Religious Tax Reclassification for Public Charities

Churches, synagogues, mosques, temples, and other houses of worship have long enjoyed Section 501(c)(3) public charity status, with resulting exemption from IRS Form 990 filings, availability of clergy housing allowances, and religious liberty protections. When, why, and how should other faith-based organizations affirmatively seek IRS reclassification as a “church” – or as an “association of churches” or “mission society” – with similar tax and other legal benefits? The following article addresses such questions extensively, including applicable tax considerations, corporate governance aspects, legal requirements for housing allowance, employment discrimination aspects, and other resulting implications. We hope this deep-dive guidance will help those who are interested in religious tax reclassification. This article was co-authored by W&O Partners Sally Wagenmaker, Ryan Oberly, and Paul Winters and was previously published in Thomson Reuters’ Taxation of Exempts Journal (Jan./Feb. 2022)

Nonprofit Sales Tax Exemption - Simple or Complex?

“Can we get sales tax exemption?” Our law firm’s State Compliance and Tax Practice Group handles this question on a regular basis, usually for a specific state and increasingly with an eye toward online activity and multi-state legal compliance. Additional questions arise depending on whether the anticipated activities will involve purchases, sales, tangible goods, and intangible goods, as well as how and when such activities will be carried out. While this short question seemingly could be answered by a quick “yes” or “no” response, the answer usually warrants a more extensive and fact-specific legal evaluation. This article addresses key points of such evaluation for nonprofits, including purchases, sales, online activity, and guidance about state-specific dimensions.

What - Another Tax? Nonprofits’ State “Franchise” Taxes and Related State Tax Compliance

It is indeed a joyful day when a nonprofit receives the anticipated IRS determination letter, recognizing its tax-exempt status. But note: such status is under federal law and only for income tax liability generally. What state tax considerations exist?  A minority of states impose additional legal compliance steps for state “franchise” or income tax exemptions. Additional taxes may be owed such as on a nonprofit’s purchases, sales, employment activities, real estate ownership, and specific types of revenues. This article focuses on state franchise or income tax obligations and related legal compliance aspects.

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