Pastors and church treasurers often call our business office to ask different financial and legal questions. The question that is raised on a frequent basis is the clarification of church tax exemption.
Tax exemption can mean a couple of different things. On a federal level, the church can become tax-exempt under IRC section 501(c)(3). This section of the codes gives churches and other religious organizations exemption from federal income tax, and those organizations are eligible to receive tax-deductible contributions.
To qualify for this exemption, the church must meet several IRS rules which can be found on the IRS website or on IRS Publication 1828.
There are three ways that a church can be tax-exempt under this code. The first is automatically. This means that the church has to do nothing except meet the IRS requirements mentioned on the website or publication. The second way is by applying for their own exemption. This can be done by filing Form 1023 with the IRS. The third way is through a group exemption with a parent or central organization. This is available for churches in Indiana through the Southern Baptist Convention (SBC).
In order to get under the national SBC umbrella, three criteria must be met:
A church must be established and constituted.
The church must be financially supportive of SBC causes.
The church must be recognized by SCBI as a cooperating church.
A second tax exemption the church should apply for is the state sales tax exemption. This is different from the 501(c)(3) exemption. This application can be found on the Indiana Department of Revenue website.
It is important to note that you will need a 501(c)(3) exemption letter from the IRS or from the SBC if you are under their umbrella in order to complete this application. This does not mean that you still cannot purchase items and get the sales tax exemption. This can be done by simply filling out Indiana Form ST-105 and providing your Federal ID number in the State ID number space.
If you would like to get under the SBC umbrella, please contact Morgan Roettele by email firstname.lastname@example.org. You will need to provide the name and address of the church, as well as the name of the pastor. Please contact our Business Office at 317-481-2400 if you have any other questions regarding these exemptions.