​IRS Changes the Game for Obtaining Tax-Exemption Recognition Letters

​IRS Changes the Game for Obtaining Tax-Exemption Recognition Letters

Effective January 31, 2020 the IRS stopped accepting paper filings of Form 1023 – the complex application for recognition as an IRC Section 501(c)(3) nonprofit organization. All new applications must be submitted electronically via the www.pay.gov website along with the $600 application fee. Once approved for a recognition letter, a church will be included in the IRS Exempt Organizations master database which some donors and donor organizations search to verify the status of a charity before making a donation.

Churches are not required to obtain a Recognition Letter from the IRS, and CSBC has long had a “group” exemption letter from the IRS that is made available to cooperating churches needing to show they are a legitimate, tax-exempt entity in lieu of applying for an individual letter. But in some circumstances, a church may need to have its own recognition letter instead, including becoming an “approved charity” under the Smile.Amazon.com program or gaining access to the TechSoup,org website. That requires submitting Form 1023, paying the $600 fee and being approved by the IRS.

The current Form 1023 (2017 version) was “streamlined” a little, but the electronic filing process now requires the application, and everything that goes with it, be combined into a single PDF for uploading on the www.pay.gov website at one time. A complete Form 1023 package – which includes a copy of the church’s Articles of Incorporation and all amendments to it, current Bylaws, representative copies of worship bulletins/programs, responses to several questions in the application, and several other supporting documents – can be 30-60 pages. There are specific instructions to include the church’s FEIN on every page of supplemental information.

In some cases, Bylaws are deficient and need to be modernized before a church submits its application. This is a separate process that can take several weeks to a few months. CSBC’s Human Resources and Church Compliance Ministry offers help with reviewing and recommending changes or additions to church Bylaws.

Completing Form 1023 has always been a significant challenge, requiring an investment of 12-20 or more hours to complete. These new technical requirements may be beyond the capabilities of many churches that might otherwise be interested in applying for their own “501(c)(3) letter. There are vendors that charge several hundred dollars to help organizations file Form 1023. CSBC has a much better solution for cooperating churches!

The CSBC Human Resources and Church Compliance Ministry is available to offer:

  • guidance in preparing Form 1023,
  • help in gathering the necessary supporting materials,
  • help in assembling all documents into a single PDF with proper formatting, including FEIN headers or footers as required,
  • reviewing the application to ensure all questions have been answered correctly and all required responses and additional elements have been included prior to submitting the application.

Best of all, there is no cost for this assistance which will save hundreds of dollars, thanks to your church’s giving to the Cooperative Program.

For more information about the process to obtain a Recognition Letter from the IRS, please contact Max Herr or email hrcc@csbc.com.

This Convention serves our culturally diverse congregations as we fulfill the Great Commandment and the Great Commission.