Question: What’s the Difference Between a Church and a Religious Organization?
Answer: Let’s first do what we can to define the terms and then address
the question. As we all know the Internal Revenue Code (IRC) is not always
an easy read, but here are a few facts:
The term church is found, but not specifically defined, in the Internal
Revenue Code. With the exception of the special rules for church audits,
the use of the term church also includes conventions and associations
of churches as well as integrated auxiliaries of a church.
Certain characteristics are generally attributed to churches. These attributes
of a church have been developed by the IRS and by court decisions. They include:
- Distinct legal existence
- Recognized creed and form of worship
- Definite and distinct ecclesiastical government
- Formal code of doctrine and discipline
- Distinct religious history
- Membership not associated with any other church or denomination
- Organization of ordained ministers
- Ordained ministers selected after completing prescribed courses of study
- Literature of its own
- Established places of worship (e.g., temples, mosques, and synagogues)
- Regular congregations
- Regular religious services
- Sunday schools for the religious instruction of the young
- Schools for the preparation of its members
The IRS generally uses a combination of these characteristics, together
with other facts and circumstances, to determine whether an organization
is considered a church for federal tax purposes. Therefore, the term “church”
can include a religious order or a religious organization if the order
or organization is an integral part of a church and is engaged in carrying
out the functions of a church whether as a civil law corporation or otherwise.
A ”Religious Organization” is defined best by what it is not.
Religious organizations are not places of worship. They may be, for example,
non-denominational ministries or entities whose principal purpose is the
study or advancement of religion. Unlike churches, religious organizations
that wish to be tax exempt generally must apply to the IRS for tax-exempt
status unless their gross receipts do not normally exceed $5,000 annually.
You may also hear the term, “Faith-based organization”. Faith-based
organizations might be a church, but often are not. They differ from secular
charities like the Red Cross and United Way in that their call to serve
is based on scripture or other religious texts. The Salvation Army and
Catholic Charities are two such examples of what are broadly construed
as faith-based organizations.
Figuring out how the IRS will see your organization and understanding its
obligations is not always an easy matter. The Internal Revenue Manual
outlines an number of specific characteristics the IRS will review during
its 501(c)(3) examination of a religious organization not claiming church status:
- Determine that the organization is both organized and operated for IRC
§ 501(c)(3) purposes;
- Ensure the organization operates for public purposes rather than private
- Ascertain whether the organization engages in any substantial nonexempt
activity, such as trade or business, social or recreational activities;
- Ensure the organization’s assets are permanently dedicated to IRC
§ 501(c)(3) purposes;
- Evaluate the organization’s procedures to account for funds disbursed
to individuals or non-IRC § 501(c)(3) organizations;
- Determine if the organization pays, directly or indirectly, any excessive
compensation, fees, allowances, or taxable benefits;
- Determine whether the organization has participated in any substantial
- Determine whether the organization has intervened in any political campaign
on behalf of or opposition to any candidate for public office
- Verify the organization’s foundation status.
Is your Nonprofit a Church or a Religious Organization? Hopefully, this
Post has shed a little light on the complexity of that question and how
the IRS might see things.