Louis E. Michelson, A Professional Corporation

Frequently Asked Questions.

Do churches register with the federal and state government?  How do you know if a church is recognized as a “church” for federal income tax purposes and for state income tax purposes?  By the way, the term “church” is not limited to Christian churches, but also applies to other religions, so there are Jewish churches, Buddhist churches etc.

Federal Income Tax Purposes

Churches are not required to apply for recognition of tax exemption with the IRS.  However, if nonprofit wants to be recognized as a church for federal income tax purposes, the church would complete and submit an application to the IRS.  The IRS would then issue a determination letter which recognizes their tax exempt status under Internal Revenue Code 501(c)(3).   If IRS recognizes the organization as a church, the IRS determination letter will specify that organization has public charity status” under 170(b)(1)(A)(i) which means that the organization is classified as a church as well as being recognized as tax-exempt under IRC 501(c)(3).  This IRS determination letter is THE critical document that indicates that the organization is recognized as a church for federal income tax purposes.

State Income Tax Purposes (CA)

To determine whether the nonprofit is a church for California income tax purposes, the church must (it is not discretionary) fill out and submit an application to the Franchise Tax Board.  If the FTB recognizes that the organization is a church, FTB then issues a determination letter which recognizes the tax exempt status under Revenue and Taxation Code Section 23701d, which is the California equivalent of Internal Revenue Code 501(c)(3).  The FTB determination letter also has a caption at the beginning of the letter which specifies the “purpose” of the organization.   If the organization is recognized as a church, the FTB will indicated that the “purpose” is “church”.  The FTB determination letter is THE critical document that indicates that the organization is recognized as a church for California income tax purposes.