Whenever people mention that they have started a non-profit agency, the first question they are asked is, “Is it 501 (c)(3)?” In the minds of many Americans this is the only kind of tax exempt status available through the IRS. According to IRS Publication 557, entitled “Tax Exempt Status for Your Organization,” the IRS identifies at least ten categories of organizations that could qualify for tax exemption. There are also more than thirty (30) classification codes for tax exempt organizations. Some of these organizations include charitable organizations, social and fraternal organizations and political organizations. There is no way I would dare attempt to explain the various ways organizations can qualify for tax exempt status, so let’s keep it simple. We will focus only on charitable organizations.
By definition a charitable organization is an organization that is organized and operated for “charitable” purposes. Recently I registered a non-profit that is indeed organized to operate only for charitable purposes, but it is also faith based. My goal is to design and operate this company in a way that is consistent with God’s kingdom principles. According to the Bible, paying taxes is our way of giving honor to the government for allowing us the opportunity to do business under their jurisdiction. So the idea of going tax exempt was one that needed much thought and prayer. On one hand, you could argue that since the earth is the Lord’s, his sons and daughters should not be required to pay taxes. Yes, we could make that argument, but that is not what Jesus taught. There was a story in the Bible (Matthew 17:24-27), about a tax man who came to Peter to collect temple tax. The tax collector asked Peter if Jesus also paid taxes and he responded “Yes.” Then Jesus asked Peter, “Of whom do the kings of the earth take custom or tribute? Of their own children, or of strangers?” Peter said, “Of strangers.” Jesus responds, “Then are the children free.” If kings didn’t require taxes from their children then by right Jesus (son of God) shouldn’t have to pay temple tax. Jesus could have easily refused to pay temple taxes because the temple belonged to God, but that is not what he did. Jesus told Peter that even though he should be tax exempt, he rather not offend the officials by not paying taxes. So, he told Peter to go fishing and look in the mouth of the first fish he caught. In that fish’s mouth would be enough money to pay taxes for the both of them. Jesus did what was required as not to offend temple officials.
There may be times when doing what is required also offends God. Here is what the Holy Spirit shared with me concerning America’s financial condition in general.“America had become a nation of takers, not givers. Everyone feels a sense of entitlement, like the government owes him or her. The wealthy won’t give up their tax breaks, ministries won’t give up their tax-exempt status and the poor won’t give up their welfare, and no one is willing to give up their social security. How can any government survive under those conditions?” Then I began to have second thoughts about becoming tax exempt. People will give to charity. They just don’t want to give to government. But what if my paying a normal share of taxes, I am able to help America get back on her feet? Jesus told us to render to Caesar that which is Caesar’s. Taxes are necessary government entities to survive and pay for their own responsibilities. In God’s kingdom tithing is comparable to taxes. Tithes are necessary so that the needs of God’s house will be supplied. Therefore, the concept behind tithing and paying taxes is quite similar. Shouldn’t I do my part?
The obvious benefit of 501 (c)(3) tax exempt status is the perceived seal of government approval. Donors trust the IRS governance over non-profits. In addition, people are awarded tax deductions for giving to 501 (c)(3) organizations. Again, in God’s kingdom charitable giving in its truest form is done because people want to give. It has little to do with desiring a tax deduction.
These are just a few factors I had to consider if I desired my non-profit to be a kingdom model. Will I apply for tax exempt status? Yes, I will, but not because I desire to be tax exempt as much as I desire to go through the 501 (C)(3) application process. If the IRS sets the bar for how non-profits should operate, I definitely want to comply. On the other hand, if what they require conflicts with how God has told me run this organization, well that is another story all together and will be the subject of yet another article.