July 02, 2013

Church Filing Requirements as a 501(c)(3)

Question:

Is a church required to apply for 501(c)(3) tax-exempt status and file an annual report with the IRS?

Answer:

Generally, churches are not required to file annual reports with the IRS or apply for tax-exempt status. Non-church tax exempt organizations must submit to often rigorous requirements that churches fortunately escape. These include Form 1023 to apply for recognition as a tax exempt organization and Form 990 to annually disclose financial and other information. 

The exception to the rule exempting churches from annual filing relates to at least two instances when Form 990 may be filed:
  • Unrelated business income tax (UBIT): according to IRS Pub. 598, a church which earns income from a "trade or business not substantially related to its exempt purpose" (excluding rental income from real property) will be required to report that income on Form 990-T.
  • Small Business Healthcare Tax Credit: a church which qualifies for and claims this credit will be required to file Form 990-T and Form 8941. 
While these rules apply to IRS filing at the federal level, there may be state and local government filings that congregations must prepare. Churches that choose to incorporate should be especially careful to understand what filings will be required at the state level.

Additional information on this topic is available through the link below.

Church Annual Filing Requirements

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