Advice for Religious Entrepreneurs

Tax Consequences of a Religious Organization Startup

Religious organizations receive special treatment when it comes to federal, state and local taxation.

Obtaining and maintaining your tax-exempt status should be a priority for your religious startup because without it your revenue and property will be subject to tax, and donor contributions will no longer be tax-deductible.

Once you have formalized your tax-exempt status with the government, there are multiple areas of taxation from which you will be exempt. Tax-exempt religious organizations are not required to pay federal or state income tax so every dollar your organization brings in can go directly toward the achievement of your mission. Similarly, exempt religious organizations are not required to pay sales tax on most purchases as long as you provide vendors and suppliers a copy of your tax-exempt certificate.

While for-profit businesses are part of the local tax base, tax-exempt religious organizations are not required to pay property tax. As you might expect, this isn't good news for municipalities so you'll need to carefully research zoning when you look for space. Also, religious employers are exempt from paying the employer portion of FICA for certain categories of religious employees. Check IRS guidelines for details about religious employers' FICA requirements.

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