Can a Ministry Lose it’s 501(c)(3) Status?

By Chaston Asbury

Congratulations! Your ministry has received its 501(c)(3) status with the IRS! We are excited for you and the work that your ministry now has the freedom to do!

Amidst the excitement of running a charitable organization, you may be asking yourself, “Is there anything that I have to do to maintain my ministry’s tax-exempt status?” In addition to maintaining compliance at the state level by filing required annual reports or registering in your state as a charitable organization, there is a requirement at the federal level that is imperative you know about.

Most nonprofit organizations, except for churches, are required to file Form 990 every year to maintain compliance with the IRS. If an organization goes three consecutive years without filing a Form 990, then the IRS will revoke your organization’s 501(c)(3) status.

Why do I have to file Form 990?

Since your organization will be receiving funds from the general public as tax-deductible donations, those funds must be used for charitable purposes. Once organizations have obtained the 501(c)(3) status by completing Form 1023, the IRS uses Form 990 to ensure that those organizations are remaining compliant with the tax code.

Requesting financial information on Form 990 allows the IRS to determine if your ministry is: 

• Continually meeting the public support test

• “33.3% or more of [a 501(c)(3) organization’s] total support must come from governmental agencies, contributions from the general public, and contributions or grants from other public charities.” - Department of the Treasury Internal Revenue Service

• Remaining organized for charitable purposes

• “The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; the advancement of religion; the advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law, and combating community deterioration and juvenile delinquency.” - Department of the Treasury Internal Revenue Service

• Operating for the private benefit of individuals within your ministry

• “Applying the Supreme Court rationale in Better Business Bureau Of Washington, D. C., Inc. v. United States, 326 U.S. 279 (1945), the presence of private benefit, if substantial in nature, will destroy the exemption regardless of an organization’s other charitable purposes or activities.” - Internal Revenue Code

Do Churches have to file Form 990?

After learning about the serious implications of not filing Form 990 tax returns each year, many pastors may wonder if their churches are required to file the same Form 990. The answer to that question is: “No.” 

Section 6033(a)(3)(A)(i) exempts churches, their integrated auxiliaries, and conventions of churches from filing Form 990. So while all other nonprofit organizations must file an annual Form 990, churches do NOT have to file an annual Form 990 with the IRS.

If your church has filed Form 990s in the past, then there could be some negative implications to your tax-exempt status as a church. If this is your situation, call us today at 877-494-4655 so that we can provide you some guidance on how to correct it. 

Even though churches are exempt from filing annual Form 990 tax returns, there is still one type of Form 990 that churches must file if they have engaged in unrelated business income.

Are all Form 990’s the same?

There are several variations of Form 990 annual informational return. They are listed below:

• 990-N (the e-Postcard): A 990N is an electronic notice. Organizations with gross receipts of normally $50,000 or less will file this electronic notice. 
• Form 990-EZ: Form 990-EZ is also referred to as the short form. Organizations with gross receipts of normally more than $50,000 but less than $200,000, and whose assets are valued at less than $500,000, are required to file this form. 
• Form 990: Form 990 is also known as the long form. Organizations whose gross receipts are on average $200,000 or greater, or whose assets are valued at $500,000 or greater, are required to file Form 990. 
• Form 990-PF: All private foundations are required to file Form 990-PF. 
• Form 990-T: All nonprofits, including churches, must file a Form 990-T if they have a gross income of $1,000 or more from unrelated business activities (i.e. income from conducting an activity unrelated to their tax-exempt purpose). 

On April 14, 2020, the IRS confirmed that, in response to the coronavirus (COVID-19) pandemic, the deadline imposed on tax exempt organizations for filing Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF, 990-BL, 990-T, and 990-N e-postcard) that are due between April 1 and July 15 have been extended to July 15.

Typically, all organizations required to file Form 990 must submit the return by the 15th day of the 5th month of their fiscal year. For instance, if your ministry’s fiscal year ends on December 31st, you are required to file your ministry’s Form 990 by May 15th of the next year. If your fiscal year ends June 30th, you are required to file Form 990 by November 15th of the same year.

The extension of the deadlines will give tax exempt organizations more time to focus on their ministry during this time of crisis.

StartCHURCH is here to help.

The administrative tasks of operating your ministry’s nonprofit may, at times, feel overwhelming. We are here to take the burden of administration off or your shoulders so that you can focus on your ministry-related activities.

Our Form 990 Service can help you stay in compliance with your ministry's annual Form 990 filing requirement. With the assistance of our highly trained staff and CPAs, we can help ensure that you are filing the correct Form 990 for your ministry on time. Don't wait to file your Form 990. For more information or to file your Form 990, please give us a call at 877-494-4655.

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