Do churches pay taxes?

You’ve probably heard that churches do not pay taxes – but is that all kinds of taxes? 

Whether it’s a weekly food bank on your church’s campus or seasonal event centered around your religion’s holidays, Ribbon can help you through the fiscal sponsorship process so you can focus on the mission of your organization.

The Basics

Here in the United States, religious organizations including churches, temples, mosques and synagogues are exempt from paying federal income taxes, so long as they are registered 501(c)(3) organizations. This exemption is based on the principle of separation of church and state, as outlined in the First Amendment. 

There are still some tax obligations to consider however, such as employment, Medicare, and unemployment taxes. And, if your organization has income coming from unrelated activities – like renting out property or selling goods that aren’t tied to your mission – you may be required to file additional paperwork each year. 

On the state and local level, sometimes there are additional obligations to consider such as property or sales tax – but that varies from state to state and can depend on many factors. If you decide to get a fiscal sponsor for your religious charity, they will know what those factors are. 

What about tithes?

Some religious houses collect tithes regularly as a part of their practice. These monetary donations are voluntary and often given weekly or monthly. The IRS does consider tithes tax-deductible. Whether you collect or give tithes, keep up with these records in case someone needs them.

Maintaining tax exemption status

While these types of groups are generally tax exempt, there are some ways that status can be revoked by the IRS. If a religious organization participates in a lot of commercial activities, endorses political candidates, or engages in activities that are deemed lobbying, they could be at risk of losing their exemption status. 

Political or not, it’s a good idea to take a step back when considering any new program for your organization to make sure that it aligns with the core values of your mission. Compliance with IRS regulations is critical for any nonprofit regardless of religious affiliation, and failure to comply can cost a lot of money (and time).

Do I have to start a new non-profit to start a charity related to my house of worship/religion?

Not necessarily! This is a great example of where fiscal sponsorship can really shine. Your church is likely already an established 501(c)(3) and you could ask the leadership if they would be willing to sponsor your charity. 

Soup kitchens and winter clothing drives are especially great candidates for fiscal sponsorship, since you could accept tax-exempt donations specifically for these activities, but you would not have to maintain a board of directors or file a mountain of forms each year. Even if you do not have an existing relationship with a church in your area, you can still seek fiscal sponsorship from any 501(c)(3) – Ribbon will help you find the perfect fit.

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Do churches pay taxes?

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