501c3 Part 1

***Disclaimer: I’m not a lawyer.  This post doesn’t constitute legal advice our counsel.  I’m simply sharing with you my past experience.  It is always advisable to consult a lawyer when working on legal paperwork for a church.

To begin the 501c3 application download form 1023 and the form 1023 instructions from the IRS website.  Much of the form is pretty straightforward (its just long). You will want to create a separate document called “Continuation Sheets.”  You will use these sheets to answer questions listed on application.  Each page of the continuation sheet should include the church name and EIN number.

Here are some tips for the more confusing parts of the application.

Part 1.  Question 10.

Churches are not required to file Form 990.  Mark No.

Part 1. Question 11

The date you were incorporated should be stamped on the certificate you received back from the state with your Articles of Incorporation.

Part 2.  Organizational Structure

You should have incorporated as a corporation so mark yes for number 1 and no for 2, 3 and 4.  For 5 mark yes.  You will need to attach your bylaws later.

Part 3.  Required Provisions in Your Organizing Document

This section asks for your purpose statement and dissolution clause from your Articles of Incorporation.  If you did not include this in your Articles of Incorporation you will need to file Articles of Amendment with your state to include these statements.  See my post on Articles of Incorporation for language to use.

Part 4.  Narrative Description of Your Activities

It’s easy to get yourself into trouble on this one.  Keep things simple and refer to the tips in 501c3 Part 1. I have had a few things come up here that seemed innocent enough but raised flags with the IRS.  In a section on small groups, I included in a list of possible curriculum that we might do Dave Ramsey’s financial peace university.  This led to a whole string of follow up questions from the IRS.  You also need to be careful how or if you include benevolence ministries.  These have also raised flags and caused follow up questions to be asked.  Remember to keep it simple and use church words not modern language, ex. – bible study not micro churches.  Here is a list of what I include.  I add a description for each:

• Worship Services
• Christian Education
• Small Group Home Meetings
• Community Outreach/Service

Part 5

Question 1 is pretty straightforward.  Just be sure to include each person’s qualifications on the continuation sheet.  I typically include their title, current job and responsibilities and their educational background.

Questions 4 and 5 deal with how you determine compensation and if you have a conflict of interest policy.  As you might imagine, the IRS is looking for you to answer yes to these questions.  Don’t just answer yes because that’s what they want to hear.  Answer honestly.  These are all good practices that you should put in place anyway.  If you haven’t thought through these issues, take the time to do so.

Part 6 Question 1

For question 1a if you will provide anything to individuals in terms of benevolence, etc., you should mark yes.  You will need to thoroughly explain what you do.  For question 1b answer yes if you give money to other organizations.  Be sure to state that any organization you give to are recognized as 501c3 organizations by the IRS.

More to come next week in part 3.