Love Your Law - Helping Churches and Ministries Understand Law and Tax

Mark Virkler's picture

Last weekend I met Dr. M. Stephanie Zeller who has created an amazing website which offers free resources for setting up corporations and churches and gaining 501C3 status with the IRS. Her website is Love Your Law, and we have added it as a permanent link to our "Links Page," which you will find under the "Free Resources" tab. Click on "Outstanding Links" and then under "Government" you will find this amazing and extremely helpful website listed. Check it out. It's free.

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Anonymous's picture

Dr Virkler.

I strongly disagree with this post. According to our Constitution churches and religious organizations are automatically exempt from taxes and government regulation. Even the director of the IRS can't figure out why churches sign up for 501c3 exempt status!
When a church or religious organization signs up for 501c3 they are in effect making the government the head of their church when Christ is supposed to be the head. When you register with the government they can then tell you what you can and can't preach (politics included). Our founding fathers came from countries where the church was controlled by the government and ministers were told what they could and couldn't preach. That was one of the main reasons this country was started in the first place- religious freedom from government control and persecution!! So why pray tell are churches placing themselves right back into that position of government control??
I have IRS documentation to back this up if you would like me to send it to you. Give me an email address and I'll send it. We need to WAKE UP! Ever heard of 'Separation of Church and State"? It means we don't register to let the government control churches!

blessings,
Lori Jett

Mark Virkler's picture

How would you suggest a church be set up. Assuming a young congregation came to you wanting to get themselves established in some way.

Anonymous's picture

I appreciate the sentiment expressed. Perhaps a useful way to respond is to share a paragraph from one our web pages (http://www.loveyourlaw.org/church-category/ ).

Are churches immune from civil law and 501(c)(3) rules?
We are aware that there are ministries that dispute the need of the church to seek or obtain 501(c)(3) status. They see the "Christian church" as immune from civil jurisdiction on the basis that the "Christian church" is commissioned by Christ. Our view is different. It is completely true that the ecclesia is commissioned by Christ and He is head of the church He commissioned. Yet, it is also true that we do not reside exclusively in the Kingdom of God. We also reside in the kingdom of this world.

Legal immunity in the civil realm is not a matter of our theology, but of constitutions, laws and court interpretations. Churches in the USA do possess a certain degree of immunity in the civil realm because of constitutions, laws and court interpretations; however, it is not a carte blanc immunity from civil law. Civil law does exist in the USA and it strikes us as wishful thinking to assert that civil law is irrelevant to the American church.
Rather than assert an immunity that our legal system does not recognize, it seems more productive for us to try to understand the civil laws and how they may apply to the church. It is from a base of understanding that good choices can be made.

Our site is about providing churches with information and concepts, so that they understand what the law says and make informed decisions.
Dr. Stephanie Zeller

Anonymous's picture

The response to the initial comment seems to be setting up a strawman argument. There was no claim of immunity from Civil jurisdiction made. This same argument is made on the site, and it ignores the central thrust of the concern, namely, that there are a host of disadvantages of taking advantage of the tax exempt status. The Love your Law site covers a bunch of important information that churches and ministries can take advantage of, but giving better balance to these particular concerns would help bolster its credibility since it is a contentious issue and gets to the very core (and biblical!) values of freedom on which this country was founded.

Anonymous's picture

I have added a new page to the Love Your Law site titled "Church Immunity" as a follow-up to my response.

Stephanie Zeller

Anonymous's picture

I agree that the issue is an important one that needs to be covered better on the site, and I will tend to that. I’ll share now my basic take of the topic.

I don’t think it is the “applying for” 501(c)(3) status that causes difficulties for a church. I think it is the accepting of tax benefits that are associated with 501(c)(3) status that brings churches under the 501(c)(3) rules.

Now, some important items are state level items, such as the real property tax exemption. I expect that it varies state by state as to whether these particular tax advantages are based on a state’s constitutional exemption for religious organizations or is simply a state tax exemption specifically tied to an organization’s “non-profit” status.

But, other tax advantages (that churches are fond of) are federal and do seem to be tied to a church being “deemed to be” a 501(c)(3) organization. These include:
(1) The ability to grant a housing allowance to its pastor
(2) The tax deduction available to donors for gifts to the church
(3) The exemption of the church from paying income tax on non-UBIT income
(4) The ability of the church to hire a person under an R-1 visa.
(5) The ability to elect a reimbursement method for unemployment insurance (a state program with federal underpinnings)
(6) The ability to treat pastors as self-employed for SECA purposes and as employees for other purposes (which goes to the practical ability to opt out of social security)

I do agree that the church has lost a degree of independence by becoming dependent on governmental tax advantages. Where I believe we should start is by being a little more disciplined:
(1) Don’t buy a house you can’t afford without the tax benefit of the housing allowance.
(2) Train your congregation to live on an amount that allows them to tithe and give, without the tax break of a deduction for giving (e.g. they should tuck away (not spend) the equivalent of the tax benefit each year.
(3) Budget, so that a church would have a surplus, even if it had to pay some income tax.
(4) Accept that R-1 visas are not granted to non-residents working for a church that is not 501(c)(3) exempt.
(5) Have the church set aside each year an amount that would be equal to the unemployment tax on each employee, so that if it ever had to pay that tax, it could afford it.
(6) Train the pastor who has opted out of social security to live on the income that would be available if social security tax had to be paid.
(7) As to property tax (which may become an issue for all non-profits in the future), don’t incur a lot of debt when the church is built. There needs to be a buffer to cover whatever the future brings, including property taxes.

If churches followed these disciplines, then churches would experience a greater freedom. It is really the lack of economic autonomy – not the rules associated with 501(c)(3) tax breaks that has diminished the voice of the church.

Even with economic autonomy, the church would still need to follow the rules of good citizenship, follow labor laws, avoid discrimination and that sort of thing.

Stephanie Zeller

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