As discussed in earlier posts, a nonprofit organization that is organized and operated for charitable purposes may be deemed a public charity — and not a private foundation — if it is specifically defined in the Internal Revenue Code as a qualifying charity by the nature of its activities.
The IRS considers churches public charities by the nature of their religious and charitable activities. Notably, the IRS uses the term church to refer to any faith or religious body that, at a minimum, has a distinct legal existence, has a congregation, and regularly holds religious services.
Thus, the word church is used in a generic sense. It may designate a synagogue, a mosque, a temple, or an organization of any other religious denomination.
The IRS has developed 14 criteria that it applies on an ad hoc basis to an organization to determine whether it qualifies as a church.
- Does it have a distinct legal existence?
- Does it have a recognized creed and form of worship?
- Does it have a definite and distinct ecclesiastical government?
- Does it have a formal code of doctrine and discipline?
- Does it have a distinct religious history?
- Does it have a membership not associated with any other church or denomination?
- Does it have an organization of ordained ministers?
- Are its ordained ministers selected after completing prescribed courses of study?
- Does it have a literature of its own?
- Does it have established places of worship?
- Does it have regular congregations?
- Does it hold regular religious services?
- Does it offer religious instruction of the young, such as "Sunday school"?
- Does it provide schools for the preparation of its members?
An organization need not satisfy all of the above criteria to qualify as a church. As one court described it:
While some of these are relatively minor, others, e. g. the existence of an established congregation served by an organized ministry, the provision of regular religious services and religious education for the young, and the dissemination of a doctrinal code, are of central importance. The means by which an avowedly religious purpose is accomplished separates a "church" from other forms of religious enterprise.
— American Guidance Foundation v. United States, 490 F. Supp. 304 (D.D.C. 1980)
Another court helpfully defined church to mean:
A coherent group of individuals and families that join together to accomplish the religious purposes of mutually held beliefs. In other words, a church's principal means of accomplishing its religious purposes must be to assemble regularly a group of individuals related by common worship and faith.
— Church of Eternal Life & Liberty, Inc. v. Comm'r, 86 T.C. 916, 924 (1986)
While the differences may seem trivial, it is important to distinguish churches from other religious and charitable organizations because the IRS applies special tax rules to churches. See below for more information.
Integrated Auxiliaries and Conventions and Associations of Churches
The term church also includes integrated auxiliaries of churches as well as conventions and associations of churches.
An integrated auxiliary of a church must be organized and operated for charitable purposes, be affiliated with a church, and be primarily funded by the church. Common examples of integrated auxiliaries include seminaries, mission societies, and youth groups.
Although the term conventions and associations of churches is not specifically defined in the Internal Revenue Code, it is generally understood — through case law and IRS rulings — to mean a cooperative undertaking by churches of the same or different denominations. See Rev. Rul. 74-224.
The IRS uses a broader term, religious organization, to encompass both churches and nonchurch public charities with religious purposes. A nonchurch religious organization is a public charity that has as its primary purpose the study or advancement of religion, but that does not meet any combination of the 14 characteristic facts and circumstances required to be a church, as listed above.
Religious organizations that are not churches might include nondenominational ministries or interdenominational and ecumenical organizations. They could also be religious societies, schools, or faith-based relief organizations that do not on their own meet the definition of church. See IRS Publication 1828.
Churches vs. Religious Organizations
Why would an organization rather be recognized as a church than as a nonchurch religious organization or public charity? There are three primary reasons. First, U.S. churches do not have to file applications for recognition under section 501(c)(3) with the IRS. They are legally permitted to self-declare that they are churches if they genuinely believe that they satisfy the federal tax law definition. Note that many churches still choose to apply with the IRS so that they have evidence that the IRS agrees that they meet the definition.
Second, and more importantly, churches are not required to file annual IRS information returns (Forms 990).
Third, it is not uncommon for churches of a single denomination to operate under a group exemption, or a "group ruling" from the IRS. The most notable example is the Catholic Church, whose primary group ruling is under the United States Conference of Catholic Bishops (USCCB). The central organization, or parent, in a group ruling permits subordinate entities to apply and become a part of its group. The subordinates thus attain recognized 501(c)(3) status by virtue of the parent's existing exemption.
Finally — and this is most relevant to the equivalency determination analysis — churches are not required to satisfy any mathematical public support test. Of course, both churches and religious organizations must still satisfy the organizational and operational requirements to qualify as a public charity.
For more information on churches and religious organizations, we recommend the following resources.
- IRS webinar for churches and religious organizations
- IRS Publication 1828: Tax Guide for Churches & Religious Organizations
- Starting a Nonprofit: What is "Religious" under 501(c)(3)?, NEO Law Group