Non-profit And Irs 501(c)(3) Faq


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First, the disclaimer: The information provided here is provided as a generic guideline only and is written to give a basic outline of the differences, procedures, and terminology as used in dealing with corporations, non-profits, and charitable organizations. You are hereby warned that this is not written by an attorney. This forum, the ULC, and the author make no representations as to the accuracy of this information for longer that the time it takes you to read it, nor for its fitness for use of any specific purpose. If you want legal advice you should consult with a legal professional in your jurisdiction. This document cannot possible address all situations or all jurisdictions. This is generally applicable in the United States of America only.




One of the most asked questions is "How do I start a congregation? What do I need to do?" So, I have put together a very, emphasis on very, basic outline of steps one would normally take when creating your organization. You can stop at almost any point, depending on your goals.


Your Congregation

A church is really the people, not a bunch of legal documents. Three persons gathering together can be considered a church. No document whatsoever. However, your church will not be legally recognized by anyone except your church members. So you will likely want to proceed on to some additional organization.

Your church needs at least a Pastor or minister, a secretary, and a treasurer. You will likely want to call the ULC in Modesto and register your congregation as a congregation of the ULC. It's a minimal cost but well worth it. You will need the three people above to complete the congregation application form with the ULC. You will be asked to send in reports to the ULC monthly with a minimal accounting fee. Registering your congregation with the ULC is optional.

If all you wanted to do was to create a congregation then you are finished. That was simple.



Your Non-Profit Corporation

You must now understand that non-profit, or not for profit organizations are not all charitable organizations. However, all charitable organizations are, in fact, non-profit.

If your goal is to be recognized by the IRS as a church so that you pay no personal income taxes you may stop right here. This document does not address that issue. Even as a minister of a church you will always pay personal income taxes. However, if your intent is to be recognized by the IRS as a charitable organization (commonly referred to by the IRS Code 501), or to simply create a non-profit organization as your church then keep reading.


Your first step is to create a corporation, and that corporation should be a non-profit corporation created under the laws of your state. There are various services that will create a corporation for a minimal expense, but it is far too easy in some states to simply do it yourself. Your best source of information for this is your Secretary of State. You can search for them on the Internet or the phone book of your state's capital city. They generally have a form that you simply fill in the blanks. The form in simply called your Articles of Incorporation. Here is a sample of the Texas form for Non-Profit Articles of Incorporation. <http://www.sos.state.tx.us/corp/forms/202.pdf"]http://www.sos.state.tx.us/corp/forms/202.pdf Find and use the one applicable to your state.

If your final goal is to become a charitable organization recognized by the IRS then you will want to be certain that the language on your Articles of Incorporation meet all of the requirements. You should get IRS Publication 1828 at http://www.irs.gov/pub/irs-pdf/p1828.pdf"]http://www.irs.gov/pub/irs-pdf/p1828.pdf This will assist you in making sure you complete the Articles of Incorporation correctly.

You will generally need three individuals that reside in the state to be the Incorporators and/or initial Directors for your corporation. The same three used to create your initial congregation are normally used, but not necessary.

Although the Secretary of State may assist you with this you cannot be certain that all is necessary and proper for future use with the IRS. You should really consider using an attorney to at least look over your forms before you file them.


Now that you have a corporation set up you will need to get a tax ID number, commonly called an Employers Identification Number, EIN, or Taxpayers ID Number. For this you will need IRS form SS-4. I can be completed online or even over the phone, in most cases.http://www.irs.gov/pub/irs-pdf/iss4.pdf"]http://www.irs.gov/pub/irs-pdf/iss4.pdf



The IRS

If your sole intent was to create a church that is operating as a non-profit corporation then you're done. However, keep in mind that although you are a church, and a non-profit corporation, donations to your church are NOT necessarily deductible by your parishioners as donations to a charity. For that you must now take a serious step and apply for Recognition for Exemption under Section 501c(3) of the Internal Revenue Code. You should use the aforementioned IRS Publication 1828 and the Application for Exemption found at http://www.irs.gov/pub/irs-fill/k1023.pdf Schedule A is the part of the application that deals specifically with Churches.

Can you claim exemption under the ULC Parent Church? No. The ULC in Modesto is not able to extend the blanket of exemption to your church. You must file your own exemption.

In completing this form 1023 there are several other publications and forms which may be required are that you will determine to be very helpful. Some of those might be Publication 557, Tax Exempt Status for Your Organization, Publication 598, Tax on Unrelated Business Income of Exempt Organizations, and Form 8718, User Fee for Exempt Organization Determination Letter Request.

While a church is not required to complete this form in order to be considered exempt it is the only method whereby it removes any and all questions regarding your churchâ™s status and your parishioners ability to claim a deduction for donations to your church.

What are the 14 tests you keep hearing about? The IRS uses a number of tests to determine your organization's eligibility to receive the exemption. All of those tests are addressed in Schedule A of Form 1023. By answering the question correctly you will most likely qualify for the exemption. The best descriptions I have found for these tests are at Thompson & Thompson.

Unfortunately, the specific details of completing these forms are well beyond the scope of this article. You would be well advised to seek the help of a professional if at any point in the process you are not completely comfortable with completing the forms.

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