Churches and Incorporation?

[RamistThomist]

This isn't necessarily a post on how evil modern statism in America is (though that certainly may be a legitimate inference at the end) but is an honest question. I am trying to wrap my mind around the idea of tax-exempt status, incorporation, etc. Does the State require churches to "incorporate" into it? If so, is this not an ecclesial and sacramental act? Has not the church already been incorporated into the Body of Jesus, who is its head?

More specifically, is the act of seeking tax-exempt status a form of incorporating into the body of the State?

I understand Jesus said the sons of the kingdom are exempt from this, but go ahead and pay it to Caesar as kind of a bribe to get them off your back. I think that is a different statement that bureaucratically incorporating into the State.

 

[Edward]

Does the State require churches to "incorporate" into it?

More specifically, is the act of seeking tax-exempt status a form of incorporating into the body of the State.

No, and no.

 

[Backwoods Presbyterian]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

Our church is not incorporated.

 

[JML]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

Our church is not incorporated.

Do Presbyterian denominations leave this up to the individual session/congregation if there is a choice of whether to incorporate or not?

 

[Backwoods Presbyterian]

According to the ARP Form of Government it is up to the local congregation.

 

[RamistThomist]

Thanks

 

[Edward]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

Our church is not incorporated.

Do Presbyterian denominations leave this up to the individual session/congregation if there is a choice of whether to incorporate or not?

The PCA has recommended incorporation but leaves it up to the congregation.

 

[Unoriginalname]

As someone who does not get tax and business code, what does incorporation mean and what would the alternative even be or mean?

 

[VictorBravo]

As someone who does not get tax and business code, what does incorporation mean and what would the alternative even be or mean?

Incorporation is different from tax treatment. Two separate areas of law.

Incorporation is subject to a particular state's laws and can vary from state to state. Primarily, it allows an organization to take advantage of protection from liability. For example, if a group of people gather together to do something and, while they are doing it, someone (outside of the group) gets injured, each member of the group could be personally liable for paying for that injury. Same would go for business debts, etc.

But under incorporation protection, only the assets of the corporation are at risk (with some exceptions I won't go into much except to say if owners of the corporation are using the corporation for personal purposes, they could be personally liable). So if a person is injured by the corporation, usually that person can only go after the corporation's assets, not the personal assets of the owners or members.

Practical example: a church does a poor job of maintaining its front steps and a visitor slips and falls. If the church is unincorporated, potentially any and all members of the church could be personally liable because they are involved in a joint venture. If the church is incorporated, generally the visitor can only look to the church assets themselves for recovery (usually through insurance).

Tax exempt status is a creature of federal tax law. If you are a church, you are tax exempt regardless of whether you are incorporated or not. There are bookkeeping advantages to being incorporated, but it is not a requirement for tax exempt status.

 

[SRoper]

I'm trying to figure out where the idea of "incorporation into [the state]" even comes from. Is there some corner of the conspiracy interwebs where this is being put forth as something that actually exists? Do they also think that when the state recognizes your marriage that you are being "married into the state"?

 

[VictorBravo]

I'm trying to figure out where the idea of "incorporation into [the state]" even comes from. Is there some corner of the conspiracy interwebs where this is being put forth as something that actually exists? Do they also think that when the state recognizes your marriage that you are being "married into the state"?

I think among many there is a well-intentioned, good-faith fear, or at least concern, that by incorporating, you are essentially putting your church under the oversight of government. State laws governing incorporation of non-profits typically require the non-profits to operate as a corporation for "any lawful purpose...." and this usually includes religious activities. The issue for some people is whether that is a submission to a state's authority to determine if its purpose is lawful. In other words, if you incorporate, you are subject to a state's interpretation of the rules.

As a counter to that, as far as I can tell, the worst thing that can happen is that the state revokes your corporate status. So if, in the very unlikely event that some rogue state determines that preaching the gospel is not a legitimate purpose, you get your status revoked. In other words, you are back to where you would be if you had never incorporated. To be sure, weird things can happen, but if a state starts going down this road, incorporation would be the least of our worries because such a state would be rogue anyway.

I'm fairly confident that even the ACLU would jump in to defend a church if some state told a church to change what it preaches.

The other issue that sometimes muddies the waters is political activity vs religious activity. But that is a matter of Federal tax law, meaning it doesn't matter if you incorporate or not. If you are a church having fundraisers for political campaigns, tax-exempt status would not apply to those funds and other statutes kick in. On the other hand, if you have a pastor who preaches against a political figure in a regular church service, it is not likely to be considered political activity. Where it gets sticky is if you have a church constantly and overtly preaching to vote a certain way. It may bring some kind of challenge to tax-exempt status. It wouldn't matter if the church were incorporated or not.

Here, the worse case scenario would be along the lines of the IRS determining some church income to be not tax exempt, or, more likely, some donations would not be tax deductible. In that case, a tax could be imposed on the donors, the recipient, or both, along with fines. The hurdles the IRS must jump to demonstrate such things are significant.

Egregious cases invite scrutiny. If, for example, you gather together 1000 members to a "church" and require them to tithe $2000 per year, and all of that money goes to promoting a political agenda, it is likely that church tax exempt status would be revoked and the raised money would have to be accounted for under laws pertaining to political action committees--no tax deductions for donors, for one thing.

But, again, this has nothing to do with incorporation.

 

[Edward]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

I've certainly not researched all, or even most, of the states. Do you have a link to a site showing states that either require or prohibit?

 

[SRoper]

Thanks, Victor. I'm aware of the unfounded concerns of some regarding incorporation, but I was interested in the language of "incorporate into [the state]." It just seems so unmoored from what incorporation actually involves. The only explanation I have is that someone read some misinformation on the Internet, added their own misunderstandings to it, and arrived at a faulty definition of incorporation through a new folk etymology.

 

[reaganmarsh]

As someone who does not get tax and business code, what does incorporation mean and what would the alternative even be or mean?

Incorporation is different from tax treatment. Two separate areas of law.

Incorporation is subject to a particular state's laws and can vary from state to state. Primarily, it allows an organization to take advantage of protection from liability. For example, if a group of people gather together to do something and, while they are doing it, someone (outside of the group) gets injured, each member of the group could be personally liable for paying for that injury. Same would go for business debts, etc.

But under incorporation protection, only the assets of the corporation are at risk (with some exceptions I won't go into much except to say if owners of the corporation are using the corporation for personal purposes, they could be personally liable). So if a person is injured by the corporation, usually that person can only go after the corporation's assets, not the personal assets of the owners or members.

It's for precisely these reasons that I am thankful that our congregation is incorporated.

 

[Backwoods Presbyterian]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

I've certainly not researched all, or even most, of the states. Do you have a link to a site showing states that either require or prohibit?

When I lived in PA it was required, in WV it was prohibited.

 

[SRoper]

Some U.S. states do require incorporation, some states forbid it, and some states are open to interpretation. It all is a matter of state law.

I've certainly not researched all, or even most, of the states. Do you have a link to a site showing states that either require or prohibit?

When I lived in PA it was required, in WV it was prohibited.

I found this. Looks like it was forbidden in WV:

In Win for Rev. Falwell (and the ACLU), Judge Rules VA Must Allow Churches to Incorporate

 

[Edward]

When I lived in PA it was required, in WV it was prohibited.

Thanks.

Judge Rules VA Must Allow Churches to Incorporate

I had forgotten about that case.