Ministry Freedom: Introduction to 508c1A
What are the 508c1A benefits and requirements for an outreach program, ministry, chaplaincy, Bible study or church? What is a 508 Non Profit Faith-Based Organization (FBO)? These are important considerations when learning how to start a ministry without 501c3. Destiny 508 has provided this document to summarize the "must-know" information you need to be able to understand the 508c1A Nonprofit option as an alternative to the 501c3 status for your church, Bible study group or ministry. Introduction to Section 508 It may be a surprise to some that there are over 27 classifications of IRS nonprofit organizations. When people hear the word nonprofit, they typically assume that the organization is a 501c3. Most have never heard of the 508c1A nonprofit alternative for churches, even if they have been in church or ministry for years. The 508c1A designation for churches is part of the Internal Revenue Code Section 26 and the organization that files under this designation is often referred to as a Faith-Based Organization or FBO You may be on this website having done an internet search for IRS 508c1A information or 508c1A law. If you did, this page will help answer your questions. The church has many types of styles and ministry models as it shares the love of God and the gospel with the world. We always say that some churches or ministries are much less formal than what we think of today and look more like the church that Jesus gathered which was missing the four walls and a steeple that we may be accustomed to in our spiritual and religious upbringing... The following information will help you understand if your ministry or outreach would be served well by formally setting up as a 508c1a nonprofit. Even if you are a church ministry, it may be time to organize it under its own legal nonprofit structure and discover what God may do the grow the ministry from there. Here is some great information to help answer some of the most common questions that we receive. We do not offer this information as legal advice as we are not lawyers, but we believe you will find it helpful. What every believer needs to know concerning churches that are automatically tax exempt under 508(c)(1)(A) [Free Churches] verses the government approved churches 501(c)(3) [State Churches] The Church was once a great influence on our nation and its government. However, that all changed in 1954 when churches were added to the 501(c)(3) section of the IRS tax code (IRC). The 501(c)(3) church has been stripped of its freedom of speech as a result of its partnership with the government. They have voluntarily silenced themselves concerning anything touching politics and the government, even in spiritual matters important to believers. If the Church had not lost its freedom of speech to influence the government, maybe prayer would have not been removed from schools on June 25, 1962. It was at this point the nation began a huge spiritual spiral downward, the statistics are staggering. The Church’s influence on politics and government concerning spiritual matters such as freedom of religion, freedom of speech, abortion, and homosexuality is the evolutionist greatest fear. By silencing themselves regarding “political” issues, the 501(c)(3) church has given government run public schools permission to teach our children lies without resistance and compromise the truth on these and many other issues touching our faith. When we compromise we agree to go below what we believe or know to be true, at that point we allow falsehood to become the “truth”. Something cannot be both true and false; it has to be one or the other. Once falsehood is added to or replaces any part of the truth, the statement, belief or “fact” is no longer true. The Butler Act was passed in 1925, prohibiting the teaching of evolution in public schools; it was overturned in Tennessee on May 19, 1967. Its overturn allowed evolutionism, which is one of the greatest “Fairy Tales” in the history of the world, to be taught in public schools. It is currently not taught as an idea, theory, hypothesis or guess, but as an actual fact. The public schools are teaching our children an inaccurate account of our country’s history by removing references to the providences of God and the Christian faith, which is what our country was founded upon. The public school system is also teaching our children about inappropriate sexual relations, promoting the homosexual lifestyle in their sex education classes. All this is aimed at removing God from our hearts and minds in order to erode the faith of our children. The Church, the Body of Christ, can once again become a spiritual influence on the government if we take back our voice, our freedom of speech, by breaking the bond it has with the government. When the Church turns away from the world and submits itself to and is ruled by Jesus Christ the Lord alone, then it can truly be the light of the world and the salt of the earth. Only then will the Body of Christ truly be “the Church”. The Lord reveals that as His disciples we should not be unequally yoked with unbelievers (2 Cor. 6:14-7:1).This not only covers marriage and personal relationships, but also all business partnerships. As the Church, this also includes our partnerships with the State and Federal government in pursuit of 501(c)(3) status. How can we take back our freedom from the government’s control? We can do this by not incorporating our churches and pursuing 501(c)(3) status. The Church, or individual groups of the Church, should not incorporate on a state level, due to becoming creatures of the State which are subject to the State. Those who incorporate and choose to pursue 501(c)(3) status, become creatures which are subject to the Federal government and are prevented (gagged) from speaking out on political and spiritual matters that do not agree with the current “political atmosphere”. Section 508(c)(1)(A) states that “churches, their integrated auxiliaries, and conventions or associations of churches” are a mandatory exception to section 501(c)(3), they are already tax exempt without notifying or applying to the government under section 501(c)(3). Churches receive the same tax exempt status and benefits as a 501(c)(3) organization, without the partnership with the government. We do not have to lose our voice! Sec. 508. — Special rules with respect to section 501c3 organizations (a) New organizations must notify Secretary that they are applying for recognition of section 501(c)(3) status Except as provided in subsection (c), an organization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3) (c) Exceptions (1) Mandatory exceptions (A) churches, their integrated auxiliaries, and conventions or associations of churches, or In IRS Publication 526, Charitable Contributions, the IRS once again states that churches are qualified organizations and do not need to apply to the IRS: “You can deduct your contributions only if you make them to a qualified organization. To become a qualified organization, most organizations other than churches and governments, as described below, must apply to the IRS.” Examples. The following list gives some examples of qualified organizations. Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations.” And according to IRS Publication 557,Tax-Exempt Status for Your Organization: “Churches. Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption.” As shown in the examples above and the IRS code itself, a church does not have to apply to or notify the government (state or federal) of its tax exempt status, we are already established as a separate creature from the state. We need to remain separated from the state and not join in any type of partnership that would create a yoke between the church and government, no matter what “benefits” they may mislead us to believe are available. Note: The church as described under IRC 508(c)(1)(A) in this article is also known as a “Free Church”. What is the difference between 501(c)(3) and 508(c)(1)(A)? Section 501(c)(3) of the Tax Code is the section that describes charitable organizations that are exempt from paying federal income tax, including churches. Section 508 of the Code, which is entitled "Special rules with respect to section 501(c)(3) organizations," requires any organization created after October 9, 1969 that seeks 501(c)(3) charitable exemption to notify the Internal Revenue Service and apply to obtain an official recognition, but exempts those organizations described in Section 508(c) from the filing requirement. Section 508(c)(1)(A) exempts churches, their integrated auxiliaries, and conventions or associations of churches, while subsection (B) exempts charities that are not private foundations and normally have gross receipts of not more than $5000 a year. Basically everybody who wants 501(c)(3) status, except churches, has to file a Form 1023 or 1023-EZ to be recognized as a 501(c)(3) charity by the IRS. The religious organizations mentioned in (A) are also exempt from filing an annual Form 990 series tax information return. The small nonprofits that don’t have to file for recognition of exemption under 508(c)(1)(B) nevertheless have to file a tax information return, normally the Form 990-N electronic postcard. They will automatically lose their exempt status (even though the IRS may not know that they exist) if they fail to file for three consecutive years. What are the advantages of a 508c1A? In the past the church, or Faith-Based Organization, was seen as the source of moral and religious standards and had a great influence on the shaping of the culture in the United States. The Founding Fathers who wrote the Constitution believed this so emphatically they placed in the First Amendment the freedom of speech, religion, press, assembly and citizens the ability to petition the government if they did something that blocked any of these freedoms. The church has the greatest opportunity to again make an impact on American society through the 508c1A designation. Each donor, each kingdom steward will be very blessed as well. The advantages of being 508(c)(1)(A) FBO include rights guaranteed under Federal Law 26 U.S.C. § 6033(a)(3(a): 1. Tax Exempt, and can give tax deductible receipts for donations. 2. Freedom of Speech, including, but not limited to, politics, referendums, initiatives, and candidates. 3. Exception from Federal reporting (does not file a tax return). 4. Exception from “rendering under oath such statements, make such other returns, and comply with such rules and regulations as Secretary (IRS) may from time to time prescribe”. 5. Not subject to public scrutiny due to the non-reporting requirements required by the 501c3 status. 6. Not required to file for non-profit status with the IRS. 7. Simplified filing process. 8. The Founding Members cannot be removed from the Board of Directors. A 508c1A financial records and Board meeting minutes are not subject to public scrutiny, unlike the 501c3 that is required to file their records with the IRS for the purpose of public scrutiny. |
What other kinds of ministries can benefit from the 508c1a legal structure?
Where in the Internal Revenue Code does it talk about a 508c1A?
Why was it added to the Internal Revenue Code?
How does the IRS define "Churches"?
What are the advantages of a 508c1A?
Are there disadvantages filing as a 508c1A?
What are some of the 508c1A benefits compared to a 501c3?
What other kinds of ministries can benefit from the 508c1a legal structure?
There are several ministries such as discipleship ministries, church planting ministries, para church ministries, prayer groups, restoration ministries, men's ministry, worship teams, a helping hands ministry that serves the local community or any help ministries.
Ministry leaders, pastors, youth ministers, and nonprofit founders lead various ministries like a local church, an online or virtual church, a chaplaincy program, a recovery program, an evangelism church, children's ministries or children's church, local missions, a five fold ministry, a Christian fellowship, renewal ministries, a Christian center, or a women's ministry. It is surprising how many ways the church functions.
Other ministries that may be lesser known could benefit like your local outreach ministry or outreach church, missionary care or Christian pastoral ministries. Do you have one of these ministries or programs? A Baptist preschool, a Christian school, a student ministry, a revival ministry, prayer ministry, church youth group, young adult ministry, singles ministry, family worship center, or any life changing ministries? A simple 508 nonprofit could help you grow and reach more of those you love.
We've helped many leaders within the local church benefit from organizing their own 508 nonprofit to reach the specific audience that they are called to reach. Many times the local church that meets on Sunday does not have the personnel or staff to reach all the needs of the community around them and starting your nonprofit ministry would provide additional impact to the community and unburden the local church.
Where in the Internal Revenue Code does it talk about a 508c1A?
26 USC § 508 - Special rules with respect to section 501(c)(3) organizations
Legal Information Institute
Cornell University of Law School
26 USC § 508
Current through Pub. L.112-143, except 112-141. (See Public Laws for the current Congress.)
(a) New organizations must notify Secretary that they are applying for recognition of section 501(c)(3) status except as provided in subsection (c), an organization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3)-
(1) unless it has given notice to the Secretary in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or
(2) for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection.
(b) Presumption that organizations are private foundations
Except as provided in subsection (c), any organization (including an organization in existence on October 9, 1969) which is described in section501 (c)(3) and which does not notify the Secretary, at such time and in such manner as the Secretary may by regulations prescribe, that it is not a private foundation shall be presumed to be a private foundation.
(c) Exceptions
(1) Mandatory exceptions Subsections (a) and (b) shall not apply to-
(A) churches, their integrated auxiliaries, and conventions or associations of churches, or
(B) any organization which is not a private foundation (as defined in section 509 (a))and the gross receipts of which in each taxable year are normally not more than $5,000.
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Do not confuse the 508c1A code with the 508c1B code above.
Why was it added to the Internal Revenue Code?
"Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." Constitution of United States of America 1789, Amendment 1
Legislation approved in 1954, commonly known as the Johnson Amendment, put into place a law that churches and other nonprofit organizations that are tax exempt “are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office,” according to the IRS website. This mandated that those organizations be registered under the IRC as a 501(c)(3) with reporting requirements that would allow the government to monitor their activities.
Section 508 of the Internal Revenue Code (IRC) was codified to formalize a standard that had been implicit since America's independence in 1776 - freedom of religion, freedom of speech and freedom to peaceably assemble.
Due to the violation of First Amendment rights on the religious organizations in America with the requirements of the 501(c)(3) designation, the decision was made to establish a new law which returned to FBO's their First Amendment Rights. As a result, 508(c)(1)(A) was approved by Congress.
How does the IRS define "Churches"?
As a 508c1A, the church designation by Internal Revenue Code, there is an exception to all taxation and is, therefore, not required to file federal tax.
The IRS generally uses a combination of the characteristics listed below, together with other facts and circumstances, to determine whether an organization is considered a church for federal tax purposes which they apply to churches filed under the 501c3 Internal Revenue Code.
The term church is found, but not specifically defined, in the Internal Revenue Code. With the exception of the special rules for church audits which does not apply to the 508c1A designation, the use of the term church also includes conventions and associations of churches as well as integrated auxiliaries of a church.
Certain characteristics are generally attributed to churches. These attributes of a church have been developed by the IRS and by court decisions.
They include:
1. Distinct legal existence
2. Recognized creed and form of worship
3. Definite and distinct ecclesiastical government
4. Formal code of doctrine and discipline
5. Distinct religious history
6. Membership not associated with any other church or denomination
7. Organization of ordained ministers
8. Ordained ministers selected after completing prescribed courses of study
9. Literature of its own
10. Established places of worship
11. Regular congregations
12. Regular religious services
13. Sunday schools for the religious instruction of the young
14. Schools for the preparation of its members
What are the advantages of a 508c1A?
In the past the church, or Faith-Based Organization, was seen as the source of moral and religious standards and had a great influence on the shaping of the culture in the United States. The Founding Fathers who wrote the Constitution believed this so emphatically they placed in the First Amendment the freedom of speech, religion, press, assembly and citizens the ability to petition the government if they did something that blocked any of these freedoms. The church has the greatest opportunity to again make an impact on American society through the 508c1A designation. Each donor, each kingdom steward will be very blessed as well.
The advantages of being 508(c)(1)(A) FBO include rights guaranteed under Federal Law 26 U.S.C. § 6033(a)(3(a):
1. Tax Exempt, and can give tax deductible receipts for donations.
2. Freedom of Speech, including, but not limited to, politics, referendums, initiatives, and candidates.
3. Exception from Federal reporting (does not file a tax return).
4. Exception from “rendering under oath such statements, make such other returns, and comply with such rules and regulations as Secretary (IRS) may from time to time prescribe”.
5. Not subject to public scrutiny due to the non-reporting requirements required by the 501c3 status.
6. Not required to file for non-profit status with the IRS.
7. Simplified filing process.
8. The Founding Members cannot be removed from the Board of Directors.
Are there disadvantages filing as a 508c1A?
This is a common question that we are asked, so we want to address this concern right up front. It is always good to be wise in making any important decision and knowing both the advantages and disadvantages of an option helps you to make an educated decision. The same is true in choosing between becoming a 508c1A or a 501c3 nonprofit. Below we have listed the most obvious disadvantages for your consideration in making your decision.
1. It is not technically considered a disadvantage, but we include it here as it may cause you to question the legitimacy of the designation. The 508c1A is lesser known in the marketplace and nonprofit world and often misunderstood. Because of this, you may find it difficult to find information about it, especially from lawyers and accountants as their services are not needed to establish and maintain the organization. It may also cause donors to pause before making a donation should they be aware of your 508c1A status because they have never heard of it before.
2. The 508c1A is not usually eligible for government grants because the nonprofit status does not require approval by the Federal Government and is not required to fill out reporting forms 1023 and 990 which the 501c3 designation requires. These submitted reports to the IRS are what Federal Grantors use to determine approval for Government Grants. This is not a hard and fast rule since we know of some 508c1A organizations that have been successful in received government grants, although it is not common. We suggest that you do not form your 508c1A with an expectation of receiving grants since it is so rare. Should you need grants to accomplish the purpose of your organization then a 501c3 status would be a wise choice.
What are some of the 508c1A benefits compared to a 501c3?
Having listed the benefits, advantages and disadvantages, it becomes clear that the 508c1A is the best option for a church, ministry or FBO to form under for their organization. This allows for true freedom as a church or faith-based organization compared to the traditional 501c3 with its reporting and permission-based requirements. Even if you are researching what are the pros and cons of 501c3 for churches and ministries or are asking does a ministry have to be a 501c3, this information will help you.
There are several benefits that the 508c1A nonprofit designation holds over the 501c3 nonprofit designation. The following is a listing of some of those benefits.
1. Filing an application to become a 508c1A non-profit with the IRS is not required. There is no requirement to file Form 1023, which is required to become a 501c3. This eliminates the need for IRS approval of your application.
2. There is no annual income tax filing requirements, such as the required Form 990 salary disclosure as a 501c3, when you are a 508c1A.
3. The church or ministry does not have any restrictions on speaking about politics as a 508c1A, unlike the restrictions under a 501c3.
4. A 508c1A financial records and Board meeting minutes are not subject to public scrutiny, unlike the 501c3 that is required to file their records with the IRS for the purpose of public scrutiny.
508c1a
What Are the Benefits of a 508c(1)a Trust Ministry?
A 508c(1)a Trust Ministry is a faith based organization that provides benefits similar to a Private Membership Association or PMA. You may be wondering, what are the benefits of having a 508c(1)a Trust Ministry? Here are just a few:
1. You will have a place to call home. A 508c(1)a Trust Ministry provides a sense of community and belonging that is often missing from modern life.
2. You will have structure and support. A 508c(1)a Trust Ministry provides structure and support, which can be invaluable for those who are struggling.
3. You will have access to resources. A 508c(1)a Trust Ministry provides access to resources that can help you grow in your faith.
4. You will be able to make a difference. A 508c(1)a Trust Ministry allows you to make a difference in the world by helping others find faith and hope.
Other advantages of being 508(c)(1)(A) FBO include rights guaranteed under Federal Law 26 U.S.C. § 6033(a)(3(a):
1. Tax Exempt, and can give tax deductible receipts for donations.
2. Freedom of Speech, including, but not limited to, politics, referendums, initiatives, and candidates.
3. Exception from Federal reporting (does not file a tax return).
4. Exception from “rendering under oath such statements, make such other returns, and comply with such rules and regulations as Secretary (IRS) may from time to time prescribe”.
5. Not subject to public scrutiny due to the non-reporting requirements required by the 501c3 status.
6. Not required to file for non-profit status with the IRS.
7. Simplified filing process.
8. The Founding Members cannot be removed from the Board of Directors.
Skill OneRead the above information as it explains in detail.
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Skill TwoWe essential do the documents for you and tell you exactly where to file them and what to do next.
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Skill ThreeWe can offer two ways of service, 1. If you are a Moor/Muur, we can take you from the step of Nationality to the 508c1a Trust Ministry. Or if you are NOT reclamated then we can also help you with the 508 process. Therefore, it doesn't mater as long as you are interested in forming a 509c1a.
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