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3 Myths of the 501(c)(3)

By Raul Rivera

With a concerned look on his face, Pastor Mark approached me at the end of our conference in Detroit, and we began to converse. During the course of that conversation, Pastor Mark told me how he had been researching online whether or not his church should bother applying for 501(c)(3) tax-exempt status. He had read and heard arguments from both sides of the pendulum about why a church should and should not apply. When he came across our website, he decided that he would attend one of our conferences...more out of curiosity than anything. 

You are not alone!

At our Ultimate Church Structure Conferences, many times I speak with pastors who have, unfortunately, been misinformed about what 501(c)(3) tax-exempt status truly means and the impact it will have on their churches. Pastors often attend our conference in the hopes of clearing up doubts and questions that they have been riddled with regarding tax law and church compliance. For that very reason, I have listed below 3 of the most common misconceptions that I hear from pastors across the country regarding churches and 501(c)(3) tax-exempt status.

3 common misconceptions

Misconception #1: “Obtaining 501(c)(3) approval means my church will be a ‘state controlled church’; therefore, the government can tell me what to preach.”
When you do an Internet search on whether or not a church should obtain 501(c)(3) tax-exempt status, it is not difficult to find opinions that speak against it. Some claim that when a church incorporates and obtains 501(c)(3) status then that makes the church an organization under the control of the state. This sentiment is simply unfounded.

These voices fail to distinguish the difference between the Body of Christ (members of the Church) and the corporation (a completely separate entity from the members). The claim that incorporation or 501(c)(3) status makes a church “non-biblical by bringing the church under the authority of the government” has no theological validity because their premise for defining the church of Christ is off.

As members of the Body of Christ, we are to live in peace with, and subject to, the authorities that God has established (Romans 13; 1Tim. 2:1-3; 1Peter 2:13-17). We find that there is nothing in section 501(c)(3) that would make us violate any of God’s laws. It does not require us to water down the gospel or keep us from preaching it. It simply raises the level of accountability, which is necessary to combat the growing problem of improper use of tax-exempt status using the church model.

In fact, it is for this reason that Congress passed section 7611, which now states that unincorporated churches shall be treated as incorporated for tax purposes. Although many who claim that receiving 501(c)(3) status is unfounded in Scripture are sincere, their claims are based on old lines of legal thought without any consideration for the current trends that are established through case law, which affect our legal system and the way the IRS enforces the law.


Misconception #2: “Obtaining 501(c)(3) approval would subject my church to participate in activities it does not condone.”
Currently, there are 37 states that officially recognize same-sex marriages. With more and more states quickly following suit, many pastors I speak with are concerned that if they obtain 501(c)(3) status then their churches will be forced to participate in activities they do not condone. Although this is a valid concern for pastors and churches to have, this sentiment is not entirely true. While churches have the protection of the First Amendment to religious freedom, an increasing number of states are making changes to state laws that favor same-sex marriage. In addition, the Supreme Court is about to make a decision later this summer regarding the constitutionality of same-sex marriage for all 50.

Although there is nothing within section 501(c)(3), or the tax code for that matter, that requires churches to participate in activities they do not condone, we believe that now is the time for all churches, whether they have or have not obtained 501(c)(3) status, to be prepared for what is to come. The church is called to be the head and not the tail.
Therefore, we believe your church can prepare and protect itself by implementing the following:

  1. Add a “Prohibited Activities Clause” to your church’s constitution & bylaws. This clause simply states that your church is prohibited from engaging in activities that violate its written doctrines. In addition, the church is also prohibited from condoning, promoting, or allowing any of its assets to be used for activities that violate its written doctrines.
  2. Establish written doctrines. The written doctrines are separate from your constitution & bylaws. Your doctrines should be detailed in describing how your church’s specific beliefs are walked out in day-to-day life.


Misconception #3: “Obtaining 501(c)(3) approval is not required.”

With just a small amount of searching online, you will find many groups teaching that applying for 501(c)(3) is not necessary for churches because of section 508(c)(1)(a). These groups have the mistaken and misinformed notion that by simply not applying for 501(c)(3) status, the church entity is not required to meet any of the requirements of section 501 and the IRS cannot revoke its exempt status. However, this is simply not true.

Now yes, section 508(c)(1)(a) provides that churches do not have to apply for 501(c)(3) status. However, in a case heard before the United States Tax Court (Jack Lane Taylor v. Commissioner), the court ruled that “Section 508(c)(1) simply relieves churches from applying for a favorable determination letter regarding their exempt status as required by section 508(a).” Nothing in section 508(c)(1) relieves a church from having to meet the requirements of section 501(c)(3).

Where we stand on the matter

In my firm and honest opinion, I believe that applying for 501(c)(3) status is the best First Amendment defense available to your church. When you apply for 501(c)(3) status, your organizational and governing documents (articles of incorporation, constitution & bylaws, written doctrines, etc.) all become a part of your public record.

We can look to the court case Bernstein v. Ocean Grove. Ocean Grove, a Methodist retreat center in New Jersey, was ruled to allow a same-sex marriage take place at its retreat center because it was incorporated as a secular organization (rather than religious), and did not have any written doctrines. The case may have gone much differently had Ocean Grove properly established itself as a religious entity in its governing documents. Therefore, when you apply for 501(c)(3) status and have sound religious language in your organizational and governing documents, all of that will be included in your public record, giving your First Amendment rights a strong defense.

Why we do what we do

After Pastor Mark expressed his initial concerns and doubts that day in Detroit, he told me with tears welling up in his eyes that that day had been the best day in his church’s existence. He told me that the information he received at our conference did not make him feel overwhelmed and burdened, but that he felt a sense of peace and grace for the first time regarding church compliance and applying for 501(c)(3) status.

I left the Detroit conference amazed at the opportunity God has given me to serve hundreds and thousands of pastors just like Pastor Mark. It is my prayer that you experience the same peace and grace that Pastor Mark experienced that day. If you are able, I would love for you to join us at an upcoming Ultimate Church Structure Conference. If not, please leave a comment below and let us know how we can serve you!

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