When Exactly is My Church Plant 501c3 Tax Exempt? How to Know

Many planters want to know – when is my church plant 501c3 tax exempt? The answer is ‘both now & later’. Let me explain:

What’s the Problem?

As a sort of separation of church and state, the IRS has taken an arm’s length approach to churches’ tax matters. So they grant churches an automatic 501c3 tax exemption. No problem there! Churches that have been around for 1.5 days or 150 years get this blanket exemption (with a caveat, below).

The problem typically comes from the fact that the IRS seems to be the only entity that knows about this special clause for churches. Even their buddies over at the US Post Office demand the 501c3 letter in writing when a church applies for nonprofit bulk mailing rates!

Sometimes it’s a problem when an extra-cautious donor wants to be sure that everything is on the up-and-up and that they won’t lose their tax write-off because the new church isn’t an exempt nonprofit yet. Understandable.

Most commonly, it’s a problem when church staff or volunteers go to seek donations of materials or services. More and more, corporations are creating red tape that says, “No 501c3 Determination Letter, no donation.” This is basically the same as the donor above, but on a corporate level. And they have the right to put conditions on their charitable gift; it just becomes an onerous provision for brand new churches (and other nonprofits) as the IRS is 7-9 months behind in processing new 501c3 applications (as of 2023).

What to Do – Organize as a Church

IRS Publication 1828 goes into detail on the automatic church exemption. My paraphrase is, “If you’re organized as a church and behaving as a church, you’re automatically 501c3 tax exempt.” You can read more on my previous post Does My Church Plant Have to Apply for 501c3 Exemption?

Common legal organization types are:

Each of those organization types has its pros and cons, but either one requires setting up some sort of Bylaws. So at least get those two things done.

The biggest caveat I’ve experienced is their criteria that a church have a brick-and-mortar location for public worship. If you’re meeting in someone’s home or in smaller groups at coffee shops, etc., they will probably question whether you’re really a church.

What to Do 2 – Get Your Church Plant 501c3

How to apply for your church plant 501c3 tax exemption

How to get faster IRS 501c3 Application Processing






Leave a Reply

Your email address will not be published. Required fields are marked *