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Congressional Research Service
Informing the IegisIative debate since 1914
October 25, 2023
What Is a Church for Federal Tax Purposes?
Entities that are churches under Internal Revenue Code
(IRC) Section 170(b)(1)(A)(i) also qualify as religious
organizations under IRC Section 501(c)(3), and thus are
generally exempt from the federal income tax under IRC
Section 501(a). However, churches receive additional tax
benefits that make it more advantageous for an organization
to qualify as a church under IRC Section 170(b)(1)(A)(i),
than merely as a religious organization. For example,
churches are generally subject to fewer filing obligations
and receive special procedural protections during audits.
Congress has not defined church in the IRC, and the
Department of the Treasury and Internal Revenue Service
(IRS) have not defined the term in regulations
corresponding to IRC Section 170. Courts have stated that
the additional statutory allowances provided to churches
indicate that Congress intended the term church to have a
more restrictive definition than religious organization.
Over time, courts and the IRS have developed several tests
and applied a number of factors to determine whether an
organization qualifies for church status. In applying these
tests and factors, courts and the IRS have routinely avoided
evaluating an organization's beliefs. Accordingly, church,
as used in the IRC, is not limited to a particular faith,
denomination, sect, ritual, or practice, and can include
several houses of worship.
This In Focus reviews how courts and the IRS determine
when a religious organization is a church for the purpose
of federal income tax exemption.
Qualification Under IRC Section
SOI1(c)(3)
Churches must first qualify for federal income tax
exemption under IRC Section 501(c)(3). To so qualify, (1)
the organization must be organized and operated
exclusively for religious, educational, scientific, or other
charitable purposes; (2) the organization's net earnings may
not inure to the benefit of any private shareholder or
individual; (3) no substantial part of an organization's
activities may be attempting to influence legislation; and (4)
the organization may not intervene in any political
campaign on behalf of (or in opposition to) any candidate
for public office.
Relying on the Supreme Court's decision in Bob Jones
University v. United States, 461 U.S. 574 (1983), the IRS
asserts that there is another requirement for exemption from
the federal income tax under IRC Section 501(c)(3)-an
organization's purpose and activities must not be illegal or
violate fundamental public policy. In Bob Jones University,
the Supreme Court upheld the IRS's revocation of a
university's 501(c)(3) status because the university had a
disciplinary rule that prohibited interracial dating and
marriage, which was in violation of federal public policy.
The disciplinary rule, carried out on the basis of the
university's religious beliefs, called for students to be
expelled if they dated outside their race, were in an
interracial marriage, or encouraged others to violate the
disciplinary rule. The university also denied admission to
applicants in an interracial marriage or known to advocate
for interracial marriage or dating.
The Court analyzed and construed [IRC Section 501(c)(3)]
within the framework of the [IRC] and against the
background of congressional purposes. Its examination
revealed that
underlying all relevant parts of the [IRC], is the
intent that entitlement to tax exemption depends on
meeting certain common-law standards of
charity-namely, that an institution seeking tax-
exempt status must serve a public purpose and not
be contrary to established public policy.
The government's compelling interest in eradicating racial
discrimination in educational institutions substantially
outweighed whatever burden denial of tax benefits placed
on the university's exercise of its religious beliefs, which
were otherwise substantially protected by the First
Amendment's Free Exercise Clause. The Court also noted
that the IRS's policy was founded on a neutral, secular
basis, and did not violate the First Amendment's
Establishment Clause.
An organization that is organized and operated exclusively
for religious purposes and satisfies the rest of IRC Section
501(c)(3)'s requirements is a religious organization.
The De La Salle Approach
In De La Salle Institute v. United States, 195 F. Supp. 891
(N.D. Cal. 1961), a district court determined that in the
absence of congressional guidance, the term church is to
be interpreted in light of its common usage and meaning.
Applying this approach, the district court said [a]n
organization established to carry out 'church' functions,
under the general understanding of the term, is a 'church.'
In decisions after De La Salle, courts have declined to adopt
this approach. Some courts have expressed doubt about the
soundness of the De La Salle approach given the plurality
of religious beliefs, the range of organized activities
undertaken, and the assortment of church structures in the
United States.
The I RS's 1 4 Criteria
In 1978, the IRS announced a list of 14 criteria to evaluate
whether a religious organization qualifies as a church.
The 14 criteria are (1) a distinct legal existence; (2) a
recognized creed and form of worship; (3) a definite and
distinct ecclesiastical government; (4) a formal code of](ViewImageLocal?handle=hein.crs/govengp0001&div=1&collection=&method=preview&ext=.png&size=3)
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