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Comparing 501c4 and 501c3 Nonprofit Organizations for Church Purposes
This article compares 501c3 and 501c4 nonprofit organizations. Trailblazers Church of State College is a 501c3 nonprofit organization. All donations to Trailblazers are tax-deductible.
501c4, 501c3, and Tax-Deductibility
By default, the IRS considers every church and religious organization a 501c3 nonprofit organization, regardless of whether it files to become one. Section 508 of the Internal Revenue Code specifies that a church is not required to notify the IRS of its existence, and it is exempt from mandatory annual financial reporting to the government, but it may still accept tax-deductible donations and is automatically subject to the rules of 501c3. 501c3 organizations must operate exclusively for charitable, religious, and educational purposes and must not make any political statements nor address any issue which may be construed as political and supportive of one candidate over another. Under 501h, some 501c3 organizations can be exempt from this rule to a limited degree, but 501h5 specifically disqualifies churches and related organizations from this exemption, leaving the rule intact.
This means, for example, that, especially in an election year, it is against the law for a church to speak out against abortion because abortion is an identifying political issue between candidates: by taking a stance against abortion, the church implicitly supports the pro-life candidate against the pro-abortion candidate, or so says the IRS. If any person provides a record of such a statement to the IRS, the church can be retroactively stripped of its nonprofit status, and the IRS can force the church to pay taxes to compensate. Additionally, the IRS can audit every single person who claimed a tax-deductible donation to that church, forcing them to pay taxes and any penalties. This law, which enshrines against churches the separation of church and state, is called the Johnson Amendment, named after then-Senator Lyndon B. Johnson who proposed it in 1954. The Trump Administration chose not to enforce this law, but it is unlikely future administrations will follow suit.
Another type of nonprofit organization is a 501c4 social welfare organization. This kind of organization is mostly unlimited in its ability to make political statements, as long as doing so is not its primary purpose, and thus is safe against losing its tax-exempt status. However, donations to a 501c4 are not tax-deductible. 501c4 organizations may also have 501c3 affiliates to accept tax-deductible donations as long as those donations are used only for 501c3 qualifying activities. Well-known examples of 501c4 organizations with 501c3 counterparts are the ACLU, the NRA, and Planned Parenthood, all of which are structured for heavy political involvement while also accepting tax-deductible donations for much of their work. Though churches are by default 501c3 organizations, a church can register as a 501c4 social welfare organization instead, as it is clear that churches promote the social welfare of their communities.