Is One 501(c)(3) Better Than Another?

By Raul Rivera

Part two of the article "Why You Should Get 501(c)(3) Status Before the Year Ends."

What a strange question.  What do you mean?  Are there different types of 501(c)(3)'s?  To best answer that question, let me refer you back to a motor oil commercial.  It featured two men in a car leaving a plume of smoke behind them.  One man asked if he used the proper brand of motor oil and the driver's response was, "Motor oil is motor oil."  Apparently, it is not.  The oil the driver used burned easily and the evidence was obvious.

Is it the same with your ministry’s 501(c)(3)?  The answer is yes.  In all of the years I have been involved in ministry and consultation, I have had countless conversations with leaders who were told by the person preparing their 501(c)(3) application that it was better to go "middle of the road" and keep their application simple so that they could get approved quickly.  I cringe every time I hear that because your 501(c)(3) is your church's public record.

What is your public record and why is it so important?

As stated in my previous article, in order for your church to be able to guarantee that contributions to your ministry are tax deductible, you must get 501(c)(3) status.  When you apply for the 501(c)(3), the entire application is a public record that anyone in the general public can look up and read.  Section 6104(d), as regulated by the IRS, requires that the following records of your 501(c)(3) be made available for public inspection.

Your entire 501(3)(3) application which includes:

1. Articles of incorporation
2. Constitution and bylaws
3. Doctrines
4. Your ministry's form of government
5. Schedule A and all of the supporting facts such as your ordination program details

Are you certain that your 501(c)(3) application on record with the IRS accurately reflects your heart, vision and ministry government?  Does it reflect the way you run your ministry?  Unfortunately, many ministries have fallen prey to the quick and easy 501(c)(3) mills that offer super, super low prices and fast, "one-week" preparation.   They do this because they take a cookie cutter approach due to the fact that they are simply form preparers that do not consult with you to hear your heart and strive to make your dreams a reality.  While their approach may be tempting, the long term consequences may leave your ministry with a limp.  Remember the motor oil commercial?  The driver's goal was to get the motor oil in the car without considering if it would protect his car's engine for the long term.  So, he chose the cheapest oil money could buy.  The consequence was the breakdown of his car, as all could clearly see.

Your 501(c)(3) represents your life's goal and work.  It should take time and cover an extensive number of considerations.  This requires one-on-one consulting, interviews by telephone and extensive reviews by more than one person. Never buy into the concept of quick and easy 501(c)(3) status.  This is not only deceptive, but it is harmful to your ministry because more often than not, the changes are not made and even if they are, IRS letter 947 requires your church to submit those changes for further reconsideration.  This is a bad proposition that will cost you more time and money in the long run.

Ten things your 501(c)(3) should reflect

Let me give you a quick list of some things that should be in your 501(c)(3) application.  This list is not comprehensive, but should give you an idea of what should be in your application.

1. A purpose statement that allows your ministry to expand into activities that may not be on your radar today (Ordinations, colleges, universities, international activities, expanding and creating a network of churches and ministries, etc.)
2. Ecclesiastical authority of the founder and proper accountability that prevents him/her from being voted out without cause (This is super important; what you don't know can be detrimental!)
3. Mutual interest language to protect the board of directors from defamation lawsuits should a member need to face disciplinary action or removal
4. Standard of living requirements for members and directors
5. Doctrinal statements that protect the church from future public policy that runs contrary to the ministry's beliefs and practices
6. A policy for the correct handling of donated property
7. Foreign activities policy and the office of foreign asset control
8. Conflict of interest policy
9. Reimbursement policy
10. Appointment and removal of board of directors (elders, trustees)  Who does it?