The Finance of Faith: Finances for Tax Exempt Organizations

Normally, one of the benefits of running a religious non-profit organization is being tax exempt. Religious non-profits can easily obtain tax-exempt status under sections 501(c)(3) and 501(c)(4) of the Internal Revenue Code, and free themselves of many of the reporting requirements that other organizations are subject to. That said, however, a religious non-profit cannot simply ignore its finances altogether. Remaining diligent about your finances can be incredibly important if your organization ever runs into trouble.

First, it’s important to remember that your tax-exempt status as a 501(c) organization is not absolute. While you may not need to pay federal income tax, you may still be subject to other forms of taxation, depending on what activities your organization engages in. Also, if your non-profit status is ever called into question (such as if you engaged in some sort of activity barred under the regulations governing non-profit organizations), you may find yourself suddenly owing some or all of those taxes that you haven’t been paying thus far.

Second, even if you are exempt from certain reporting requirements, you still need to have your relevant documents available for public inspection. If you don’t, and your finances come under scrutiny for any reason, your tax-exempt status could be in danger, and with it the welfare of your entire organization. And even when you do comply, it’s important to make sure all your finances add up, to avoid potential legal or financial trouble down the line.

And finally, your status as a 501(c) organization is crucial for the purposes of donors who want to take advantage of charitable deductions on their own taxes. Without that 501(c)(3) status, a donor can’t take a deduction on their own taxes, and as a result are far less likely to donate. This is also true for corporate sponsors who might wish to contribute matching contributions.

If you need any help starting your church or religious organization, or have questions about applying for tax-exempt status, you’ll need an attorney who thoroughly understands the religious organization law and its tax implications. The non-profit law attorneys at Wingate, Kearney, & Cullen, LLP have offices in Brooklyn and Long Island, New York.  The firm is experienced in incorporating religious organizations and applying for tax-exempt status. For more information or to schedule a consultation, call (718) 852-5900 or fill out our contact form.