January 04, 2015

IRS Determination Letter for Church

Question:

Does a church need an IRS Determination Letter?

Answer:

Generally, a church is already considered tax exempt and is eligible to receive tax-deductible contributions; therefore, a determination letter is not needed. But sometimes a church does need an IRS Determination Letter. To ascertain if a church needs a letter, the church should consult an attorney or CPA. 

Requesting a 501(c)(3) IRS Determination Letter can be a time-intensive and costly process, if a letter is needed. Form 1023 needs to be filed to request the determination letter. The IRS's filing cost for Form 1023-EZ is $400. If a full Form 1023 is needed, the filing costs are higher. We encourage any nonprofit to work with a law firm or CPA firm when filing the Form 1023. 

Here is an excerpt from the Form 1023 Instructions:
Form 1023 not necessary. The following types of organizations may be considered tax exempt under section 501(c)(3) even if they do not file Form 1023. 
  • Churches, including synagogues, temples, and mosques.
  • Integrated auxiliaries of churches and conventions or associations of churches.
  • Any organization that has gross receipts in each taxable year of normally not more than $5,000. 
Even though the above organizations are not required to file Form 1023 to be tax exempt, these organizations may choose to file Form 1023 in order to receive a determination letter that recognizes their section 501(c)(3) status and specifies whether contributions to them are tax deductible.

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