What is religious enough for the government to recognize a ministry’s tax exemption? Within the unemployment tax context, Illinois and other state laws exempt churches and “church-controlled” nonprofits “operated primarily for religious purposes.” If they meet either definition, then they are not “employers” for unemployment purposes and therefore need not participate in the state unemployment system. But how does the government determine whether the “primarily” religious element is met?
An Illinois court ruled recently that the state can’t tax a religious ministry to underprivileged children. The Illinois Department of Employment Security had attempted to assess unemployment compensation taxes to By the Hand Club For Kids, a ministry of The Moody Church, reversing the Department’s previous determinations that By the Hand was nontaxable since its creation in 2001.
What is a church? According to materials released early 2018, the venerable Christian radio and publishing ministry Focus on the Family pressed that question with the IRS, successfully garnering official reclassification as a “church.” The IRS’s willingness to accede to Focus’ request, as reflected in recently released IRS documentation, may be surprising and certainly invites further evaluation of what constitutes a “church” for legal purposes.