First if you go to a church that is NOT 501 3c tax exempt I would love some contact information to talk to someone in charge of making that decision. If your a pastor of a church that is NOT 501 c3 tax exempt I would love to talk to you. Leave a comment on this post with contact info. I will not publish any comments with contact information, they will be strictly for my eyes only.
My story starts about six years ago. I had a thought about most churches. I began to wonder how most churches were able to keep their doors opened. I mean most churches are dependent on tithes and offers, but someone has to pay the utilities and payroll. How can churches afford to balance their books? It seems there are a hundred black hole ministries that need started for every dollar the church brings in.
I should state now, I don’t work for a church, and in fact I don’t go to church anymore, at least not in any kind of organized manner. I did spend about 12 years in which I saw and heard many interesting things though. This is not a story about one church, it’s an overall view of years of observation and piecing together stories and events, researching, digging, and of course questioning.
As always I realize some people will not like my approach to this subject. I don’t censorship my thoughts, I keep no question off limits, and for some it’s either threatening or irresponsible. My goal is not to cheapen the gospel, or discredit the thousands of churches that do productive ministries and actually change peoples lives.
My questions involve the ideas of just how does a church become 501 c3 tax exempt? It never bothered me for years and one day it was just an itch I had to deal with. My grandpa use to tell me don’t ever take money from anyone because once you owe someone money they own you. In a very simple play on words, debt makes you indebted to the service of another. But it doesn’t have to be just taking money or a loan, it could also be taking a favor, or in the tax exempt case, excepting a favor that saves you money.
This of course brought up all kinds of questions like who started 501’s, what do you have to do to qualify for a 501? Why would the government willing want to help churches? and what’s the cost that churches pay in order to maintain their tax exempt status? I found that these were mainly questions churches didn’t want to discuss.
so I started at the IRS website
From the IRS website (1) it seems quite simple To apply for recognition by the IRS of exempt status under section 501(c)(3) of the Code, use Form 1023 Application for recognition of Exemption (2). But then I see this line
“See Application Process for a step-by-step review of what an organization needs to know and to do in order to apply for recognition by the IRS of tax-exempt status”(3).
That page states: First Things First. Does The Organization Have an Appropriate Legal Form? For the Internal Revenue Service (the IRS) to recognize an organization’s exemption, the organization must be organized as a trust, a corporation, or an association. Is the organization a trust, corporation, or association?
The IRS defines trust as a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another. (4)
The IRS defines a corporation as formed under state law by the filing of articles of incorporation with the state. The state must generally date-stamp the articles before they are effective. You may wish to consult the law of the state in which the organization is incorporated. (5)
The IRS defines an association as a group of persons banded together for a specific purpose.
To qualify under section 501(a) of the Code, the association must have a written document, such as articles of association, showing its creation. At least two persons must sign the document, which must be dated.(6) If your unclear if your qualify as any of those, the IRS encourages you to download publication 557 (7) “Tax-Exempt Status for your Organization.
Publication 557
This is a very interesting form. It’s goal is to help you walk through the required steps to becoming tax exempt. The first requirement is that you MUST have an Employer identification number (EIN), you can not be tax exempt with out it, regardless of whether there are any employees or not.
The EIN webpage states: An Employer Identification Number (8) (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity.
So the first thing the IRS wants is for you to volunteer to get a Taxable ID number, So that you are taxable.
Secondly, from page 3 of publication 557, you must submit your articles of incorporation. Articles of incorporation are the primary rules governing the management of a corporation in the United States and are filed with a state or other regulatory agency.
So first they want you to admit your making money and need to pay taxes. Then to willingly submit the “corporations” rules under the laws of the state.
One line that catches me eye is on page 21 of the 557 form. Under the heading “Organizations Not Required to File Form 1023.” Which is the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code” It states:
“some organizations are not required to file form 1023.”

- Publication 557, page 21
These includes: (number one answer is) churches!
I’m not an expert or a lawyer, but it seems to be the IRS is contradicting it’s self here. If you trying to start a church and you want to be tax exempt you need to file form 1023, the only organizations that don’t have to file form 1023 are churches. I don’t know if this is a loop hole or a symantical game the IRS is playing.
Yet again this same language is in publication 4220 on page 4. a detailed list of what types of Organizations could be 501 (c)(3). Under the Religious heading is states:
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The term church includes synagogues, temples, mosques, and similar types of Organizations. Although the IRC excluded these Organizations from the requirement to file an application for exemption, many churches voluntarily file applications for exemption. Such recognition by the IRS assures church leaders, members and contributors that the church is tax exempt under section 501 (c)(3) of the IRC and qualifiers for related tax benefits.
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Publication 4220, page 4

Publication 4220, page 4, close up
So Why do Churches become 501(c)(3)
I’m starting to wonder why churches apply for tax exemption if they already are? I think the biggest reason is misinformation, we have been lead to believe you have to be 501 (c)(3) to be exempt. That you have to have special permission from the IRS. Now the IRS would have you believe it’s because churches want the piece of mind, and other tax benefits most notably that tithes would be tax deductible.
But according to publication 526, page 2, under the heading “Organizations that Qualify To Receive Deductible Contributions” it says:
You can deduct your contributions only if you make them to a qualified organization. To become a qualified organization, most organizations other than churches and governments, as described below must apply to the IRS.
once again, there is the impression that churches do NOT need to be 501(c)(3) to be tax exempt or for members to make tax deductible contributions. More evidence is in section 508 “Special rules with respect to section 501(c)(3) organizations”. Under subsection (c) it states the organization that do not have to apply for special exemptions. Again in the United State Code, Title 26, section 170, subsection A. It states that any contribution to a church is tax deductible as long as it’s less then 50% of the taxpayers income for the year.

- section 508, subsection (c)
From the IRS
Steve Nestor is a former IRS Senior Revenue Officer that wrote the forward for a book tittled “In Caesar’s Grip”. He stated
“ I am not the only IRS employee who’s wondered why churches go to the government and seek permission to be exempted from a tax they didn’t owe to begin with, and to seek a tax deductible status that they’ve always had anyway. Many of us have marveled at how church leaders want to be regulated and controlled by an agency of government that most Americans have prayed would just get out of their lives. Churches are in an amazingly unique position, but they don’t seem to know or appreciate the implications of what it would mean to be free of government control.”
In the UNITED STATES OF AMERICA, Inc. v. Janet Mavis: Marcusse, Sui Juris, on page 19 is a reference to Melvin Blough an IRS agent testified in federal court in 2002 that once a church obtains the status of 501(c)(3) under the IRC they are trapped. The only way to be removed from a 501(c)(3) status is if the IRS chooses to remove the exemption. So if you dissolve the corporation and continue on as ABC church, an unincorporated church, you’re still trapped in their web and under their control.” He further testified that a church is automatically exempt under federal law without a 501(c)(3) designation. He also stated under oath that churches request the status just to get the governments stamp of approval
There is of course an interesting argument under the first amendment. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”
I read a case where a 501(c)(3) church was being investigated by the IRS for political speech during the recent election campaigns last summer. The churches defense was that under the first amendment the government could not censor their free speech. But I disagree.
I am a big first amendment supporter, even to those groups with whom I totally disagree with. But once a church becomes a 501(c)(3) they willingly volunteer their first amendments rights in exchange for the IRS’s stamp of approval on their tax exempt status. In the contract that churches sign for the IRS’s stamp of approval it clearly states. Under the Internal Revenue Code, all section 501(c)(3)
organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. (9)
And because you have to be either a corporation, a limited liability company, or an unincorporated association to be 501(c)(3), that means you fall under the sovereignty of the state. See i1023 page 7 to clarify the difference (A corporation is organized under a federal or state stature. An LLC is treated as a corporation, an unincorporated association is formed under state law.)
What does the IRS get?
But if the IRS is allowing a church to not pay taxes then what’s in it for them. Why waste their time with paper work to make an already tax exempt organization, tax exempt? That’s when I noticed the “User Fee”. Form 8718 is to determine how much your user fee is, based on exactly what kind of exemption you will have. the three choice are $300, $750, and $900. So in order to not pay taxes you must first pay the IRS? Imagine how many organizations are tax exempt, that’s a nice little amount of change.

i1023, page 3, User Fee
A quick search on Foundation Center (10) shows an estimated 1. 5 million 501(c)(3) organizations. If you take the average of the 3 user fees which is roughly $650 (rounded down for easy math) you get 975,000,000. Nearly a billion dollars from organizations to not pay taxes.
With out a doubt there is a lot of information and forms and research that go along with becoming 501(c)(3). I’ve read over 75 pages on blogs and websites, the IRS website that has dozens and dozens of sub pages, plus the dozen IRS forms like f1023, i1023, f8718, p526, p557, p1635, p4220, p4221, and the United States code 26.
A little history
Yet I find it odd that most churches line up with their hand out to be approved. One of the motivating factors in people coming to the new world (America) was to break free from the power of state controlled religion. People were looking for religious freedom, and yet a couple hundred years later we are asking the government to approve our churches, it’s nonsense. In fact the reason behind the Christian persecution under the Roman empire had much more to do with taxes then religion.
By 6 AD all persons were required to incorporate. Caesar wanted all people, business, and churches to be taxable. Yet the Christians refused, siting that only God was the head of the church, and to incorporate under Caesar was to give away their natural sovereignty. The myth was they were persecuted for who they worshiped, but Rome had hundreds of deities. The empire wasn’t concerned with who you worshiped as long as you were licensed under the state, meaning you paid taxes. Christians were concerned to be in civil disobedience, because of their refusal to incorporate.
The Merger of Church and State
The real organic Jesus following church has always been a threat to the state. Yet we live in a world with the signing of George Bushes Executive Order #13397 that takes a step towards merging the two back together. Executive Order #13397 is the “Responsibilities of the Department of Homeland Security with Respect to Faith-Based and Community Initiatives”.
Remember this, Christians were praising Bush for giving government funds to religious organization. Yet they never saw the strings attached. Under the Executive Order section 1 is the Establishment of a Center for Faith-Based and Community Initiatives at the Department of Homeland Security. And under Homeland Security that responsibility falls to FEMA.
Under Section 3, subsection (b) it says,
coordinate a comprehensive departmental effort to incorporate faith-based and other community organizations in Department programs and initiatives to the greatest extent possible;
That sounds like to me, “lets give churches so much federal money that we blur the line between church and state.”
Section 3, subsection (d) says,
propose the development of innovative pilot and demonstration programs to increase the participation of faith-based and other community organizations in Federal as well as State and local initiatives;
Now what does funding a religious organization have to do with national security? or Emergency management? It’s simple, they want the churches on the payroll, and involved in government sponsored programs as much as possible. This explains why FEMA is training pastors for “Crisis Intervention” in the aftermath of a natural or man-made disaster. Like they used in Katrina. (11) There are even churches they will refuse to tell members of their congregation if any of the pastors on staff are also being paid by FEMA. (12)
With a little bit of looking you can find hundreds of examples of this.
In the event of a disaster or community crisis, clergy can play a vital role in responding to the spiritual and emotional needs of disaster’s human consequences. In light of this possibility IDTF and The University of Southern Mississippi have partnered to provide training for MS Gulf Coast clergy to equip and train them to deal with those affected by disaster. The United Jewish Communities and The Federations for North America has helped make this possible through a grant that will cover the majority of the cost for this training.
The instructor for this program is a certified instructor for FEMA, and no doubt where the grant came from. Which only churches that are 501(c)(3) approved by the IRS can qualify for those special grants. I know what your thinking, I’m taking it to far and reading to much into it. After all crisis preparedness is a good thing. Maybe, but my fear is that if churches and pastors don’t pay attention they will find themselves one day preaching a subsidized gospel, courtesy of the government.
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footnotes
1 http://www.irs.gov/charities/article/0,,id=96109,00.html
2 http://www.irs.gov/pub/irs-pdf/f1023.pdf
3 http://www.irs.gov/charities/article/0,,id=96210,00.html
4 http://www.irs.gov/charities/article/0,,id=96116,00.html
5 http://www.irs.gov/charities/article/0,,id=96118,00.html
6 http://www.irs.gov/charities/article/0,,id=96120,00.html
7 http://www.irs.gov/pub/irs-pdf/p557.pdf
8 http://www.irs.gov/businesses/small/article/0,,id=98350,00.html
9 http://www.irs.gov/charities/charitable/article/0,,id=163395,00.html
10 http://foundationcenter.org/getstarted/faqs/html/howmany.html
11 http://www.ksla.com/Global/story.asp?S=6937987
12 http://www.prisonplanet.com/church-organization-refuses-to-divulge-if-pastors-are-on-fema-payroll.html