Does a Church Need to Apply to be a 501(c)(3) Nonprofit to Apply for Grants, by Jeffrey J. Rodman

Churches are not required to file an application (IRS Form 1023) with the IRS to qualify as tax-exempt. Churches are of course permitted to file such an application with the IRS if they wish to obtain a formal determination letter from the IRS documenting the fact that they are tax-exempt under IRC section 501(c)(3), but the vast majority of churches choose not to do so and instead simply rely upon this automatic exemption under the Internal Revenue Code and IRS regulations. Churches should be aware that some foundations require grantees to be 501(c)(3) nonprofits thereby eliminating churches relying on an automatic exemption from applying for funding. It is our experience at Here-4-You Christian Grant Consulting that churches with a 501(c)(3) have many more opportunities for funding available to them.

Under the Internal Revenue Code and relevant IRS regulations, certain categories of nonprofit organizations - including "churches" - are exempt from the requirement to file an application with the IRS to be recognized as tax-exempt public charities under § 501(c)(3). See generally Tax Guide for Churches and Religious Organizations: Benefits and Responsibilities Under the Federal Tax Law (Sept. 2003), http://www.irs.gov/pub/irs-pdf/p1828.pdf, at 3; William W. Bassett, Religious Organizations and the Law, § 4:37 (West 2002). Specifically, 26 U.S.C. § 508(c)(1)(A) provides "[m]andatory exceptions" from the filing requirement for "churches, their integrated auxiliaries, and conventions or associations of churches." Accord Treasury Reg. § 1.508-1(b)(2); IRS Publication 1828; IRS Publication 4220. See also 26 U.S.C. § 6033(a)(2) (mandatory exemption from filing annual Form 990 returns for "churches, their integrated auxiliaries, and conventions or associations of churches").