Should a house/simple/organic church register as a 501c3?

Dollar bills
"I think that God wants my wife and I to start up a network of house churches in a small town in northern South Australia. I am keen that these groups don't become inward looking, but give money (and time, energy, and prayer) away to needs within the local community and further afield. I'm of Baptist and Anglican background, and am keen to continue to be part of the wider "legacy church" if possible…  I'd be very interested if you could write something about how small informal organic churches can organise their finances to be transparent and above reproach, available to outside audit if requested. Also, the measures that would be appropriate to ensure accountability of the people with authority to access the money"

This comment by John Bethell to one of my previous posts echoes a question we are often asked. What should a house church do in terms of the practical side of finances? Should they take on a charitable status?

The way this is handled varies from country to country. For example, the situation regarding tax benefits in the UK was very different from that here in the USA. I'm sure Australia would be different still.

As always, when the Bible doesn't have anything specific regarding our situation, the answer is to listen to Jesus and respond to what he says. But here are a few pointers, more specific to this country:

  • Some people say that a church doesn't have to have 501c3 (charitable) status in order to gain the tax benefits. This is something of a gray area legally.
  • If you give to a 501c3 charity, there are tax benefits.
  • Groups who do not wish to go this route can give through other churches. For example, our simple churches at one stage gave via another network of churches who did have 501c3 status, with a separate account under their financial structure. This might help in John's quest to continue an involvement with the legacy church.
  • Another option is to use the financial umbrella of an organization such as the American Evangelistic Association.
  • The Evangelical Council for Financial Accountability is an accreditation agency that sets standards of financial accountability.
  • Financial transparency is essential if we are to be above reproach.

Some groups do not want the government to have any kind of access to their finances. These groups choose not to take the tax benefits involved in having a charitable status.

As always, the Lord will lead us clearly. It might also be good to take professional accounting advice.

Any thoughts?


3 replies on “Should a house/simple/organic church register as a 501c3?”

The house churches in our network here in Chicago do not individually have a 501(c)3, but as a network, we do have a 501(c)3 – allowing the house churches to make tax-deductible donations at a network level. Those that want to keep some donations within their particular house church usually have a sort of “shoe-box” they contribute to.

I have looked into this question and, as I understand it from looking at the laws and talking to CPAs, a church does not need 501(c)(3) status to enjoy all the benefits of being a 501(c)(3). Obtaining official 501(c)(3) status is seen as a governmental seal of approval that assures donors that their contributions are tax exempt.
Practically speaking, as long as a church is keeping good records and legitimately abiding by the rules for churches & non-profit tax-exempt entities, donors should not need to worry about the government challenging the church’s status as a tax-exempt entity. The government is pretty good about leaving churches alone.
No matter what a church’s official status, donors still need to get and retain year-end contribution statements from the church for gifts in excess of $249.
To open a bank account, a church will need to file for an Federal Employer Identification Number (IRS Form SS-4). There is a box to check saying that the entity is a church. The bank will provide some paperwork that will need to be filled out. Here is a great link covering these administrative questions and more:

Drew, this is helpful info. People vary as to what they think about the necessity of the 501c3 status in order to obtain tax exemption, but you have laid out the position of those who don’t believe you need it very clearly. Thank you!
Mark, I think many networks function as yours does.

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