Church and 501(c)(3)

Discussion in 'Tax' started by Dick Adams, May 5, 2004.

  1. Dick Adams

    Dick Adams Guest

    The entity involved is a store-front church in an
    impoverished neighborhood. Its expenses exceed its revenues
    and are covered by contributions from its Board of Directors.
    It does not qualify for a group exemption.

    Per the instructions for the 1023 package, a church may be
    considered as tax exempt under 501(c)(3) without filing a
    1023 package. However, most funding sources require a
    "Letter of Determination" from grant applicants. SO:

    1) Is a church exempt from the filing fees on Form 8718?

    2) Since I suspect the answer to (1) is "You're joking", has
    anyone circumvented this for external funding purposes by
    writing an equivalent "Letter of Determination"?

    3) The church has been in existence for six years and has
    not been incorporated. They had less than $10,000 in
    revenues in each of the last four years. May they use
    that four year window or must they use the projected
    four year window after incorporation.

    Dick Adams, May 5, 2004
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  2. Unfortunately Dick, you are correct in answering your own
    question. To further compound it many corporate gift
    matching and other programs are administered by individuals
    with no authority and no ability to read and understand.
    The code, and the regs, and the instructions to the 1023
    quite clearly explain that a Church is by definition exempt.
    Donations to churches are by definition deductible and
    Churches are not required to seek formal recognition.

    Your case is not unusual. You need to make the decision as
    to whether or not such donations will ever be significant
    enough to justify the user fee and more importantly the time
    and effort of a volunteer or fee of a paid professional to
    prepare and pursue the 1023.

    Good luck.
    Andrew Goldstein, May 8, 2004
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  3. Not as far as I know or have been able to determine by
    looking at the Code.
    I suspect that when they say "Letter of Determination" they
    mean the one issued by the IRS. It might be a lot easier,
    faster and cheaper to get one issued by the state - it
    certainly is in California.
    If done properly, I think you can do it either way. What
    they're primarily looking for is to be sure that money comes
    from proper places in the proper proportions, and that it is
    spent for proper purposes. If you apply as an ongoing
    organization, the IRS won't come out, if at all, for several
    years to check the books to make sure those numbers are all
    within the legal guidelines.

    But if you apply as a new organization, they will come out
    sooner to check the books.

    Stuart O. Bronstein, May 9, 2004
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