How the US government can stop “churches” from being treated by the IRS as real churches

(The Conversation) – The Family Research Council is a conservative advocacy group with a “biblical worldview.” Although it has a church ministries department that works with churches from several evangelical Christian denominations that share its viewpoint, it does not represent a single denomination. Although its activities focus primarily on politics, advocacy, government lobbying and public communications, the Internal Revenue Service granted the council’s request to be recognized as an “association of churches” in 2020.

Concerned that the IRS made a mistake by allowing the board and similar groups to designate churches or associations of churches, Democratic members of the House of Representatives sent letters to the Secretary of the Treasury and the IRS commissioner in 2022 and 2024 expressing concern. House Democrats pointed to what appeared to be an “overreach” of the tax code and asked the Internal Revenue Service to “determine whether existing guidance is sufficient to prevent abuse and what resources or congressional action are needed.”

As a professor of nonprofit law, I believe that some groups that are not churches or associations of churches want to be designated this way to avoid the scrutiny required for a charity. At the same time, some other groups that should qualify as churches may have difficulty doing so due to an outdated IRS test for that status.

My colleague Ellen P. Aprill and I recently published an article presenting two main arguments for revising the federal government’s definition of churches for tax law purposes.

No 990 means less control

All nonprofit charities, including churches, receive the same basic benefits under federal tax law. This means they don’t have to pay taxes on their income, and donors can deduct the value of their gifts from their taxable income – provided they itemize these deductions on their tax return.

Unlike other tax-exempt charities, churches do not have to file Form 990s. This means the public does not have access to information about church staff salaries, board memberships and funding details, which are found on the publicly available tax form that all other charities must complete every year. The availability of 990 forms increases transparency and accountability in the nonprofit sector.

Churches and church associations are unlikely to be audited by the IRS. Federal law requires a senior IRS official to “reasonably believe” that a church or association has violated federal tax laws before initiating an investigation. This means that the official must have reason to believe that the organization has violated federal tax law before obtaining any information from it.

This standard is higher than what is required to initiate an audit for all other tax-exempt organizations and, indeed, all taxpayers. For all others, the IRS may initiate an investigation based solely on a suspected violation or even on a random selection basis.

Additionally, unlike other tax-exempt charities, churches and church associations automatically qualify for tax-exempt status. They don’t have to apply for it.

Why churches get special treatment

Congress has passed laws giving churches and what it calls “integrated auxiliaries” and “conventions or associations of churches” special protection because the First Amendment to the U.S. Constitution protects religious liberty.

Churches include houses of worship ranging in size from a few parishioners to megachurches with at least 10,000 people attending weekly services. According to the IRS, houses of worship of all denominations, including synagogues, mosques and temples, count as churches.

Integrated auxiliaries are church schools and other organizations affiliated with churches or conventions and supported primarily by internal church sources rather than by the public or government.

Church conventions or associations are organizations whose members include houses of worship of one or more denominations. Most denominational bodies, such as the executive committee of the Southern Baptist Convention and the United States Conference of Catholic Bishops, are likely conventions or associations of churches, although the IRS does not publish a list of such entities.

Not every religious nonprofit organization falls into one of these categories.

For example, the University of Notre Dame, where I teach law students and conduct legal research, and World Vision, a global humanitarian group, are religious organizations that do not fit into either of these categories. This makes sense because Notre Dame and World Vision are primarily engaged in activities other than supporting a religious congregation or coordinating the activities of churches within a single denomination.

To distinguish churches from other religious nonprofits, the IRS has long relied on a 14-factor test. Examples of these factors include the ordination of clergy, formal doctrine, distinct membership, and regular congregational attendance at religious services.

It is not necessary for all factors to be present to pass this test.

But courts have been uncomfortable with this test for almost as long because it draws heavily on traditional characteristics of Protestant Christian churches, as the U.S. Court of Federal Claims explained in a 2009 ruling. Therefore, this system may be a poor fit for houses of worship of other denominations, especially given the increasing diversity of faith communities.

Instead, these courts adopted the “association test.” It focuses on whether members of the organization regularly hold religious services and meet in person on other occasions.

With the rise of virtual and televised worship services, an update to this test is overdue.

Proposed solutions

Aprill and I recommend that the IRS change its definition of churches to the definition of associations adopted by some courts in decisions as early as 1980. As the U.S. Court of Federal Claims explained in a 2009 ruling, this test focuses on whether a group of believers gathers regularly to worship. Given advances in technology, the IRS should also make clear that this test can be met by remotely attending religious services using interactive teleconferencing applications such as Zoom.

This definition would also be better suited to congregations of all denominations, as some denominations do not prioritize many of the factors considered in the IRS test, such as having a formal doctrinal code or requiring members to not be affiliated with other houses of worship or denominations. This would better reflect the way some Americans participate in religious services today.

We recommend that the IRS re-examine its church affiliation test and that Congress pass legislation that changes the definition of church associations. The new law could limit church associations to organizations representing a single denomination, as Congress originally intended.

This latest change would make it more difficult for religious organizations that are primarily involved in uniting churches of different denominations to engage in advocacy or other activities to obtain this status, as well as the associated lack of transparency and accountability. We believe that Congress, not the IRS, should make this change because of the potential political tensions that narrowing the definition could create.

We do not believe that the changes will affect the special role that churches play in our society. Indeed, a revised test for qualifying as a church would better fit both our country’s growing diversity of denominations and technological advances.

(Lloyd Hitoshi Mayer, professor of law at the University of Notre Dame. The views expressed in this commentary do not necessarily reflect those of Religion News Service.)