What does it mean to be a religious organization under federal tax exemption law? W&O attorneys Jonathan Hwang and Meaghan Falkanger addressed this question at length recently, at the ABA Business Law’s September 2024 meeting. Their presentation covered the IRS’s 14-factor test for churches and other houses of worship.
Jonathan and Meaghan addressed best practices to memorialize doctrinal commitments within corporate structures, cultural factors and current trends, and opportunities to foster and to protect organizations’ unique expressions within religious freedoms. In addition, they dove into questions about legally appropriate distinctions, particularly for Section 501(c)(3) tax-exempt status and other applicable tax requirements. For example, if a Christian organization that operates a thrift store as a form of worship is recognized as a “church,” what corporate, doctrinal, and governance aspects separate its activities from being recognized as simply charitable or religious? What legal implications may present from any gray areas? Their presentation also looked into intriguing legal developments involving controlled substance use within a faith tradition and related challenges for garnering tax-exempt status.
More broadly speaking, the IRS holds certain regulatory constraints for religious organizations through its official recognition of tax-exempt status, to the extent it is sought. A clear and balanced approach by the IRS to determine federal tax-exemption ideally helps our pluralistic society live with flourishing religious freedoms. An ongoing evaluation of the IRS’s rulings affecting houses of worship, whose activities exist on or beyond the fringe of the traditional tax-exempt determination framework, provides important insight into current trends and availability of certain tax-exempt classifications.
Find out more about Jonathan’s and Meaghan’s presentation on Unique Expressions of Churches under §§ 501(c)(3), 509(a)(1), and 170(b)(1)(A)(i), through their powerpoint presentation, available here.
