Charity work is often part of a church's activities -- and some churches may choose to expand their charitable work by forming an independent nonprofit ministry. A 501(c)(3) organization is a nonprofit entity formed under state law and granted tax-exempt status by the IRS under section 501(c)(3) of the Internal Revenue Code. To qualify for exemption from federal income tax under IRC section 501(c)(3), your ministry must operate and organize exclusively for religious, educational, scientific or other charitable purposes.
In most cases, a ministry is a faith-based charitable endeavor that operates under the auspices of a church, such as a soup kitchen or homeless outreach program. Church elders and those running the ministry should agree on extending or converting the ministry into an independent incorporated organization. Once they agree on this, they must decide on a name, scope of mission and board of directors to take responsibility for the overall management of the organization.
In creating a nonprofit ministry, the leaders must decide whether the church will control the organization or if it will be independent of the church. If the nonprofit organization will operate under the auspices of the church, the board of directors should be the same individuals who sit on the board of the church. On the other hand, if the organization will be independent, it will have its own board that may or may not include members of the church board. The Duke Divinity School indicates that outside funders are often more likely to support a separate nonprofit organization than one controlled by a church. As a result, a nonprofit ministry independent of the church may have a better opportunity for growth.
To establish a ministry as a 501(c)(3) nonprofit organization, you must first file articles of incorporation with the secretary of state, or similar state office, where the ministry is located. Although the information you must include in the articles can vary from state to state, they typically include the names of the incorporators, name and location of the nonprofit organization, and the purpose of the organization. To qualify for 501(c)(3) tax exempt status, you must state in the articles of incorporation that the organization’s assets are dedicated to tax-exempt purposes; this means if the organization dissolves, its assets must be distributed for an exempt purpose. The procedure for submitting the articles of incorporation can vary by state, with some requiring registration by mail while others offer online processing. Processing fees vary by state as well.
You will likely have to register the ministry with the state before you can solicit any donations from the public. If your nonprofit ministry is interested in pursuing public fundraising endeavors, check with your state's attorney general or secretary of state to determine if you need to register. Generally, you must fill out an application with information about your fundraising activities and financial records, as well as pay a fee.
For recognition as a 501(c)(3) organization by the IRS, which allows the ministry to avoid certain taxes and accept tax-deductible contributions, you must prepare and file IRS Form 1023, Application for Recognition of Exemption. On Form 1023, you must provide detailed information about the organization, including names and addresses of the board of directors, description of the programs and fundraising plan. Once the IRS approves the application, the ministry is recognized as a tax-exempt 501(c)(3) nonprofit organization.
- Internal Revenue Service: Tax Guide for Churches and Religious Organizations
- Faith and Leadership: Should Your Church Start a Nonprofit?
- Internal Revenue Service: Life Cycle of a Public Charity
- GuideStar: Fundraising: What Laws Apply?
- National Consumer Supporter Technical Assistance Program: How to Establish a 501c3
- Nonprofit Risk Management Center: Fundraising and Charitable Organizations
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