Starting a Nonprofit: What is “Religious” under 501(c)(3)?

Hands praying
A “religious” purpose is one of the seven exempt purposes specified in Section 501(c)(3) of the Internal Revenue Code (the “Code”). However, unlike with the terms “charitable,” “educational,” and “scientific,” the term “religious” is not defined in the Treasury Regulations, in large part due to constitutional issues. IRS guidance explains “[u]nder the First Amendment, the Service cannot consider the content or sources of a doctrine alleged to constitute a particular religion, and cannot evaluate the content of a doctrine an organization claims is religious. This does not apply to rites or practices that violate federal, state or local law.”

501(c)(3) religious organizations include churches, conventions and associations of churches, integrated auxiliaries of churches, nondenominational ministries, interdenominational and ecumenical organizations, and other entities whose principal purpose is the study or advancement of religion. The IRS has recognized 501(c)(3) exemption for religious organizations conducting primarily the following activities:

  • Publishing a newspaper primarily devoted to news, articles, and editorials relating to church and religious matters; and
  • Conducting weekend religious retreats, open to individuals of diverse Christian denominations, at a rural lakeshore site at which the participants may enjoy the recreational facilities in their limited amount of free time and that charges no fees.

Since 501(c)(3) of the Code requires that organizations must be organized and operated exclusively for one or more exempt purposes, religious organizations may be disqualified if they promote a substantial nonexempt purpose. For example, religious organizations conducting primarily the following activities have been held not to be exempt under 501(c)(3):

  • Publishing literature having little connection to the religious beliefs of the organization and for profit motives; and
  • Operating a religious retreat facility where religious activities are not required and only incidental to recreational and social activities.

Because many activities may serve more than one purpose, an organization that is religious may also qualify as exempt under 501(c)(3) as an organization organized and operated primarily for charitable and/or educational purposes. (see: Starting a Nonprofit: What is “Charitable” under 501(c)(3)? and Starting a Nonprofit: What is “educational” under 501(c)(3)?).

Unlike other religious organizations, churches (including synagogues, temples, and mosques) that meet 501(c)(3) requirements are automatically considered tax-exempt without having to file Form 1023 for tax exemption. The IRS uses a variety of characteristics, facts, and circumstances to determine whether an organization is considered a “church” for federal tax purposes. These include: whether the organization has a distinct legal existence, recognized creed and form of worship, definite and distinct ecclesiastical government, distinct religious history, formal code of doctrine and discipline, membership not associated with any other church or denomination, established place of worship, regular congregations and religious services, organization of ordained ministers, schools for the preparation of its ministers, ordained ministers selected after completing prescribed courses of study, literature of its own, and Sunday schools for the religious instruction of the young. Additionally, court precedents have emphasized the associational test, which defines a church as an organization whose members meet regularly for organized worship. See Found. of Human Understanding v. United States, 614 F.3d 1383, 1387-88 (Fed. Cir. 2010). Although churches claiming exemption under 501(c)(3) are generally subject to all of the requirements under 501(c)(3) (e.g., no private inurement or private benefit, no substantial lobbying, no electioneering), they are also subject to special tax rules and are not required to file Form 990 returns.

Additional Resources:

IRS Tax Information for Churches and Religious Organizations

Religious Organization Loses Claim for “Church” Status, Don Kramer’s Nonprofit Issues

13 thoughts on “Starting a Nonprofit: What is “Religious” under 501(c)(3)?

  1. HQ

    Question: can a Religious Non-profit organization donates to a Charitable Non-profit organization (NOT Religious)

    • Gene Takagi

      Generally, a religious nonprofit organization may support charitable activities that are consistent with its religious purposes. This may include making donations or grants to other nonprofit organizations that engage in such charitable activities.

  2. Brettney

    I am starting a Christian based womens sober living home in KY.. would 501c3 be the route I need to go. And if so.. I plan on seeking private grants not federal so would I have to file for the incorporation on a federal AND state level or just state?

    • Gene Takagi

      Incorporating is done on the state level. 501(c)(3) is a federal tax-exempt status. If your state has a state corporate income tax, check with a local attorney regarding what you need to do, if anything, for state tax-exempt status.

  3. Ruben

    “Unlike other religious organizations, churches (including synagogues, temples, and mosques) that meet 501(c)(3) requirements are automatically considered tax-exempt without having to file Form 1023 for tax exemption.”

    I do not totally agree with this quote… they need the “Determination Letter” for tax purpose with the city and in some states is require for Annual Statements and Sales Tax Exemptions…Thats why we always recomend (exept the real ones mentioned in Publication 517, ex. Christian Science, Latter Saints(Mormones)) to file 1023. You can start with 1023EZ but only if you manage a gross annually income of 25,000.00 or less (we normally do 1023) Plus in the deduction of FUTA for the Minister Salary, the church has to be in the EO Listing recognized as an 501 c3 (Determination Letter). Also, for Tax Deduction with the Donation Letter for tithes is a thin line if the church, other than mentioned on the Publication, do not count with the Determination Letter from the IRS EO.

    • Gene Takagi

      As a matter of law, churches that meet the requirements under 501(c)(3) may self-declare their federal tax-exempt status as a 501(c)(3) organization without filing Form 1023 and receiving formal recognition of exemption under 501(c)(3) from the IRS. However, as you note, there may be significant advantages for a church to file Form 1023 and receive an favorable IRS determination letter (including for state income tax or sales tax exemption). One of the most important advantages is to provide major donors with assurance that their contributions will be deductible as qualifying charitable contributions. Accordingly, we strongly encourage newly formed churches to apply for recognition of 501(c)(3) status using Form 1023.

      Note, however, that churches can NOT apply for IRS recognition of 501(c)(3) status using Form 1023-EZ. See the Instructions to Form 1023-EZ, which provide: “Private operating foundations and certain categories of public charities, such as churches, schools, and hospitals, are not eligible to apply for exemption under section 501(c)(3) using Form 1023-EZ.” 1023-EZ also has a threshold of $50,000 (not $25,000).

  4. Christopher Para

    I was wondering how this applies if one is seeking to establish a new belief system. Perhaps its a contradiction of terms, but I’ve been considering the possibility of creating a nonprofit based on the idea of unifying humanity and it seems the most effective way to do this would be to establish a “religion” with humanity itself at the center, a secular religion, if you will. How would one accomplish something like this under the religious nonprofit description?

    • Gene Takagi

      This is a complicated question as agencies don’t want to be involved in defining what is and what is not a religion. And the IRS may not care so much if the purpose and activities are clearly within a 501(c)(3) tax-exempt purpose (e.g., educational) if such exemption is being sought. However, if an organization tries to get the additional benefits of being characterized as a “church” for tax purposes, whether it meets the requirements may be a critical issue. See the IRS Publication 1828 for more information. https://www.irs.gov/pub/irs-pdf/p1828.pdf

  5. Ark Jazz

    I am interested in starting a Christian based non profit. Does this qualify within the definition of religious organization?

    • Gene Takagi

      “Christian-based” is not sufficiently descriptive of the mission or activities of the organization. Can you provide more information?

  6. ROBERT hickie

    I need more information and interested to start one

    • Gene Takagi

      Robert, if you’re interested in setting up a religious 501(c)(3) organization in California or New York, send us a message at info @ neolawgroup.com.

  7. Good read. I know there have been quite a few instances, especially in urban centers like NYC, where churches have certainly promoted “a substantial nonexempt purpose” by renting out prime real estate and venue for non-religious events. It’s hard not to monetize a fifth avenue address. Great blog.
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