Tax Exempt Thesis

Thesis

A church is EXCEPTED from taxation and IS qualified to receive tax deductible gifts without State corporation status and without having filed the required Form 1023 that seeks tax-exempt status that the church automatically possesses because it is a church.

Note: Please note the word “excepted.” This is not a mistake. See the definition of “excepted” below. The excepted church (non-501(c)(3)) is under the control of Jesus Christ. The “exempted” church is under the control of the government. Take your choice.

Misperception

So, you too have believed that churches are required to file for corporation status with the State in which they reside to eligible to file with the IRS for tax exempt status and to be able to receive tax-deductible contributions from their contributors. You, too, have believed in error. What follows is documentation taken directly from the IRS Code and Publications. You read the documentation and determine for yourself.

Why Have I Italicized Below?

Everything written in italics below is a direct quote from the IRS Code or one of its Publications.

Important Terms to Understand

Important terms to understand when reading the IRS Code and Publications: exempt, excepted, qualified.

IRS PUBLICATION   557

IRS CODE
Section 508(c)(1)(A)

IRS PUBLICATIONS
526
1828

IRS Publication 557, Tax-Exempt Status for Your Organization

Churches. Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption.”

Dr. Jim’s comment: How much more clear could this be? The reason for filing Form 1023 is to be considered for and receive exemption from federal income tax. Since the church is not required to file a 1023, the implication is that the church is already tax exempt without having to file the 1023. In addition, the church is not required to file a Form 1023 to be able to receive tax deductible contributions.

Dr. Jim’s comment: There must be a fundamental reason that the church is not required to file a Form 1023.

Question: Is it possible that the 1st Amendment to the US Constitution might be the reason that the church does not have to file a Form 1023, and is in fact, without filing that form, already tax exempt and able to receive tax deductible contributions?

Sec. 508. — Special rules with respect to section 501c3 organizations

(a) New organizations must notify Secretary that they are applying for recognition of section 501(c)(3) status . . .

Except as provided in subsection (c), an organization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3)

(c) Exceptions

 (1) Mandatory exceptions

 (A) churches, their integrated auxiliaries, and conventions or associations of churches, or . . .

What does Section 508(a) and 508(c)(1)(A) tell us?

508(a) tells new organizations that they are required to notify the Secretary of State that they are applying to the IRS for recognition of 501(c)(3) status.

508(c)(1)(A) tells us that “churches” are “mandatory exceptions” to 508(a). This means that a new church is NOT required to notify the Secretary of State of anything.

Dr. Jim’s Question: What is the reason why a new church is not required to notify the Secretary of State? Might it be that the church is already tax exempt?

IRS PUBLICATION 526

Organizations That Qualify To Receive Deductible Contributions

“You can deduct your contributions only if you make them to a qualified organization. Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization.”

Dr. Jim’s comment: The key word here is qualified. The question: Is the church qualified?

Types of Qualified Organizations

“Generally, only the following types of organizations can be qualified organizations.

“Examples. The following list gives some examples of qualified organizations.

“Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations.”

Dr. Jim’s comment: The church is qualified to receive tax deductible contributions.

Consider 508(c)(1)(A) and 526 Together

Dr. Jim’s comment: 508(c)(1)(A) indicates that the church is not required to notify the Secretary of State and Pub 526 indicates that the church is qualified to receive deductible contributions.

Final conclusion from these IRS Publications and Code

The church by reason that it is the church, the following are true:

The church is automatically exempt from taxation.
The church is excepted from taxation.
The church because it is the church can receive tax deductible contributions.

As shown in the examples above and the IRS code itself, a church does not have to apply to or notify the government (state or federal) of its tax exempt status. The church is already established as a separate creature from the state. The church needs to remain separated from the state and not join in any type of partnership that would create a yoke between the church and government, no matter what “benefits” they may mislead us to believe are available.

Note: The church as described under IRC 508(c)(1)(A) in this article is also known as a “Free Church”.

 IRS PUb 1828 (p. 27) Glossary

Church. Certain characteristics are generally attributed to churches. These attributes of a church have been developed by the IRS and by court decisions. They include: distinct legal existence; recognized creed and form of worship; definite and distinct ecclesiastical government; formal code of doctrine and discipline; distinct religious history; membership not associated with any other church or denomination; organization of ordained ministers; ordained ministers selected after completing prescribed courses of study; literature of its own; established places of worship; regular congregations; regular religious ser¬vices; Sunday schools for the religious instruction of the young; schools for the preparation of its ministers. The IRS generally uses a combination of these characteristics, together with other facts and circumstances, to determine whether an organization is considered a church for federal tax purposes.

The IRS makes no attempt to evaluate the content of whatever doctrine a particular organization claims is religious, provided the particular beliefs of the organization are truly and sincerely held by those professing them and the practices and rites associated with the organization’s belief or creed are not illegal or contrary to clearly defined public policy.

Integrated Auxiliary of a Church. The term integrated auxiliary of a church refers to a class of organizations that are related to a church or convention or association of churches, but are not such organizations themselves. In general, the IRS will treat an organization that meets the following three requirements as an integrated auxiliary of a church. The organization must:

  • be described both as an IRC section 501(c)(3) charitable organization and as a public charity under IRC sections 509(a)(1), (2), or (3),
  • be affiliated with a church or convention or association of churches, and
    receive financial support primarily from internal church sources as opposed to public or governmental sources.

Men’s and women’s organizations, seminaries, mission societies, and youth groups that satisfy the first two require¬ments above are considered integrated auxiliaries whether or not they meet the internal support requirements. More guidance as to the types of organizations the IRS will treat as integrated auxiliaries can be found in the Code of Regulations, 26 CFR section 1.6033-2(h).

The same rules that apply to a church apply to the integrated auxiliary of a church, with the exception of those rules that apply to the audit of a church. See section Special Rules Limiting IRS Authority to Audit a Church on page 26.

EXCEPTION Defined
Black’s Law Dictionary, 6th Edition

Exception. Act of excepting or excluding from a number designated or from a description; that which is excepted or separated from others in a general rule or description; a person, thing, or case specified as distinct or not included; an act of excepting, omitting from mention or leaving out of consideration. Express exclusion of something from operation of contract or deed.

An “exception” operates to take something out of thing granted which would otherwise pass or be included. Christman v. Emineth, N.D., 212 N.W.2d 543, 552. Such excludes from the operation of conveyance the interest specified and it remains in grantor unaffected by conveyance. Elrod v. Heirs, Devisees, etc., 156 Neb. 269, 55  N.W.2d 673, 675, 676.

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