There are dangers that most synagogues and churches are not aware of when considering whether to incorporate under IRS Tax Code 501(c)3. Many who run these institutions are asleep, thinking they just need to follow their lawyer or accountant’s advice and incorporate. I have read the relevant tax code on this. Here is what I remember:
Churches are tax excepted, which is a higher level of freedom from taxation and regulation than tax exemption. For tax purposes, the term “church” does include synagogues. If you are Jewish, please just read “synagogue” wherever the word “church” or “congregation” is typed. Here are a few links for consideration:
Check out the actual IRS Code here.
If a congregation chooses to incorporate, they are promising the government that they will adhere to all future IRS codes under the 501(c)3 section of the IRS code. If a church decides later they don’t want to be incorporated under IRS Code 501(c)3 and they have assets, they can’t simply transfer their assets to a their new “free church”. A 501(c)3 corporation can only sell it’s assets acquired under this form of incorporation to another 501(c)3 corporation. So, it is a serious decision, and it can affect the lives of every member of the church, especially the officers.
There are currently some disadvantages to not incorporating as well. It’s harder to open a bank account, it’s much harder to obtain financing for a building once the congregation is large enough to need one…but in my opinion, the advantages of staying FREE greatly outweigh the disadvantages.
I believe we need to increase the number of congregations in the country who operate Scripturally, and then the bankers will just have to get used to dealing with us in our freedom. Or, maybe larger congregations can help smaller ones avoid the system altogether, perhaps privately funding them. We need to get creative, especially considering the fraudulence and double-enrichment (at least) that is the current banking system.
Before new congregations, churches or synagogues makes any decision in this regard, it is wise to really do the research, and not rely only on lawyers or accountants. It is to the advantage of these professions to recommend 501(c)3 incorporation, as the given congregation will then be dependent on these professions to handle their legal and financial affairs, especialy the legal affairs. In the event of a lawsuit, no matter how easily dealt with or petty, corporations MUST be represented by a lawyer. This is very costly for most congregations.
Please keep this in mind: According to IRS Code § 508(c)(1)(A), churches are already tax excepted, or exempted, whatever your preferred terminology. It is called the “mandatory exception” rule. The words within IRS Code make it clear that it is completely unnecessary for any church to apply for tax-exempt status, as a “church” is automatically tax-exempt.