Legal Requirements for the Local church
The following information has been prepared to assist you in properly registering your church with the State and Federal government. There are four principle issues to be covered:
1. Application for Recognition of Tax-Exempt Status
2. Obtaining an Employer Identification Number
3. Sales Tax Exemption
1. Application for Recognition of Tax-Exempt Status
Local churches are not required to apply to the IRS for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. The General Council of the Assemblies of God has a group exemption number (GEN) that covers all local congregations. A copy of the General Council's IRS determination letter may be used by the local group to provide evidence of tax-exempt status. A copy of this letter is mailed to every church upon inception.
However, if the church wants to establish its own exemption with the IRS and receive a ruling or determination letter recognizing its exempt status, it should file Form 1023, Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code. By establishing its exemption, potential contributors are assured by the IRS that contributions will be deductible.
2. Obtaining an Employer Identification Number (EIN)
Every church must obtain an Employer Identification Number (EIN) by filing IRS Form SS-4. An EIN is required for each church even though churches are not required to file with the IRS for tax-exempt status. This number is not a "tax-exempt number," but is simply the organization's unique identifier in the IRS's records, similar to an individual's Social Security number. The EIN is a nine-digit number (for example 12-3456789) used for filing and reporting purposes.
If your church does not have an EIN, your application for recognition of exemption should include a completed SS-4, Application for Employer Identification Number.
How to obtain an EIN
You can obtain an EIN either through mail or by telephone; but first, you must fill out Form SS-4, Application for Employer. You can obtain Form SS-4 at IRS or Social Security Administration (SSA) offices. You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. If you apply by telephone, you can get an EIN immediately. If you apply by mail, file Form SS-4 at least 4 to 5 weeks before you need an EIN.
Need an EIN fast? Follow these simple steps!
1. Complete a Form SS-4
2. Call the IRS at (512) 460-7843 weekdays between 7:30 a.m. and 7:00 p.m mountain standard time.
3. An IRS representative will only issue an EIN over the phone to those duly authorized in the church (pastor or secretary/treasurer of the church).
4. Write the obtained number in the upper right hand corner of the Form SS-4, above the phrase "Official Use Only."
5. Fax your SS-4 to the IRS. FAX telephone number: (512) 460-7823.
Note: Your original SS-4 should not be mailed to the IRS. FAX service can only be used to send SS-4's with EINs issued by the IRS over the phone.
3. Recognition of Sales Tax Exemption
When an organization applies for exemption from state or local income sales or property taxes, the state may provide an HTTC type 9 certificate which includes a CRS number. This number is often called a "tax-exempt number." This number should not be confused with an EIN. Most businesses in the State of New Mexico require a copy of your certificate before allowing you to make tax-exempt purchases for the church. To obtain this letter/certificate, write a letter on church letterhead to:
New Mexico Taxation and Revenue Department
P.O. Box 630
Santa Fe, NM 87504-0630
*NOTE: You must have a Federal Identification Number before applying for your tax letter/certificate.
The main advantages of incorporating are liability protection and tax exemption. A church that chooses to do business as a corporation has protection from liability. Members are exempt from liability if the leaders or other members engage in any wrongful activity. In the event of a legal judgment against the church, claims would be paid out of an insurance policy or from assets of the church - but not from assets of the members. If an individual officer or person is guilty of wrongdoing, a lawsuit could be brought against that individual, but the remaining members would be free from liability.
The disadvantages of not incorporating are significant. On a practical level, it is difficult to do business without incorporating. Banks are reluctant to open accounts without someone taking ultimate responsibility, which usually means the senior pastor. A church functioning as an unincorporated association normally places the pastor or one or more trustees at risk for all debts, contracts, and legal matters.
For more information, contact:
PUBLIC REGULATION COMMISSION
CHARTERED DOCUMENTS DIVISION
PO BOX 1269
SANTA FE, NEW MEXICO 87504-1269
Governmental Benefits of Incorporating
When a church incorporates, it normally secures a non-profit status. The benefits of a non-profit distinction are many. Federal statutes provide certain direct benefits to non-profit organizations.
- A non-profit may apply and receive exemption from federal income taxes.
- A non-profit may receive a reduced postal rate.
On a state level, non-profits enjoy certain other benefits:
- Exemption from state income taxes.
- Release from paying franchise taxes.
- Exemption from property taxes.
- Exemption from sales tax.
Incorporation forms are available from the Secretary of State's Office.
To determine if a church is already incorporated, you may contact the Secretary of State's Office at 1-800-477-3632 or 505-827-3600.
Are you required to renew your incorporation status annually with the Secretary of State's Office?
No. However, you do need to check to verify that your status is current. When you originally file or request an amendment of an incorporation certificate, make sure you ask that the corporation be listed as "perpetual." You are not required to file any kind of report unless there is a change in the registered agent, which most generally is the pastor.
Upon a change in pastorate, the church is required to file an amendment (SOS Form 0015 ) changing the registered agent to the new pastor. This form may be obtained by contacting the Secretary of State's Office at (505) 827-3600. This is very important.
It is necessary that every church send a copy of its Certificate of Incorporation to the Network Office to be retained in its permanent file.
You can also look up tax advice for New Mexico's non-profit organizations by clicking HERE.