Do Churches Really Need 501(c)(3) Status? What Every Pastor Should Know
By Brandon Williams, VP of Marketing
Why This Question Matters
One of the most common questions pastors ask is: “If my church is already tax-exempt, why do we need 501(c)(3) status?”
It’s a fair question. A quick search reveals millions of results and conflicting opinions. Unfortunately, much of the information floating around online is incomplete—or simply wrong.
Here’s the truth: while churches are automatically considered tax-exempt under federal law, not applying for 501(c)(3) recognition can create serious risks for your church, your donors, and your long-term ministry goals.
This article clears up common myths and explains why 501(c)(3) status is one of the most important legal protections for your church.
The Myth of the “508 Church”
Many pastors hear the phrase “508(c)(1)(A) church” and believe it means a church exists outside the law. That’s not accurate.
Here’s what the law actually says:
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Section 508(c)(1)(A) removes the requirement for churches to apply for tax exemption.
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But it does not create a new category of church.
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Nor does it allow churches to accept tax-deductible donations without meeting the requirements of section 501(c)(3).
In other words, there is no such thing as a legally recognized “508 church.”
What Happens If a Church Doesn’t Apply for 501(c)(3)?
It is optional to apply, but the consequences of not doing so can be costly.
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Donor Risk: In Jack Lane Taylor v. Commissioner, the court ruled that donors to a non-501(c)(3) church had to prove the church qualified as tax-exempt. Most donors don’t want that burden—and many will simply stop giving.
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Loss of Presumed Exemption: Without IRS recognition, your church has not officially proven compliance with federal requirements. If audited, exemption can be denied retroactively to the date of your church’s founding.
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Political and Legal Risk: In Branch Ministries v. Rossotti, a church that violated IRS rules had its 501(c)(3) revoked. Because it had applied, the revocation was limited. Without recognition, the IRS could have deemed the church non-exempt from the start.
Recommended Reading: 5 Steps to Legally Start a Church
Do You Meet the IRS Criteria for “Church” Status?
The IRS does not define “church” in the tax code. Instead, it uses the 14/15 Point Test, which looks at whether your organization functions like a church. Some factors include:
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A distinct legal existence (incorporation and EIN)
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A definite ecclesiastical government (pastor, board, or elders)
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A formal code of doctrine and discipline
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An established place of worship
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Regular religious services and a congregation
No exact number of points is required, but the more criteria your church meets, the stronger your case for 501(c)(3) recognition.
3 Benefits of Incorporating* and Applying Early
If your church is still in the planning phase, you may wonder if you should wait to incorporate or apply for 501(c)(3) status. Here’s why acting now is better:
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Legal Protection – Incorporation* establishes a corporate veil that protects pastors and members from personal liability in lawsuits.
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Governance and Structure – Once incorporated*, your church can adopt bylaws*, ordain ministers, and function legally as a religious organization.
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Financial Legitimacy – Most banks require incorporation* papers and an EIN to open an account in the church’s name. This separates personal finances from church finances.
Why Your Church Should Apply for 501(c)(3)
While churches may be considered tax-exempt by default, IRS recognition provides essential legal protection and donor confidence. It:
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Protects your church’s exemption from being challenged
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Gives donors assurance that their gifts are tax-deductible
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Helps your church establish credibility with banks, vendors, and the community
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Safeguards your church from costly misunderstandings and legal battles
How StartCHURCH Helps Churches Get 501(c)(3) Status
At StartCHURCH, we guide pastors through every step of establishing a solid legal foundation. Our StartRIGHT Service ensures your church is properly incorporated*, compliant, and approved for 501(c)(3) status.
Whether you’re planting your first church or leading a congregation of hundreds, we’ll help you protect what God has called you to build.
Call us today at 770-638-3444 to learn how we can help your church secure 501(c)(3) recognition.
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*StartCHURCH provides clerical assistance to help you process your own articles of incorporation and prepare your own bylaws. StartCHURCH does not provide legal advice.