3 Top Myths Pastors Hear About 501(c)(3) Status

Written by Mariel Villarreal on Aug 31, 2021 in IRS Compliance

Read time: 5 mins

“You have to have 501(c)(3) status!” 

“Don’t apply for 501(c)(3)!” 

“The government can’t tell you what you can and can’t preach!” 

Every day, pastors and church planters are asking, “What does getting 501(c)(3) status mean for my church, and do I have to have it?”

In today’s blog, we’ll look at the top three most common myths about 501(c)(3) status and what you really need to know.

3 common myths about 501(c)(3) status

Myth #1: “Obtaining 501(c)(3) means that the IRS can tell me what I can and can’t preach.”

Have you heard this one before? It’s a myth. However, this misconception has spread like wildfire. When you search the internet for whether churches should obtain 501(c)(3) status, it is easy to find website after website discouraging pastors and church leaders from doing so. Some even claim that getting 501(c)(3) status makes the church an organization under the control of the federal court. It’s important to note that this is simply not true. 

The IRS doesn’t look for us to water down the gospel or keep us from preaching it. It simply raises the level of accountability in order to avoid improper use of tax-exempt status. In fact, Congress passed section 7611, which states that unincorporated churches shall be treated the same as incorporated churches for tax purposes. This means that regardless of whether they have obtained their 501(c)(3) status, all churches must obey all nonprofit requirements.

Let’s move on to myth number two.

Myth #2: “Having 501(c)(3) would subject my church to participate in activities it does not condone.”

On June 26, 2015, in the case of Obergefell v. Hodges, same-sex marriage was established in all 50 states as a result of a landmark civil rights ruling by the Supreme Court of the United States. This ruling poses a major question in the minds of pastors: Does having 501(c)(3) status mean I have to perform same-sex marriages? 

There is nothing currently within section 501(c)(3) or the tax code that specifically requires churches to participate in activities they do not condone. However, we at StartCHURCH 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 may come down the road. 

God has called you to lead a church in these times, and we want to help you protect it. Here are two ways you can prepare and protect your church:

  1. Add a “Prohibited Activities Clause” to your church’s bylaws. This clause simply states that a 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. Written doctrines are separate from your church’s bylaws. Your written doctrines should be detailed in describing how your church’s specific beliefs are carried out in day-to-day life. While it is important for bylaws to state major beliefs backed by Scripture, written doctrines allow you to write out your church’s stance on any and all issues that your church believes in. This document is meant to be updated whenever you or your fellow church leaders see fit. 

Do you want to ensure you have solid byways that protect your church? Give us a call at 877-494-4655 to speak to a specialist.

%schedule-a-call-cta%

Myth #3: “Obtaining 501(c)(3) approval is not required for churches.”

Because information is so readily available on the internet, it is easy to find groups promoting the idea that applying for 501(c)(3) status is not necessary for churches because of section 508(c)(1)(a). 

These groups have the misinformed notion that by 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 also not true.

Section 508(c)(1)(a) does state 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).” 

Please note: Nothing in section 508(c)(1) relieves a church from having to meet the requirements of section 501(c)(3). In short, just because a church does not apply for 501(c)(3) does not mean they are exempt from complying with the regulations. 

Obtaining 501(c)(3) status isn’t just a matter of protection for your church; there are many benefits of getting tax-exempt status, such as tax-deductible contributions for donors and grant funding. You can read a more detailed list by clicking here.

Knowledge is power

At StartCHURCH, we are firm believers that obtaining 501(c)(3) approval for your church is an essential step in the church planting process. With the StartRIGHT Service, our specialists will walk alongside you through the entire process (and we will save you valuable time! The IRS estimates it can take up to 100 hours applying for tax-exempt status!) 

Whether you’re starting a new church and don’t know where to begin, or you’ve been operating for a while and you want to be confident your documents include adequate protective language, the StartRIGHT Service can help you obtain the coverage you need. Give us a call today at 877-494-4655 or click the button below to have a specialist call you to help you protect your church.

%schedule-a-call-cta%

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


And receive Book 1 of our Grow Trilogy FREE today! This series gives you the strategies you need to get started growing your church plant today!