part 2 in a 4-part series about Church Tax Exemption
We know that the church is the people. It was about people from the beginning and wasn’t intended to be about real estate. So when a church applies for 501c3 nonprofit status, why is the IRS hung up on buildings?
In 2010, I helped a planter who was starting a Missional Community (MC) movement. We explained in our IRS 501c3 application that it was a church, that it was about the people, that each of the several gatherings had the necessary DNA of the church, and that the meetings included worship, communion, Bible teaching, etc. But we also explained that the church wasn’t meeting in a leased or borrowed commercial facility yet: the MCs were meeting in homes, in public spaces, and the like.
Here are snippets of the IRS’s actual followup questions and comments that we had to address. See if you can figure out what they were after:
- “Is the organization leasing or purchasing a facility? If the organization is leasing, provide a copy of the lease agreement. If the organization owns the facility, provide a copy of the deed and mortgage to the property.”
- “Does your building have a sign showing the days and times of services?”
- “Provide pictures of the building inside and outside, and while activities are being conducted.”
- “What steps is the organization taking to locate a permanent facility?”
- “The activities you have listed do not appear to be consistent with those of a church. You do not have any worship services, congregation, and a regular place of worship.”
There were a few other questions, too, of course. But it was obvious that the IRS was hung up on buildings.
The Post Office, Too
And their buddies over at the USPS have the same hangup. In applying for nonprofit postal permits, a lot of the hoops that church plants have to jump through revolve around not owning a building. Or at least not having weekly Sunday morning services yet. In the stack of supporting documentation that I send with church planters to apply for nonprofit pricing, I always include a bulletin. Usually it’s a draft because weekly worship services are still 3 or so months away. But too many times my planters had come back unsuccessful at submitting the paperwork because the clerk would ask, “Do you have a bulletin?”
It’s About Access
In spite of all the jokes I’ve made and fun I’ve poked at the situation, at the heart of it is something that I think is well-intentioned: making sure the public has access to the worship services. If it’s just 5 families meeting together in someone’s family room, how is anyone in the community going to know that they’re welcome to join the church service? A commercial building (and sometimes a bulletin) helps answer that question.
Some of the other questions/comments from the IRS were:
- “Other than advertising by word of mouth and newspaper, how does your organization ensure that its services are open to the public?”
- “Do you advertise in the yellow pages?” (no, seriously)
- “Does your organization do any mailings in the community to inform them of the days and times of services?”
And I’m sure the government has seen their share of attempts to set up churches that were really fraudulent tax shelters.
It matters if you’re starting a Missional Community movement. You think you’re starting a church; the IRS may think differently. And that’s the difference between whether you need to apply for 501c3 nonprofit status or not.
Based on this and some other circumstantial evidence, I don’t have my planters apply for their 501c3 until they have a signed facility contract.