21ST CENTURY CHURCHES AND FEDERAL TAX LAW

46 Pages Posted: 2 Feb 2023 Last revised: 16 Jul 2024

See all articles by Ellen P. Aprill

Ellen P. Aprill

Loyola Law School Los Angeles

Lloyd Hitoshi Mayer

Notre Dame Law School

Date Written: February 2, 2023

Abstract

Federal tax treatment matters to churches, the term the IRS uses for all types of religious congregations, including synagogues, mosques, and temples. The federal tax provisions most significant for churches and certain entities closely related to them, however, are not those that the public and commentators often assume. Exemption from income tax and the ability of donors to deduct contributions, the benefits that receive the most public attention, in fact provide surprisingly little benefit either to churches in the aggregate or to most individual churches. Their status as organizations taxexempt under section 501(c)(3) of the Internal Revenue Code, moreover, imposes a variety of burdens on them. The burdens include limitations on lobbying and the prohibition on any intervention in campaigns for public office. At the same time, churches enjoy special tax benefits not afforded to other section 501(c)(3) organizations, not even other kinds of tax-exempt religious organizations. These special benefits make church status appealing. Such benefits include exemption from filing with the IRS Form 990, an annual information return that, with the exception of the names and addresses of major donors, is also publicly available. In addition, the IRS cannot begin any audit of a church unless it complies with several procedures. Further, unlike other section 501(c)(3) organizations, churches are not required to file an application for recognition of exemption, although many choose to do so. These advantages limit oversight of churches by the IRS, the media, and the public. They create an incentive for religious organizations that share some traits commonly found in churches to seek status as a church. Two recent IRS grants of church or association of churches status have attracted sharp criticism from the media and members of Congress. At the same time, a number of developments, such as loss of membership,

Keywords: church, tax, nonprofit, religion, virtual

JEL Classification: K39, L39, Z12

Suggested Citation

Aprill, Ellen P. and Mayer, Lloyd Hitoshi, 21ST CENTURY CHURCHES AND FEDERAL TAX LAW (February 2, 2023). 2024 U. Ill. L. Rev. 939, Loyola Law School, Los Angeles Legal Studies Research Paper No. 2023-01, Available at SSRN: https://ssrn.com/abstract=4346286 or http://dx.doi.org/10.2139/ssrn.4346286

Ellen P. Aprill

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1157 (Phone)
213-380-3769 (Fax)

Lloyd Hitoshi Mayer (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States
574-631-8057 (Phone)
574-631-4197 (Fax)

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