When it comes to religious belief, things tend to be very personal. Although many of the world’s most established faiths include tenets and a doctrine, it’s up to each person to decide the spiritual path they’ll take. Freedom of religion is one of the most important rights granted to citizens of the United States by the Constitution. Freedom of assembly is another cherished right afforded to American citizens by law. Given these freedoms, it would seem there isn’t much needed to start your own church or religion.
In the United States, churches are usually exempt from paying federal and state taxes. For many faith-based organizations, tax-exempt status is a critical part of how they manage donations and resources. Donations made to these organizations by individuals can also be deemed tax-deductible if they’re recognized as such by the IRS. In order for your organization to be legally recognized by the Internal Revenue Service and be tax-exempt, there are some requirements you should understand.
General Guidelines for a New Religion
The IRS provides a publication outlining tax regulations for churches and religious organizations. Generally, the following statements should be true about your religious movement as far as the IRS is concerned:
- Is registered as a legal entity (registered as a nonprofit corporation or charitable organization in most places)
- Has a creed or set of beliefs and a style of worship
- Has a distinct operational and governmental structure (also known as “ecclesiastical polity”)
- Has a distinct religious history
- Includes a formal set of doctrinal and disciplinary rules
- Is independent of other churches, denominations, or sects
- Has an established location of worship
- Convenes regularly for services
- Has licensed, ordained, or commissioned ministers
- Provides education and training for its ministers
- Has its own religious literature
- Has organized worship and structure
The IRS doesn’t examine a religion’s doctrine or beliefs to determine if it’s a legitimate faith. Generally, your beliefs should be sincerely held by adherents, and rituals and practices should not be illegal or contrary to established public policy.
Regulations for Tax-Exempt Status
For your church to be tax-exempt, it should not do the following:
- Participate in political lobbying or political campaigning
- Engage in unlawful activities
- Provide financial benefits to private individuals or shareholders
The last rule requires special attention, as many churches employ people full and part time who receive income for services rendered. Churches also make payments to outside entities for services, products, and property ownership or rental. These payments usually don’t violate the last rule, but as a legal entity, it’s a good idea for your church to consult a tax professional for compliance.
How To Get Started
To make things official, you would start by applying for an Employer Identification Number. This EIN is a nine-digit number used by businesses, organizations, and other entities for tax purposes. You can think of this EIN as being analogous to a social security number for your church. To claim tax-exempt status and collect charitable donations (i.e., tithes and offerings) from members, your church also needs to register as a 501(c)(3) organization. You must submit your application within 27 months of the end of the month in which you created your church to be tax-exempt.
By the Book
As the founder of a new religious movement, it’s also important to understand the IRS rules concerning ministers and ordained staff. There are tax regulations regarding the wages of pastors, priests, and other members of the clergy. Again, a tax professional can provide guidance on making sure you’re operating on the right side of the law.
Creating a new religion or faith that is tax-exempt is relatively easy. You may not even have to officially register your church with the IRS, but doing so helps guarantee that member contributions are tax-deductible. It also lends credibility to your sincere belief system.