PCUSA Group Federal 501 (c)(3) Tax Exemption

The Presbytery of Los Ranchos

- A Presbytery of the Presbyterian Church (U.S.A.) -

The Presbyterian Church (U.S.A.) Group Federal 501(c)(3) Tax Exemption

The initial Group Ruling was granted to the Presbyterian Church (U.S.A.) on January 31, 1964 by the IRS, and the IRS has reaffirmed the Group Ruling periodically with respect to the Presbyterian Church (U.S.A.) and its related entities. The related entities entitled to the use of the Group Ruling include synods, presbyteries, local congregations and their unincorporated affiliates. The Legal Office, in conjunction with the Office of the General Assembly, submits to the IRS an annual filing of all covered organizations within the Group Ruling. If your church or middle governing body needs a personalized letter certifying its status as a covered entity within the Group Ruling it can be obtained by calling Brenda Smithers, Senior Legal Assistant/Office of Legal Services. Her number is 1-888-728-7228 ext. 5377. Normally, such letters are requested as evidence of:

federal tax-exempt status by state revenue departments (in assessing applications for state income and sales tax exemptions),
U.S. Postal Service (in relating to application for third-class bulk mailing permits),
grant-making foundations or attorneys for estates (in order to be sure that the grant or bequest is going to a federally tax-exempt entity),
real estate taxing jurisdictions (to help determine the taxable status of church-owned real property).

The Group Ruling issued by the IRS has two important benefits for the Presbyterian Church (U.S.A.). First, all churches, governing bodies, and included related entities are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code and from federal unemployment tax (FUTA). Second, contributions to such organizations are deductible for federal income, gift, and estate tax.

Please note, however, that states may impose an unemployment tax. The Group Ruling does not control excise taxes or state or local income, sales or property taxes. Additionally, all entities in the Group Ruling must pay taxes under the Federal Insurance Contributions Act (FICA) for each lay employee who is paid $100.00 or more unless they have obtained an exemption. Also, the Group Ruling exempts churches and middle governing bodies from the Form 990 filing requirement imposed upon other nonprofits (unless unrelated business income on which tax is due has been earned during the year, in which case Form 990T must be filed). Please remember, however, that the Group Ruling does not in and of itself establish exemption from state and local taxes. The relevant state statutes should be reviewed to determine the information and filing requirements at the state (income and sales taxes) and local (sales and real property taxes) levels. As stated above, the Legal Office, in conjunction with the Office of the General Assembly, annually submits a report to the IRS listing all covered groups. Thus, a covered entity is not required to file any type of report with the IRS concerning its tax exempt status.

The following is a list of those understood to be automatically included in the Presbyterian Church (U.S.A.) Group Ruling. These groups need not take any additional action to be included within the denomination's Group Ruling:

The particular churches, congregations, sessions
The presbyteries
The synods
The General Assembly
The first or primary corporation of any of the above (e.g. First Presbyterian Church, Inc.).
The unincorporated programs or functions of any of the above.
Other incorporated bodies are not automatically included. Examples are:The second, third and fourth corporations created by governing bodies. Typically, these are camp/conference center corporations, campus ministry corporations, etc..

These organizations desiring inclusion in the Group Ruling which are separately incorporated, but controlled related entities of a synod, presbytery or local church must apply with the Office of the General Assembly and follow certain guidelines as developed by the Office of the General Assembly and the Office of Legal Services. The major criteria for determining if such a corporation is to be included are as follows:

The group applying must have an affiliation with a governing body of the Presbyterian Church (U.S.A.).
The group must independently meet the qualifications for exemption under Section 501(c)(3) of the Internal Revenue Code.
The affiliated governing body must exert control over the group applying. Examples include control by the governing body in the areas of finances, policies, the group's programs, and electing a majority of the board.

A copy of these guidelines can be secured by calling Senior Legal Assistant Brenda Smithers at 1-888-728-7228 ext. 5377.

The general exemption number listed on the Group Ruling granted to the Presbyterian Church (U.S.A.) is 1617. Every entity that is incorporated has a separate employee identification number (a 9-digit number). Synods, presbyteries or local congregations that are incorporated or have employees should have separate employee identification numbers. For purposes of the federal Group Ruling, synods, presbyteries and local churches should use the Presbyterian Church (U.S.A.)'s general exemption number (1617) in conjunction with their own employee identification number. An employee identification number can be obtained by completing IRS Form SS-4/Application for Employee Identification Number. This form can be obtained from the IRS. The current telephone number for IRS forms and publications is 1-800-829-3676. See the end of this chapter for other easy resources to obtain IRS forms.

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