When it comes to tax-exempt organizations, churches enjoy a unique status under IRS regulations. Unlike most other nonprofit organizations, churches are generally not required to file the Federal Form 990 (Return of Organization Exempt from Income Tax) or its variations. This exemption stems from the IRS's recognition of churches as inherently trustworthy entities, typically engaged in community service and spiritual guidance.
Why Churches Might Choose to File Form 990
While churches are not mandated to file Form 990, many opt to do so for several important reasons:
Transparency and Accountability: Filing a Form 990 demonstrates a commitment to transparency and can help build trust with congregants, donors, and the broader community. It provides a public record of the church's financial health, governance, and programmatic activities.
Attracting Donations: Many donors, including individuals and grant-making organizations, may prefer to contribute to churches that are willing to share their financial information. A completed Form 990 can serve as a valuable tool for attracting funding by showcasing responsible financial management.
Eligibility for Grants: Some foundations and grant-making organizations require nonprofit status and may also look for a completed Form 990 as part of their funding criteria. By voluntarily filing, churches may open the door to potential grants and funding opportunities.
Special Considerations
Even though churches are not required to file Form 990, they must comply with other IRS regulations to maintain their tax-exempt status. This includes proper record-keeping, conducting activities in line with their stated purpose, and adhering to guidelines regarding political activities and lobbying.
Conclusion
In summary, while churches are not required to file the Federal Form 990, doing so can enhance transparency, boost donor confidence, and create opportunities for funding. As a trusted entity in the community, choosing to file Form 990 can reflect a church's commitment to accountability and responsible stewardship of its resources.
Instant Nonprofit provides resources and templates to assist churches and other nonprofits in navigating the filing process, ensuring compliance with IRS regulations while promoting transparency and community trust.