How to Get Your 501(c)(3) Status

All right, ladies and gentlemen, we are here with Wes Carter. How are you doing today, sir?

I’m doing wonderful.

How are you doing?

Doing great. So glad to have you. Always an informative time. You’re talking about churchlaw.tv. You are with Winters and King.

Yes.

What have you got for us today? What are you wanting to teach us today? Well, we’ve talked a little bit about various issues starting in church or ministry. I think we’ve talked about bylaws and governing documents. And so today I thought we’d talk about how to actually get your 501c3 status from the IRS can get pretty confusing when we’re dealing with churches and ministries.

So I think the first thing that’s important to kind of lay out is churches are inherently 501c3 organizations if they meet the IRS’s criteria for a church.

So if you have a regular place of worship, it’s open to the public, you have a creed that you follow, you know, it’s a good chance that you’re going to qualify as a church in the IRS’s eyes, even if you never actually file any application. Oh wow. So as opposed to other kinds of religious organizations or most nonprofits, churches have a special kind of place that even though they never apply with the IRS, if they’re operating as a church, they are a 501c3. So sometimes this causes confusion in, I have clients who say, I don’t want to be subject to 501c3. I don’t want to come underneath the IRS because I’m a church and I don’t have to do that. That’s not the case.

So you’re inherently exempt under the same statute. So whether you apply with IRS or not, you’re subject to the exact same rules, restrictions, regulations. So one, that’s important. And two, most of my clients I advise to still file with the IRS because it’s one thing to have your inherent exemption, but it’s another thing to have the rubber stamp from the IRS. So if a donor were to get audited to say, the IRS doesn’t know you exist because you’ve never applied with them. So that may cause some questions the donor would have to answer to make sure their deductions are valid, that you’re a valid church.

And also sometimes major donors, corporate donors, companies that match, different things like that. There’s a place where you can go online, look up 501c3 organizations. And if you’re not on there, you may run into problems down the road. So I still like to apply for churches, even though they don’t have to technically, because there are some big benefits to still applying as a church. The next thing is, okay, we have a church or ministry, you know, we haven’t really talked about the difference in the IRS’s eyes. So, you know, I just mentioned the criteria for being a church, you know, really the big ones are regular place of worship, open to the public, you know, they try to exclude Bible studies and other kinds of meetings.

So if you have a meetings on a Thursday night, but everybody else has another church home on Sunday, they try not to count those as churches. And the reason is they’re so strict is churches have two big, two major, but more than two, but my two favorite benefits with the IRS are one, they have special audit protections. So the IRS has to jump through quite a few hoops before they institute any kind of audit of a church. So one, that’s nice. Two, churches don’t file the annual report that nonprofits file, which is form 990.

So your 990 is just, since you don’t file a tax return, because you’re tax exempt, you file an informational return with the IRS every year and ask about income, governance, executive compensation, you know, all kinds of issues. And churches don’t have to file that annually. Wow. So this is utterly fascinating to me, because I did not know this. I I, you know, I’ve had friends who have nonprofits and they’ve applied and gone through the process to, you know, obtain that 501c3 status.

And that process, boy, I mean, I know one person who just gave up on it because I think they were just trying to do it by themselves and it wasn’t going well. But I had no idea that if you wanted to start a church, you know, you have special, you know, criteria. I didn’t know that. Yeah. So they make a differentiation between churches and other religious organizations. So that’s the one thing important.

If you qualify as a church, you want to file as a church, take advantage of those benefits. Now, if you don’t qualify, you can still be a 501c3. You just don’t get those special protections that a church gets. And so, you know, when we get down to actually filing, you know, if our firm does it for you, we try to make it as simple as humanly possible. We have a questionnaire that, We have clients fill out in their own words, and then we take all that and fill out the forms, help them with how to word things, you know. There’s certain, you know, wordings that we like to use, or it helps us identify red flags.

So before we get down the life of the organization, we can say, hey, you don’t want to do it this way. Before you set it up this way, let me tell you how this could be a problem.

And then we file the forms.

So there’s really two major options when we’re filing for a 501c3. And the two options are going to depend on where we’re going your revenue level is, so how much money are you making? The newer one, new just in the last couple of years, is.. . a 10 -23 -EZ. So 10 -23 is the number of the form.

Everything with the IRS has a number on it.

Yes. So form 10 -23 is the form that’s been around for decades to file for 501c3 status.

Okay.

Now they have a 10 -23 -EZ. Now, I always wonder, does that mean it’s easy? Is that what the easy is? That’s the goal. It’s supposed to be easier. And it is.

It’s a much tougher the chagrin, I think, of some of the nonprofit community. It’s a super, super simple form. It’s about two pages long. And you fill in your name, some directory information. You check some boxes.

I promise to follow the rules.

And you file it online.

The processing time is much quicker.

It’s a matter of weeks, usually. So the easy is true. The easy part is true. It’s true. So the two big things to remember for our purposes here are one, churches can never use an easy. Ministries and other people can use an easy.

They have a whole bunch of criteria that would exclude you, but the major ones are you don’t have, you don’t expect to have more than $50 ,000, five zero, $50 ,000 in revenue in any of the next three years. There’s a limit on your total assets, but usually for a brand new nonprofit, they don’t have to worry about that. you know, having hundreds of thousands of dollars of assets right out of the gate. So if you’re under $50 ,000, you don’t expect to grow over that in the next couple of years, the EZ may be an option for you. It’s obviously a much simpler option. And we can still help you with all the background stuff.

We can still do the questionnaires, go through your activities with you, identify red flags.

But it’s much cheaper because when it comes to the form, we don’t have to do that part of the work. I mean, that’s just get online and do it. And the filing fee goes from $850 down to $275, I believe it is now. So you’re saving a lot of money if you qualify for the EZ. But this is why you guys are so good and why I hope our listeners, number one, check out churchlaw.tv.

You can check out Winners and King.

You guys are such great attorneys for pastors. They are the church lawyers, and you can hear Wes just sharing from his wealth of experience and knowledge about just ways to navigate the industry. I mean, that’s invaluable if you’re wondering, how do I start?

church, if you need a lawyer. Tell our listeners like where do they go, what do they do, what’s the next step if they’re wanting to procure your services, what do they do next? Well, you can go to wintersking.com, or we have a special page dedicated just to our churches and ministries at churchlaw.tv, and you can contact us through our contact us page there, or you can always just call us at 918 -494 -6868. Awesome.

So here’s what I also wonder. I was thinking about this today. I knew we were going to meet and record, and I thought I’m going to ask Wes about this. If I’m wanting, you know, you know, help from, you know, like a church lawyer, or if I’m wondering how do I start a church?

I want to start a church, I need a lawyer, or I need to talk to, you know, an attorney for pastor compensation, or just anything related to a church. Is the process when I’m, if I’m new to it, and I get started with your, with your company, what does that process look like? Because I think sometimes people may feel like it’s very daunting and laborious. And do you know what I mean? And so help them understand what it’s like to utilize your services. Well, we make a conscious effort, like I said, keep it simple.

So we work with everything from living room churches, you know, ministries of one person, all the way up to, as we’ve talked about, we’ve been blessed to work with some of the largest ministries in the whole world. So we make a conscious effort to make access as easy as possible. So literally, you can pick up the phone, call our phone number, you’ll get access. the receptionist sends you right to my assistant, and we can set you up a phone call and we’ll chat. I mean, it’s just that simple. So we’ll have a phone call, we have free 15 minute consultations, we bill in one 10th of an hours.

So there’s no minimum half hours, no minimum hour. If we only talk for five minutes after you sign up, you only get billed for five minutes.

Okay, that way we encourage nice quick questions. Because if you ask me a quick question, and you pay the $20 it costs for five minutes, it may save you thousands of dollars because you didn’t want to pay for a full hour. And so you made a mistake down the road.

So we try to keep it as cost effective and as simple as possible. Nice. So that is good for people to know because it does not have to be difficult. It does not have to be stressful. And you guys are so good with your clients, like just that someone can call and ask you a quick question. I mean, that’s pretty amazing.

Yeah, call, email.

We try to be as accessible as possible. You know, it’s hard to squeeze everybody in in a day sometimes if everybody has problems the same day. So emails as well as a quick way to communicate is easy. So if you have a quick question, you can email.

we’ll email you back as soon as humanly possible. And then again, you only get billed for whatever little time we spent actually reading and writing the email. That’s great. And then I know you have a great group of lawyers that you work with and the experience. Tell us a little bit about just that whole body of, you know, lawyers that you have, your team, who are they, who are they getting access to experience wise? What do you have over there?

We’re a full service firm. So obviously we have a large emphasis on churches, ministries, religious organizations, but we have, we range usually somewhere between eight to 10 attorneys, and we have people who do nothing but litigation. Our litigation guys are doing stuff from California to New York right now, litigating stuff on behalf of churches, ministries, Christian broadcasting, in just all kinds of areas. We have estate planning, charitable giving help, family law. Our family law is mostly a local practice.

Personal injury. You know, business, corporate issues. So, I mean, we try just about everything except maritime with boats and patents. We stay away from those two things. But anything else, we’re willing to talk to you about it. And it’s something that probably one of our attorneys can help us with.

That is great.

So again, if you are needing help, if you’re wanting, you know, information on how to start a church and you need a lawyer, if you’re just wondering about pastor compensation, these are the attorneys for pastors. churchlaw.tv, wintersking.com, you’re going to get access to a phenomenal team. Thank you again, as always, for bringing such information that’s so rich and enlightening and It’s always a pleasure and we’ll see you next time. Thank you very much.

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