledgable tax professional ...BEFORE accepting any donations and especially BEFORE you issue any charitable contribution receipts.

As our responding readers pointed out...you cannot be a "for-profit" and "nonprofit" organization.

And as Marcia pointed out, 501(c)(3)is the portion of the IRS tax code that gives certain entities the right to receive tax deductible contributions.

Read more on this page: https://www.freechurchaccounting.com/tax-exempt-status.html

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Church Accounting FAQs.

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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