Faith-Based Organizations Explained: Tax-Exempt Status Under Section 508(c)(1)(A)

Understanding automatic exemption, application requirements, and ongoing compliance for churches and other religious groups

Published on Feb. 13, 2026

Got story updates? Submit your updates here. ›

Religious organizations face complex rules around tax-exempt status, with churches automatically qualifying under Section 508(c)(1)(A) while other faith-based groups must apply for formal IRS recognition. This article explains the criteria for 'church' status, the benefits and drawbacks of automatic exemption, and the compliance obligations that apply even to automatically exempt organizations.

Why it matters

Navigating the tax-exempt landscape is crucial for faith-based organizations to maintain compliance, access donor and banking benefits, and ensure their activities align with IRS rules. Understanding the nuances of automatic exemption versus formal application can save time, resources, and potential legal issues down the road.

The details

Churches and their integrated auxiliaries automatically qualify for federal tax exemption under Section 501(c)(3) without filing IRS applications, but must meet specific IRS criteria to be considered a 'church.' Other religious organizations like mission groups and religious schools typically must apply for tax-exempt status unless their annual gross receipts are $5,000 or less. Even automatically exempt churches must follow tax rules including UBIT, political activity limits, and employment tax obligations.

  • The IRS uses a 14-point definition to determine if an organization qualifies as a 'church' for tax purposes.
  • Religious organizations with annual gross receipts under $5,000 can qualify for automatic exemption without filing IRS applications.

The players

Internal Revenue Service (IRS)

The U.S. federal agency responsible for administering and enforcing federal tax laws, including determining tax-exempt status for religious and other nonprofit organizations.

Churches

Religious organizations that meet the IRS criteria for 'church' status, including having a distinct legal existence, recognized creed and form of worship, definite ecclesiastical government, and formal code of doctrine and discipline.

Other Religious Organizations

Faith-based groups that do not qualify as 'churches' under the IRS definition, such as mission organizations, religious schools, and parachurch ministries, which typically must apply for tax-exempt status.

Got photos? Submit your photos here. ›

What’s next

Faith-based organizations should consult with tax professionals to determine if they qualify for automatic exemption or need to apply for formal IRS recognition, and to ensure ongoing compliance with all applicable tax rules and regulations.

The takeaway

The distinction between 'churches' that automatically qualify for tax-exempt status and other religious organizations that must apply is crucial for faith-based groups to navigate. Proper understanding of the IRS criteria and compliance obligations can help these organizations maintain their tax-exempt status and access important benefits.