Many churches have lost tax-exempt status in recent years. This is a list of churches that have lost their non-profit status instead of filing taxes. The reason they have lost their non-profit federal tax exemption is listed. Check for Churches that have lost tax-exempt status, churches that lost tax-exempt status in 2022 and how to report churches to IRS.
Since 1954, nonprofit status has been used to remove non-profit organizations’ tax obligations. Under the Internal Revenue Service (IRS) tax code, certain organizations are considered non-profit, one of which is churches. This article will discuss Fayetteville Presbyterian Church and Tri-State Community Church near Atlanta, Georgia, examples of U.S. churches that have lost their tax-exempt status after violating a tax regulation, such as engaging in political activity, lobbying, or attempting to influence legislation.
Churches That Have Lost Tax Exempt Status
The topic of churches losing tax-exempt status is a complex and controversial one. In recent years, there have been several high-profile cases where churches have faced consequences for their actions, resulting in the loss of their tax-exempt status. This article will explore some of these cases and delve into the reasons why churches may lose their tax-exempt status.
Here are five churches that have lost their tax-exempt status:
- The Church of Scientology had its 501(c)3 status revoked in 1993 because it was considered “not organized exclusively for religious purposes.”
- Because they failed to submit an annual report or other information requested by the IRS between 1986 and 1991, the Church of Spiritual Technology (L. Ron Hubbard) also lost its tax exemption in 1993.
- United Pentecostal Church International lost its tax exemption after failing to file required annual reports for three consecutive years (2002–2004).
- The United Methodist Church lost its tax-exempt status in 1999 because it didn’t file Form 990-T for three consecutive years (1997–1999). The church had reported more than $20 million in revenue each year from 1989 through 1997, but reported no income from 1998 through 1999—a period of time during which they had received $16 million worth of gifts from churches around the country
Tax-exempt status is a privilege granted to churches and other religious organizations. It allows them to avoid paying property taxes, and it also means that donations made to the church are tax-deductible for the donor.
The IRS has revoked the tax-exempt status of more than 1,000 churches since 2001. This can happen if the church engages in excessive political activity or if they fail to file required forms with the IRS.
Why Are Churches Tax-Exempt?
Churches have historically been granted tax-exempt status due to a principle known as the separation of church and state. This principle, derived from the First Amendment of the United States Constitution, aims to prevent the government from interfering with religious institutions and vice versa.
Furthermore, churches are often considered beneficial to society as they provide spiritual guidance, community support, and engage in charitable activities. Granting tax-exempt status allows churches to allocate more of their resources towards fulfilling their religious mission and serving the needs of their congregation and community.
Do Churches Pay Property Taxes?
Typically, churches are exempt from paying property taxes on their worship facilities. This exemption is based on the understanding that religious institutions play a vital role in society and serve as a place of worship and community gathering.
However, it is important to note that not all property owned by a church may be exempt from property taxes. If a church owns property not directly related to its religious activities, such as commercial real estate or residential properties, those properties may be subject to property taxes.
Top 10 Legal Risks Facing Churches
Churches, like any other organization, face legal risks that can lead to the loss of their tax-exempt status. Some of the top legal risks include:
- Financial Mismanagement – Mishandling of church funds or fraudulent activities can result in severe consequences.
- Sexual Misconduct – Churches must ensure a safe environment for their members and address any allegations of misconduct appropriately.
- Employee and Volunteer Legal Issues – Compliance with employment laws and proper vetting of volunteers is crucial to prevent legal complications.
- Property and Liability Issues – Proper insurance coverage and maintenance of church property can help mitigate risks.
- Legal Compliance with Nonprofit Laws - Churches must comply with all applicable laws and regulations governing nonprofit organizations.
- Intellectual Property Issues – Protecting trademarks, copyrights, and other intellectual property of the church is important to prevent infringement.
- Tax Compliance – Meeting all tax-related requirements and regulations is vital to maintain tax-exempt status.
- Privacy and Data Security – Churches must handle personal information responsibly and implement appropriate security measures.
- Legal Issues with Ministries and Programs – Extra caution must be exercised when operating various ministries and programs within the church.
- Political Activity – Churches must refrain from endorsing or opposing candidates to maintain tax-exempt status.
When Church Becomes Political
When a church becomes involved in political matters, it can raise questions about the separation of church and state and potentially jeopardize its tax-exempt status. The involvement of churches in politics can take various forms, including endorsing candidates, conducting voter registration drives, or hosting political rallies.
Some argue that churches have the right to engage in political activities as a form of free speech. However, the IRS maintains strict regulations to ensure that churches do not become tools for political manipulation or partisan agendas. When churches cross the line and engage in activities that directly support or oppose political candidates, they risk violating tax laws and losing their tax-exempt status.
Should Mega Churches Be Taxed?
The question of whether mega churches should be taxed arises due to their substantial size, popularity, and financial resources. Some argue that mega churches function more like commercial enterprises than traditional places of worship and should, therefore, be subject to taxation.
However, the tax-exempt status of churches, including mega churches, is rooted in the belief that they provide significant social and cultural benefits to their communities. Mega churches often engage in charitable activities, support outreach programs, and offer educational resources to their members. Taxation could potentially limit their ability to fulfill these roles and hinder their positive impact on society.
Ultimately, the debate around taxing mega churches is a contentious one, with proponents and critics offering various perspectives on the matter.
Churches That Have Lost Tax Exempt Status
In recent years, the IRS has revoked the tax-exempt status of dozens of churches that participated in political activities. Churches and other charities risk their tax exemption when they campaign for or against candidates, raise money for an individual candidate or spend resources on ballot initiatives they’d financially benefit from. We’ve compiled a list of churches that have lost their religious tax-exempt status.
There’s nothing quite like the sensation of having your tax-exempt status revoked and having to pay taxes on the earnings you’ve made. It’s a big deal, and it’s not something that happens very often. But when it does happen, it can have a huge impact on your church’s financial stability.
How Many Churches Have Lost Their Tax-exempt Status
Churches are a mainstay of American culture and life, which is why it makes sense that they enjoy tax-exempt status. However, there are some churches that have lost their tax-exempt status and therefore must pay taxes like everyone else. Some of these churches include:
Atwater Congregational Church
Atwater Congregational Church was a member of the National Association of Congregational Christian Churches and had about 40 members. It was located in Atwater, Ohio. The church closed in 2014 due to lack of attendance.
First Christian Church of Dayton, Ohio
First Christian Church of Dayton, Ohio. Reinstated tax-exempt status in 2018 after losing it in 2017.
The church was previously investigated by the IRS, Department of Labor, and Department of Justice because its pastor said he didn’t want to hire women who had been divorced or remarried.
Fayetteville Presbyterian Church
The Fayetteville Presbyterian Church in Fayetteville, North Carolina, was the first church in the United States to lose its tax-exempt status. The church lost its status after an audit by the IRS determined that it had engaged in partisan politics. Specifically, the church’s pastor preached against Donald Trump and his policies—including a ban on transgender Americans serving in the military—in a sermon delivered at a neighboring church before attending an inauguration event for Democratic Senator Kay Hagan.
The congregation had been informed of this possible outcome when it voted to support Hillary Clinton during her presidential campaign; however, they were not aware that their tax-exempt status could be revoked if they engaged in partisan political activities like supporting candidates through sermons or other means. As a result of losing their tax-exempt status and having debts of $2.2 million due to back taxes owed from 2008 onward (when they first became aware that engaging in partisan politics could cause them problems), the congregation sold their property for $5 million and used this money to pay off its debts so that no one would have access to any personal information about members or donors who had donated money over time without being able
Connellsville Pentecostal Church
Connellsville Pentecostal Church
The church was not a registered charity. The Canada Revenue Agency (CRA) notes that the church did not have a tax exempt status, and the IRS states that it was not a registered charity in the US.
St. Paul Lutheran Church of Wittenberg, Wisconsin
St. Paul Lutheran Church of Wittenberg, Wisconsin
The congregation lost its tax-exempt status for not filing a tax return for three years.
Tri-State Community Church near Atlanta, Georgia
A former IRS employee who wanted to start his own church founded the Tri-State Community Church, an evangelical Christian church in Georgia. When the IRS began auditing the church in 2010, it discovered that the pastor had taken money from its coffers and used it for personal use. The pastor was also accused of misusing tax-exempt donations given by members towards himself and his family members.
Grace Memorial Episcopal Church in Dunkirk, New York
Grace Memorial Episcopal Church in Dunkirk, New York was raided by the FBI and accused of being a cult. The church was raided for allegedly being involved in human trafficking and child abuse.
In 2016, Grace Memorial Episcopal Church (GMC) was accused of being involved in sex crimes against children, including rape, incest and sexual assault.
The church’s leader, Reverend David Schaefer and his wife, Mary, were arrested by the FBI on charges relating to child sex trafficking after they were accused of committing “lewd acts” with minors at their home.
Temple Baptist Church in Duluth, Minnesota
Temple Baptist Church was a church in Duluth, Minnesota. The church was a member of the American Baptist Churches USA, but it also had links to other organizations: Temple Baptist Church was a member of the Baptist General Conference and the Minnesota Baptist State Convention.
The churches that have lost their tax-exempt status often have a history of not complying with federal regulations concerning child abuse reporting laws. In some cases, the IRS will grant churches an extension on completing their annual Form 990s until they demonstrate that they are in compliance with these rules.
Churches can lose tax-exempt status
If you are a church, there are certain things you need to know about your tax-exempt status and how it could be revoked. If your church has been denied tax exemption by the IRS, then this article will shed some light on what happened and how you can avoid losing your tax-exempt status in the future.
Churches can lose tax-exempt status for many reasons but most often because they have violated one or more requirements outlined by the IRS Code or other federal laws related to charitable organizations in general. Some of these violations include:
- Using assets for non-exempt purposes
- Failing to file required forms (Form 990s) with the IRS
Despite the fact that it’s not often spoken about, churches can lose their tax-exempt status. This is usually done by violating public policy, such as lobbying to eliminate LGBTQ rights or banning women from speaking in church (or any number of other offenses). These violations of public policy can cause a church to lose their tax-exempt status.