Frequently Asked Questions

I have told several of you over the last two years that I believed that the Lord was showing me that we would eventually have to discard our tax exemption status under 501 c 3. The idea that came to me was that a church or ministry could operate as a "for profit" corporation. Last year, I met a Christian Tax Attorney. He already has set one up and operating in New York. Current plans by IRS are for the audit of 20% of churches and ministries every year. Currently, less than 1/2 of 1% of US. Corporations are audited each year. With the advent of the substantial and recently enacted penalties known as intermediate sanctions against churches and ministries, this type of status continues to gain appeal.

Churches may also decide to operate simply as an unincorporated church. It may be difficult to obtain a bank account if you choose this route, although many are opting for this. The church facility can be owned by a trust or a "for profit" corporation.

My current advice is that your church should be a "not for profit" corporation, but it should not have filed for a 501 c 3 exemption. It is already automatically "excepted" under 501 c 3. Most pastors believe they are required to file form 1023 for a church or for ministry that performs part of the essential functions of the church, such as a missions organization. Such a church or ministry does not have to file form 1023 or form 990. It should simply incorporate, obtain a federal ID number and commence operations. Non-church ministry functions such as social programs and services should be run through a separate 501 c 3 approved ministry corporation.

***CHURCH TAX TIP-TO FILE FOR 501 C 3 EXEMPTION, OR NOT TO FILE?
When a new minister or church is referred to me, I advise them as follows with respect to 501 c 3 and IRS.

1) Churches and ministries that comprise a component part of a church or that perform an integral function of a church are already excepted under IRC 501 c 3. As a result, all churches and ministries operating in the United States are already dealt with under this code section. Legally speaking, all churches and ministries are already under the "watch and control of the IRS". Some believe that churches that elect not to voluntarily file for exemption under 501 c 3 are somehow not under IRS control. Nothing could be further from the truth.

2) There are advantages and disadvantages to going further by filing a voluntary application for exemption, form 1023.

First, the disadvantages: I advise the new ministry that the disadvantage of filing the 1023 is that you are required to disclose annually to IRS on form 990 the amounts of your revenue and expenses. You are also asked a whole host of questions on the 1023 application and annually on the form 990. You are probably more likely to be audited, but this is difficult to prove because the statistics relating to periods under new laws in effect are not yet in. Certainly, you are seen more by IRS. I advise people that if they won't use the letter for some tangible benefits, they are better off not spending the $1,000 dollars it takes to file. They are relieved to find out they are already excepted and that their members can donate to them and receive a tax deduction already.

The advantages of filing the form 1023 are that you get a letter, proving that you have satisfied IRS requirements for exemption. You can show people this letter. Your organization can be included in Internal Revenue Publication 78 as a charitable organization. Many donors will not donate to a charity unless it is in this publication. Some donors won't write you a check if you don't have the letter. You can't get food at the Daily Bread Food Bank or at Farm Share without the letter. So, it has it's advantages.

Now we get to the spiritual implications of being under IRS authority. My own opinion is that the purest form of biblically correct operation of a church is not as a US corporation but as "the church". An Indianapolis Assembly Of God church disincorporated in 1997. IRS attacked their changing of their operation and they appealed in tax court, where they lost and appealed.. The last I had heard, the Supreme Court had granted certiori to hear the case. Case law is a bit weak until this one is sorted out. It may have already been decided, but I am not aware of it, yet I have not researched it in the last six months.

I believe that the system of antichrist is in place and gaining strength and authority in our government. IRS represents the claws of that beast. Daniel J. Pilla in his book IRS, Taxes and The Beast eloquently presents how IRS is being and probably will be more greatly used in the future as the primary means of control by the beast.

The time is coming, perhaps very soon, when the church will have to submerge like a submarine. At that time, we will first have to legally submerge by forming "for profit Corporations" with non churchy names or simply operating without corporations and without bank accounts. Running the cash basis church seems to be where we are heading. How soon we get there is a question I currently have no answer for.

As of right now, I am still filing 1023 applications for ministries, with a good conscience, after I advise each one of what I have just shared with you. Some elect not to file. Some elect to file. All are advised by me to pray and seek the wisdom of God for their ministry. If there is any good news in this, it is that my initial advice to the churches is free. I am one of the few professionals who will tell them they are not required to file. It costs me financially when they elect not to file, but I know God is pleased when I look out for them at my expense. For those who pray and decide to file form 1023, I do the work for 1/3 of what the local attorneys charge, so that is good news too. And I do their corporations, articles of incorporation and bylaws for them for 1/3 of attorneys rates. They consider that to be good news as well. Then I try to help them any way that I can, preaching and teaching at their outreaches and sending them newsletters with prophecy and hints that are timely. They can review my web site at any time to see my latest newsletters. I am trying to be life to our master's church and to please him. I have not been perfect, but I have done my best.

Personally, my incorporated ministry, Freedom Chapel Ministries, Inc., has not filed form 1023. So I think that is an exhaustive response to the tough issues addressed here. With regard to control of the pulpit, each minister is required to be only under the control of God and serving him only. If God tells a minister to speak on a certain issue, he must decide whom he will serve. It might get him fired by his board of deacons or cause the church to incur a penalty or loss of exemption. It is happening all accross our land. Some are in jail because they have stood up for the unborn. A pastor in Connecticut spent sixty days in jail for spanking his son with a belt. He was obeying the word of God. I think that whatever our 501 c 3 status, whether exempt or excepted or in hiding, we had better obey God rather than man.

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