Introduction to 508(c)(1)(a)

 

References

 

Organizing FAQ's

  • What is a Faith Based Business?

    A Faith Based Organization is a corporation whose primary purpose or activities are religious or religiously motivated.

  • Can anyone set up a 508?

    Yes!

  • Who is a 508 for?

    For any person who wants to set up a Faith Based Organization whose primary purpose or activities are religious or religiously motivated.

  • How is the 508 formed?

    Once you have chosen your initial board of directors, we take care of the rest.

  • Are there different types of 508’s?

    Yes.  A 508 may be a

    • church or, an
    • association of churches or,
    • an integrated auxiliary of a church.
  • May a 508 ordain and license its own leaders?

    Yes.  A 508 FBC MAY ordain and license its own leaders.

  • What comes with the 508 filing?

    • The Articles of Organization
    • Certificate of Incorporation
    • UBI Number
    • SS4 and Tax Identification Number
    • Certificate of Existence/Authorization
    • Charities registration exemption letter signed by the Secretary of State listing the 508 as an tax exempt organization
    • First year registered agent services
    • Bylaws template
    • Sample first minutes of board meeting
  • How long does it take to setup a 508?

    Within 20 days.

  • Does the registered agent have to sign the 508 articles?

    Yes, but the signature does not have to be original.

  • Who serves as the registered agent?

    Our registered agent services is offered by Higher Heights Outreach. The first year of registered agent service is included with the 508 filing.  After the first year Higher Heights Outreach charges a $150 per year fee to serve as the registered agent.

  • Is a Washington Corporation good for my state?

    Yes!  Washington Corporation’s work in all 50 states.  If used in another state you may need to register as a foreign corporation depending on your states laws and the type of activity.

  • Why incorporate your Faith Based Business in Washington?

    Washington is a very popular location for non-profit organizations because we have both Non-Profit Registration and the Charities Program administered by the same agency, the Secretary of State. Many states restrict religious expression. Washington allows religious organization’s to exercise religion equal to what a natural man or woman can do.

  • Benefits of a Washington Charity?

    Washington is unique in offering a charities registration exemption letter to FBB’s. The letter acknowledges that FBB’s do not have to report for any fund raising. The Secretary of State lists the FBB as tax exempt and able to raise money from the public.

  • What are the annual fees to keep my Washington Non Profit active?

    $10 a year in Washington.  California is $800.

 

What is a 508(c)(1)(a)

The 508(c)(1)(a) Faith Based Organization (FBC) is a religious, non-profit, tax exempt organization.  The 508(c)(1)(a) FBC is separate and distinct from a 501(c)(3) and unincorporated FBC’s.  The 508(c)(1)(a) is applicable in all 50 states and recognized internationally under the Hague Convention of the United Nations Charter.

Since its inception in 1954 with the Johnson Amendment, the 501(c)(3) has been promoted and advertised by many as the only option to organizing a FBC. This is fatally incorrect.  Federal law, IRS publications, and court cases all confirm and establish the rights and protection of the 508(c)(1)(a) FBC. (Please see legal information.) link to legal

The 508(c)(1)(a) FBC enjoys a “mandatory exception” from all the restrictions a 501(c)(3) FBC has including free speech restrictions, IRS reporting requirements, rules and regulations that the IRS may from time to time prescribe and providing testimony under oath.

Advantages of  a 508(c)(1)(a)

The Faith Based Organization (FBC) was once a strong influence in our nation and can be again.  Every FBC should be free to worship and preach without restriction by government.  Something can’t be true and false.  Either the FBC has the right to free speech or it does not. Take time to review the law , and court cases related , to better understand the rights and benefits of the 508(c)(1)(a) FBC.

The advantages of being 508(c)(1)(a) FBC include rights guaranteed under Federal Law 26 U.S.C. §  6033(a)(3(a)

  1. Tax Exempt, and can give tax deductible receipts for donations.
  2. Freedom of Speech, including, but not limited to, politics, referendums, initiatives, and candidates.
  3. Mandatory Excepted from reporting (does not file a tax return),
  4. Mandatory Excepted from “rendering under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary (IRS) may from time to time prescribe”.

26 U.S.C. §  6033(a)(3(a) with Highlight

 

 

Disadvantages of  a 501(c)(3)

If a Faith Based Communities (FBC) is organized under section 26 U.S.C. §501(c)(3), that FBC is restrained from speaking on politics.  This means the FBC is legally restrained from preaching on political issues.  By law there should be no advocating for a position on a referendum,  initiative, or political candidate on any level.   There are also reporting requirements and costs including accounting and reporting a yearly Form 990.

1)  FBC application for a “determination letter” grants authority from the FBC to the IRS for income, expenses, and preaching.

2)  All 501(c)(3) FBC are prohibited from free speech.  By law, a 501(c)(3) FBC is exempt from taxation only if it is  “organized and operated exclusively for religious… purposes…. which does not participate in, or intervene in (including the publishing or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”  See 26 U.S.C. § 501(c)(3).

The heavy price 501(c)(3) organizations pay is not just waving constitutional rights in formation.  Particularly egregious, is agreeing to comply with all future rules and regulations the IRS, not congress, enacts.  Many FBC’s have realized only too late what they have done.  Once you contract with the IRS and waive your rights as a FBC to be a 501(c)(3), you can’t argue 1st Amendment Free Speech protection regarding political issues.  Over and over again 501(c)(3) FBC have lost this court battle.   Why?  Because FBC’s have the choice to be a 508(c)(1)(a) or 501(c)(3). People and corporations can waive their rights.

3) Look clearly at USC 26 6033a Returns by Exempt Organizations.  All tax exempt non profits excluding the 508(c)(1)(a)  “shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe”

4)  What is the penalty?  The penalty for a  501(c)(3) FBC that violates federal law political restrictions is losing tax exempt status.  In addition all donations given to that FBC by any taxpayer will no longer be tax deductible. See BRANCH MINISTRIES VS IRS211 F.3d 137 (D.C. Cir. 2000) and JACK LANE TAYLOR VS IRS 2000.

See Reference #9 - Exemption from tax on corporations, certain trusts, etc

When to use a 501(c)(3)

Ministries that will rely on grant money should keep or establish a 501(c)(3).  Many Faith Based Communities (FBC) have outreach programs that utilize grant money to help provide food, shelter, or education to those in need.  In these cases a 501(c)(3) organization is required to apply and maintain reporting requirements for the grant.  If your FBC fits this description, we can show you how your FBC can have both a 508(c)(1)(a) and a 501(c)(3) and how these organizations interact.