The 508(c)(1)(a) New Millennium Faith-Based Initiative

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financial projection of income. There may or may not be a filing fee on this document. NOTE: Not all states will allow a 508 to be sales tax exempt. Contact your Dept. of Revenue for details. 8. Make a determination if you need an Employer Identification Number (EIN) from the Federal Government. It is possible to file the SS4 online with the Federal Government, and is free. You will only need an EIN if: a. You pay any employees or clergy; and/or b. Your bank requires it to open a business account. You may or may not need to disclose that you are a 508(c)(1)(a), they may not understand in many cases what that is. Simply hand them the EIN Number and you Charter/Bylaws. Banks generally do not, and are not required to, understand the IRS 26 (501/508) “exceptions”. There are some that indicate that having the EIN gives more credibility to the formation and validity of your church. While this may seem appropriate, the idea of a 508(c)(1)(a) is to attempt to be removed from the Federal Government as much as possible. 9. DO NOT, unless specified by your Secretary of state, fill out a form for a fictitious name. This is usually reserved for a sole proprietor business. If in the event you choose to have paid clergy or payed employees, make sure to read the entire IRS publication 1828 (especially pages 21-22) (https://www.irs.gov/pub/irspdf/p1828.pdf). You may also wish to visit with a Tax Consultant (CPA) for details. Please locate the Secretary of State website, or contact their office to determine exactly what forms they require. They are very helpful once you explain this is a not-for-profit church filing. Fees will vary. In ending, what are the pros and cons of a 508(c)(1)(a) church versus a First Amendment church: 1. The 508(c)(1)(a) FBO is the best option for a church startup that will have a physical congregation. 2. The 508(c)(1)(a) FBO is NOT a candidate for a sole proprietorship, such as a priest who performs only weddings. By definition the 508(c)(1)(a) should be used for a church with congregation. 3. The First Amendment FBO is best for a sole proprietorship, using the example of a priest performing only weddings. The First amendment church does work well with a small group, with no intent on any paid staff, and have no concerns about tithes not being tax deductible. Page 22 of 97
4. The 508 lends itself to a higher level of personal protection regarding liability. 5. The 508 may allow for sales tax exemption. NOTE: Not all states will allow a 508 to be sales tax exempt however. Contact your Dept. of Revenue for details. 6. The 508 will allow for property tax exemption (on the first property). If your church has a second property or possible support a subordinate “collection” of churches, filing a 501(c)(3) is also recommended. NOTE: Not all states will allow a 508 to be property tax exempt. Contact your Dept. of Revenue for details. 7. The First Amendment Church allows for total and complete separation from any state or federal influence The First Amendment Church has no protection against personal liability. 8. The 508 makes a legally clean path in case of paid employees. 9. The 508 will allow for non church income in some cases, for example, church related clothing sales, church related bake sales, etc. This is also spelled out in IRS Publication 1828. 10. The 508(c)(1)(a) establishes the church as a not-for-profit entity, and protects the church itself from government reporting and taxation. None the less, it does not protect against the requirement to report income paid to clergy or employees. Note1: All 50 states allow you to register as a 508(c)(1)(a) Faith Based Organization or Church. Here is how it works: There is no such thing as a separate law to form a 508(c)(1)(a). A 508(c)(1)(a) is actually a 501(c)(3) REGISTERED WITH THE STATE ONLY. You go to their website, and I assume all allow online filings, and you will go to the link to create a nonprofit or not-for-profit. On the Articles of incorporation, you will fill it out exactly as you would a 501(c)(3) with the organization name. They will ask on the form what your primary purpose is, simply enter “We are operating as a 508(c)(1)(a)”. Poof, you organization is now a 508(c)(1)(a). Specify this in your charter/bylaws also. That is it, you do not need to file for any status to the Federal Government. The exception is if you have a paid priest or employees, and that was discussed in detail earlier in this document. Now you have the right to file for sales tax exemption and possibly property tax exemption if you decide to own a physical building. Note: Not all states will allow a 508 to be sales tax exempt. Contact your Dept. of Revenue for details. Page 23 of 97
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