From the IRS itself .............
§ 508. Special rules with respect to section 501(c)(3) organizations
(1) unless it has given notice to the Secretary in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or
(A) by any person after notification is made under section 507(a), or
(A) to a private foundation or a trust described in section 4947 in a taxable year for which it fails to meet the requirements of subsection (e) (determined without regard to subsection (e)(2)), or
(e) Governing instruments
(A) to require its income for each taxable year to be distributed at such time and in such manner as not to subject the foundation to tax under section 4942, and
(A) to any period after December 31, 1971, during the pendency of any judicial proceeding begun before January 1, 1972, by the private foundation which is necessary to reform, or to excuse such foundation from compliance with, its governing instrument or any other instrument in order to meet the requirements of paragraph (1), and
IRS Publication 557 Chapter 3 Section 501(c)(3)Organizations Page 23
Churches.
Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption. In this event, you should submit information showing that your organization is a church, synagogue, association or convention of churches, religious order, or religious organization that is an integral part of a church, and that it is engaged in carrying out the function of a church. In determining whether an admittedly religious organization is also a church, the IRS does not accept any and every assertion that the organization is a church. Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. The IRS considers the facts and circumstances of each organization applying for church status.
Black's Law Dictionary, 5th Ed. defines "organization" as:
"... a corporation or governmental subdivision or agency, business trust, partnership or association, two or more persons having a joint or common interest, or any other legal or commercial entity." UCC 1- 201(2B).
The U.S. Supreme Court shows its understanding of the artificial status of corporations:
1.) A corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises ... Its powers are limited by law. It's rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. [Wilson v. U.S., 221 US 382]
2.) Corporations are not citizens... The term citizen... applies only to natural persons... not to artificial persons created by the legislature... [Paul v. Virginia, 8Wall 168,17 also, Opinion Field, 16 Wall 36, 99]
3.) Whenever a corporation makes a contract it is the contract of the legal entity... The only rights it can claim are the rights which are given to it in that character, and not the rights which belong to its members as citizens of a state. [Bank of Augusta v. Earle, 13 Pet 586]
Comments by Art Fisher in the CBA Bulletin of August 1988
"A religious or church organization is a CORPORATION that functions in a legal capacity, doing business as a church. The IRS is fully aware of this distinction, and their publications reinforce that status. Nowhere do they define tax exempt churches - - they always refer to religious or church organizations. Surely Congress, in writing the tax law, understands this distinction as well!
"A church that voluntarily initiates an application to the state for corporate status expects limited liability and tax exemption. It in turn owes to the state its right to exist and prosper. It is obvious that its legal status and that of its of its flock has been drastically altered.
'Churches do NOT have rights granted by the Constitution. They enjoy INALIENABLE rights granted by God, which are secured by the Constitution. Incorporated churches, in contrast, are artificial entities which may have such privileges and immunities as are granted by the state."
Except as provided in subsection (c), an organization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3) -
(2) for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection.
Except as provided in subsection (c), any organization (including an organization in existence on October 9, 1969) which is described in section 501(c)(3) and which does not notify the Secretary, at such time and in such manner as the Secretary may by regulations prescribe, that it is not a private foundation shall be presumed to be a private foundation.
(1) Mandatory exceptions
Subsections (a) and (b) shall not apply to -
(2) Exceptions by regulations
The Secretary may by regulations exempt (to the extent and subject to such conditions as may be prescribed in such regulations) from the provisions of subsection (a) or (b) or both -
No gift or bequest made to an organization upon which the tax provided by section 507(c) has been imposed shall be allowed as a deduction under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such gift or bequest is made -
(B) by a substantial contributor (as defined in section 507(d)(2)) in his taxable year which includes the first day on which action is taken by such organization which culminates in the imposition of tax under section 507(c) and any subsequent taxable year.
(2) Gift or bequest to taxable private foundation, section 4947 trust, etc.
No gift or bequest made to an organization shall be allowed as a deduction under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such gift or bequest is made -
(B) to any organization in a period for which it is not treated as an organization described in section 501(c)(3) by reason of subsection (a).
(3) Exception
Paragraph (1) shall not apply if the entire amount of the unpaid portion of the tax imposed by section 507(c) is abated by the Secretary under section 507(g).
(1) General rule
A private foundation shall not be exempt from taxation under section 501(a) unless its governing instrument includes provisions the effects of which are -
(B) to prohibit the foundation from engaging in any act of self-dealing (as defined in section 4941(d)), from retaining any excess business holdings (as defined in section 4943(c)), from making any investments in such manner as to subject the foundation to tax under section 4944, and from making any taxable expenditures (as defined in section 4945(d)).
(2) Special rules for existing private foundations
In the case of any organization organized before January 1, 1970, paragraph (1) shall not apply -
(B) to any period after the termination of any judicial proceeding described in subparagraph (A) during which its governing instrument or any other instrument does not permit it to meet the requirements of paragraph (1).
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© Dr Milson Macleod Jan 2000