Religious societies and members receive tax benefits from the United States, which all officially started shortly after a bill named the “Tariff Act” was signed in 1894, granting American religious societies exemption from many different tax payments and other benefits. Although this was around 120 years after this country was founded, many experts believe that religious organizations have been receiving exemptions since America gained its independence. Let’s take a look to see what some of these benefits are:
Organizations as a Whole
Churches and other religious societies are generally exempt from income tax, along with receiving other benefits under the tax law. However, for organizations that receive income from an unrelated business outside of the organization’s exempt purpose, that income is still subject to tax.In the eyes of the IRS, a religious organization is any recognized place of worship. This includes but is not limited to; Synagogues, Mosques, and Temples. These places along with other qualifying organizations are recognized as a 501(c) (3) – Which is a charitable organization.
Tax-Exempt Status Requirements
- Operate Exclusively for religious, scientific, educational, or charitable purposes.
- Net earnings of the organization must not provide any advantage to shareholders or private individuals within the organization.
- Cannot devote a substantial amount of time influencing legislators.
- Cannot intervene with political campaigns (donations, endorsements, etc…)
- Activities must be legal and in line with public policies.
Religious Officials
Priests, Nuns, Monks, and other religious officials who work as leaders of religious organizations are entitled to have some of their income excluded from taxation. More specifically, the amount spent on housing and furnishing the home is excluded from income taxation. This is called parsonage. However, for this payment to qualify for the income tax exclusion, the church must officially designate it as housing or rental allowance before it is paid. Additionally, a definitive amount must be designated before paying this sum out.
Wrap-Up
Religious organizations are not as affected by taxes like other entities, as their status as a non-profit organization means that they do not have an income to be taxed. Furthermore, there are no shareholders that could benefit from a religious organization having a surplus in money, because that money is expected to be put into bettering the organization. On top of this, there are some tax benefits that religious officials can take advantage of. This article covers some of the benefits, but if you are looking for more it would be a smart move to get in contact with a tax advisor.
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