Yes, you can start a church without 501C3. In the United States, no law says that a church must be a 501C3. A church can be formed as a 508© (1) (a), 501C3, 501(c) (4), a 501(d), and even a for-profit corporation. Howbeit, how you form a church or church ministry is very crucial to what you can do.
Non-profit organizations are not all equal. Some non-profits have legal and tax advantages compared to others. Churches and church ministries are not the same as charities; churches have extra-Constitutional and Federal Law rights.
The US government acknowledges that churches offer very unique services to their communities that are protected by the First Amendment of the US Constitution. Congress has also established special tax laws for churches that exempt them from paying income tax and other federal taxes. Churches that apply and are approved for a 501C3 status are recognized by the IRS as a designated 501C3 entity. It’s also true that churches do not have to file for 501C3 status to be tax-exempt.
However, there are certain 501C3 restrictions that churches are expected to comply with to be considered tax-exempt whether they apply with the IRS or not. Every organization that applies for 501C3 recognition is mandated to waive speech and religious rights.
They are also prohibited from influencing legislation and political campaigns. Since social issues have become political issues, churches and church leaders are little by little avoiding social issues and avoiding taking positions out of fear of what might occur if they do.
Even though no law directly prohibits churches from speaking on candidates, politics, or legislation, the 501C3 speech restriction applies to only corporations that are organized as a 501C3. Owing to that, churches that believe it is their purpose to grow and foster Godly leaders in our modern democracy may do so, but not as a 501C3.
If you believe that your church or church ministry should do more than just pray, then forget about starting your church as a 501C3. The primary reason a good number of churches opt to identify as a 501C3 is the burden that is placed on donors of the church without 501C3 status.
Note that if a donor is audited, he or she is expected to establish or show that the church meets the requirements and qualifications of a section 501C3 organization. Owing to that, most donors may decide not to donate to organizations without 501C3 approval. Or worse, they may donate, get audited, and all the money they gave could be used against them.
In addition, the supposition of tax-exempt status does not exist until the church has been officially acknowledged by the IRS to match the requirements of section 501C3. Have it in mind that churches who have never applied for 501C3 status are usually believed to not be compliant with the law. If a church is caught functioning outside the law, the revocation of its tax exemption will go back to the inception date of the church.
Pros and Cons of Starting a Church With 501C3
Registering a church as a non-profit with the IRS enables it to meet the 501C3 church requirements and qualifications as a charitable non-profit organization. However, even though there is no requirement to do so, there are still pros and cons that come with registering as a 501C3.
Generally, corporations or establishments that qualify as public charities under Internal Revenue Code 501C3 are eligible for federal exemption from payment of corporate income tax. Note that once exempt from this tax, the non-profit will be exempted from similar state and local taxes. In addition, if an organization has acquired 501C3 tax-exempt status, an individual’s or companies’ charitable contributions to this entity are considered tax-deductible and beneficial.
Discounted Non-Profit Mailing Rates
Today, a good number of churches are known to send mass mailers to thousands of households in their community. Some churches send upwards of 25,000 mailers inviting community members to their church. Although you might not consider saving on postage to be that much of a deal, however, it can be a whole lot.
When you put together what your church might have squandered in previous years or what your church will invest in future years without the postage discount, you will be shocked to acknowledge how much your church can save with the discount. To qualify for this discount, your church is expected to be 501C3 approved and you have to produce a copy of your 501C3 approval letter with PS Form 3624. You will need to submit this form to your local post office.
Eligibility For Public And Private Grants
A good number of foundations and government agencies restrict their grants to public charities. Howbeit, there are grants that churches may not qualify for because the purpose of the grant is not church-related. However, there are also instances where certain state or federal grants may be available to the church. The only requirement for a church to get any type of grant funding is if it is 501C3 approved.
Owing to the advancement of technology and the internet, churches are beginning to leverage the digital platform to reach more people. This is commonly referred to as digital marketing; and, to some extent, digital marketing is a pay-to-play game. Have it in mind that there are discounts available to 501C3 approved nonprofits through tools such as Google Adwords.
No Private Ownership
Contrary to a business owned by an individual or private party, non-profit organizations are publicly owned. 501C3 churches cannot be sold like a business or transferred to private individuals by their founders. In certain circumstances where a church misapplies or misuses its assets, the government can decide to lay hold of those assets.
Loss of Privacy
Have it in mind that non-profit organizations are mandated to publicly divulge certain information. Although 501C3 churches are exempt from filing some of the same documentation as other non-profit organizations, there is still necessary information that is expected to be public.
No Political Campaigning Or Lobbying
Just like it was stated above, non-profit churches that get involved in political campaigns risk losing their non-profit status.
In the United States, 501C3churches are restricted to certain functions based on the law. If by any means they function outside of those restrictions, they can lose their non-profit status. If they make money outside of their purposes, these establishments may be subject to Unrelated Business Income Tax (UBIT).
Not all churches in the US are registered as 501c3 organizations, but it could be right for your church. No law says that a church is required to be a 501C3. A church could be organized as a 508© (1) (a), 501C3, 501(c) (4), a 501(d), and even a for-profit corporation.
According to experts, the 508(c) (1) (a) might be the best way to organize your church, mainly because it has none of the 501C3 restrictions. It also lets you free your ministry to speak the truth, develop Godly leaders, and stay relevant.