The IRS has its own definition of a church. We have had clients over the years who have applied for church status but for whom the IRS has said, “We’ll give you 501c3 status as a mission, ministry, or a bible fellowship, but we will not grant your church status.” Now, if these churches had given tax-deductible receipts to its congregants, believing they were churches, would those receipts have been valid? Absolutely not. Upon an audit, those congregants’ deductions could have been disallowed.
So, does a church need IRS tax-exempt status? No, if it falls in line with what the IRS says is a church (click here for IRS guidelines). But, Yes, if a church wants to be guaranteed that the tax-deductible receipts which it gives to its congregants are valid. If the IRS would determine that the “church” is not a “church” by IRS guidelines, then those tax-deductible receipts are not valid. Most churches, in order to be certain that their tax-deductible receipts are valid, prefer to have IRS church status, protecting their congregants from possibly having their offerings being disallowed as tax-deductible. There are also other advantages to having 501(c)(3) status. Click here to see what advantages a church has if it gets 501c3 status.
Unlike the IRS, the California Franchise Tax Board doesrequire incorporated churches to apply for and obtain tax-exempt status. Failure to do so results in an $800 per year assessment of the franchise tax.
A church cannot support a candidate for election or legislation from the pulpit or by a pastor in his official position. This is true whether or not the church has 501c3 status.