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Is Your Church a Franchise of the State and the IRS?

January 25, 2016

As an overseer of ordained ministers and churches, I have often told ministers that they are not required to incorporate their churches or ministries. In fact, I think it is a bad idea to do so. Once you incorporate God’s work, you are voluntarily giving the government control over it. If the government (in this case the State government) can give your ministry permission to exist – it can also withdraw that permission.
This is what has happened in Communist and other totalitarian nations. As a first step to the elimination of churches, governments will often require churches to register. This gives them control over the church, as well as the ability to disband it if the church teaches against government “doctrine.” Basically, the government is saying, “I know where you are, and I can find you whenever I wish."
A pastor friend of mine lived in an Eastern European nation both when it was under Communist control and afterward. After they thought they had thrown out the Communists, the Christians believed that they had religious freedom. But the same Communists were still in control; they had just changed their names. And they still required churches to register.
My friend and the 40 churches he oversaw refused to register. As a result they were persecuted, had church property stolen from them, and had to meet in secret. The lives of the pastor, his wife, and his three daughters were threatened by government goons.
The bottom line is that the churches that sold their souls to the government have either disbanded today, or they no longer preach the true Gospel of Christ. On the other hand, his network of churches, and others that refused government control, are thriving and leading thousands to Christ.
“Wow, that’s some story” you say. “It’s a good thing that could never happen in America!” You think so? Wait until you read the IRS’s definition of a church below.
So, what does it mean when a church incorporates under state law? Here are some of the attributes of corporations, as established by the federal court case Hale v. Henkel, 201 U.S. 43 at 74 in 1906: 
  • A corporation is “a creature of the State.”
  • The State is “sovereign”over the corporation.
  • A corporation is a State “franchise.”
  • Incorporation is a State “privilege.” 
Congressman George Hansen has stated, “It is impossible to have religious freedom in any nation where churches are licensed by the government.” Incorporation is licensing by the State government. The church that is incorporated becomes a franchise of the State.
A Franchise is “An authorization granted by a government or company to an individual or group enabling them to carry out specified activities.” Do you want your church to be a Franchise of the State?
What is the difference between registering with your State as a non-profit corporation and applying to the Federal government for tax-exempt status? Many people believe they are one and the same, and that you can’t have one without the other. This is not the case.
So what does incorporation of a church in its State have to do with the IRS? Simply that once you have incorporated as a State approved non-profit religious corporation, the usual next step is applying for federal government non-profit status for purposes of tax deductions. This takes the form of an application to the IRS for 501(c)(3) status.
I’m sure you will recall the Obama administration scandals in which the IRS readily gave 501(c)(3) status to Mosques and atheist groups, and 501(c)(4) not-for-profit status to Democrat and Socialist corporations -  while denying or dragging out for years approvals for churches, Christian organizations and Republican or Conservative corporations. I personally know of dozens of Christian and Conservative organizations that have waited three years or more, and have still not received approval from the IRS. Some of these date back from before the last presidential elections, when Obama appointees prevented groups that they thought would oppose his reelection from getting non-profit status. We will never know whether these hundreds of groups could have prevented his reelection.
There were many Congressional hearings and investigations into this, with the result that Lois Lerner (head of the department that denied exemption based on religious or political persuasions) became a folk hero to Leftists, but escaped any punishment for her crimes.
This is the quintessential example of how the government can abuse its power to prefer one religion or political organization over another. And it is the quintessential reason why churches should not incorporate (beseech the government for permission to exist) nor apply for government tax-exempt status (beg the government for permission to accept donations for God’s work).
Another friend, Dave Williams, is a retired State Police Officer as well as an Elder in a Congregational church in Massachusetts. His church was organized in 1756, and incorporated in 1880. They have never applied for federal non-profit status, but no one in their congregation has ever had a problem claiming donations to the church on their income taxes.
That’s the dirty little secret the IRS hopes your church never discovers. All churches are automatically granted the same status as 501(c)(3) charities. Donations to churches are tax-exempt – whether or not the church applies to the IRS.  There has never been a case where the IRS has gone after anyone for donating to a church that has not applied for 501(c)(3) status – because legally the IRS cannot do so.
Here’s a thought: What if they could disallow donations to churches that didn’t bow down to the IRS? So what? I told the people who attended churches I pastored that if they were giving to get a tax deduction, they were giving for the wrong reason. We give because God says to give.
I believe that one day the government will do away with tax deductions for churches anyway. They will do this under the guise of “separation of church and state.” And I wouldn’t have a problem with that. A family with an income of $50,000 would pay about $1,000 more in taxes if they could not deduct their tithe. My God is big enough to make up that amount without breaking a sweat.

Dr. D. James Kennedy has written: “The federal government has proved a tremendous impediment to the ongoing work of Christians. In all the laws that they have passed against Christian schools, gagging the church, taxation…they have made it harder for the church to exercise its prerogatives and to preach the gospel.
"Take the last presidential election. There were numbers of things that I knew that I was never able to say from the pulpit because if you advance the cause of one candidate or impede the cause of the other you can lose your tax exemption. That would have been disastrous not only for the church, but for our school and our seminary, everything. So you are gagged. You cannot do that. The IRS, a branch of our government, has succeeded in gagging Christians." 
Here’s what you gain if you have federal tax-exempt status: Nothing!
Here’s what happens if you apply for and get 501(c)(3) status: It gives the government the ability to dig around in the church’s books, including its membership rolls. This has not happened very often in the past, but it will probably happen more frequently in the future. (Say goodbye to privacy.) Also, the government can (and does) hold a sword over the church by telling it what it can and cannot say regarding politics. In other words, the government takes away the church’s First Amendment right to free speech. Worst, the church gives the government the right to define what a church is by beseeching it for permission to exist and accept donations.
A link to the full definition is below in the Resources section, but here are some revealing parts of the IRS definition of a church. It considers whether a church is legitimate by examining these attributes or characteristics, among others: 
  • “Recognized creed and form of worship.” Recognized by whom? Obviously by the IRS.
  • “Definite and distinct ecclesiastical government.” When did the IRS become an authority on church government?
  • “Formal code of doctrine and discipline.” So the government gets to determine whether the church’s doctrine is sufficient?
  • “Distinct religious history.” What if it is a new church with no history? Does that make it not a church?
  • “Membership not associated with any other church or denomination.” Pastors, if you have members that sometimes attend other churches, you’d better get rid of them. You could lose your tax-exempt status!
  • “Organization of ordained ministers.” Some churches do not believe in ordination. I guess they’re not churches according to this definition.
  • “Literature of its own.” Do you know how hard it is to write a book? I do. Most pastors are too busy to write literature, so they use literature developed by people in other churches. The IRS says that’s not good enough.
  • “Established places of worship.” What about home churches that meet in different members’ homes? Does the fact that they don’t meet in the same place every week make them any less a church?
  • “Sunday Schools for the religious instruction of the young.” This is wrong on so many levels. First, many churches meet on Saturday rather than Sunday. It’s a key part of their doctrine. But the IRS wants to tell churches which day is appropriate. Also, apparently the IRS didn’t get the memo, but Sunday School has not existed in many churches for years. I was raised in Sunday School and loved it. But the fact is that most churches no longer offer it. So I guess they’re not really churches.
Recall the definition of a Franchise above. Just as becoming a registered corporation in your State makes your church a Franchise of that State, applying for and receiving federal tax-exempt status makes your church a Franchise of the IRS.
The bottom line is that every time a church gets permission from the government it gives that government (whether local, state or federal) more power over it. The church of God should only answer to the God who created the church.
Churches are NOT Required to Apply for 501(c)(3) Status to be Tax-Exempt
Incorporation Gives the State Control Over Your Church

The IRS Has Succeeded in Gagging Christians
IRS Definition of a Church (on IRS website)

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Dr. Tom Barrett is a pastor, teacher, author, conference keynote speaker, professor, certified executive coach, and marketplace minister. His teaching and coaching have blessed both church and business leaders. He has been ordained for over 40 years, and has pastored in seven churches over that time. Today he “pastors pastors” as he oversees ordained and licensed ministers in Florida for his ministerial fellowship.

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