Church Incorporation & The 501c(3) Tax Exemption



Since the early days of the American church, religious
institutions have routinely incorporated their
denominations and their various para-church
outreaches. Incorporation is a legal means in which a
group seeks to shield the institution from
catastrophic legal consequences. It installs favorable
financial structures that, at least theoretically,
benefit the various institutions. Incorporation is
also commonly utilized as a legal means to perpetuate
the teachings and the work of the institution's
founder after his demise. In short, it is a legal way
for a leader to build an institution that will
perpetuate his work and pass on the control of that
institution to others in a multi-generational fashion.

Few pastors ever consider the spiritual ramifications
of their legal structure, for it has been deeply
ingrained that incorporation is a necessary
prerequisite to applying for tax exempt status.
Pastors were taught this at their Seminaries and
various denominational educational institutions, and
for the last century this pattern has seemed to be the
logical progression for church growth. This
compartmentalization never seemed threatening to the
faith of the individual pastor for they easily divided
their business duties from their scriptural
responsibilities. This is a grave error.

Under the Constitution of the United States, churches
are tax immune. The very nature of the American
revolution was related to the desire to separate
oneself to the freedom to worship God without
political constraints. Ever since King Henry broke
with the Pope centuries ago, in the British state
church (the Anglican denomination), the king was
always the designated head of that church. When the
colonials came to America, they brought with them a
great desire to form their own churches without any
state control whatsoever.

As the American congregations grew and prospered, they
became more sophisticated in their financial dealings.
They felt the need to build financial structures to
administer their increasing wealth. Churches formed
publishing houses, broadcast networks, overseas
schools, soup lines, and dozens of other types of
outreach ministries. The government, constrained by
the Constitution, was not only forbidden to tax the
church, they were forbidden to regulate it in any way.
In order to neutralize the spiritual and political
power the early American churches held, the spiritual
principalities ruling the bureaucracy developed the
concept of tax exemption -- as opposed to tax

The system developed as a quid pro quo relationship
between the churches and the government--or in the
modern idiom,` you scratch my back and I'll scratch
yours.' Government granted the incredibly intoxicating
privilege of tax deductibility for any donation a
citizen or corporation gave to churches--assuming that
the "church" had formally received the government's
tax exemption. The churches, in return, agreed in
writing not to become directly involved in the
political process.

In America today, many pastors will tell you they
believe the church should not be involved in politics
because they're "not called to do that." They
frequently cite the great commission of Jesus Christ
to go forth and evangelize. What they commonly conceal
is the fact that they cannot legally endorse political
candidates. They cannot campaign for specific
legislative initiatives. They cannot directly
contribute to political campaigns.

The truth is, they are legally forbidden to become
directly involved in the political process because
they have agreed not to do that in order to receive
the 501c(3) tax exemption from the Internal Revenue
Service. And every single church in America with this
tax exemption voluntarily applied to receive it. So
when the pastors tell you they don't believe the
church should be involved in the civil political
structure, the truth is their religious practice is
actually in voluntary conformity to what the state has
imposed as a condition of receiving their non-profit
tax status.

Legal dictionaries define a corporation as an
"artificial person." The word comes from the Latin
word "corpus," meaning a body. In sort of a Freudian
linguistic slip, we get our word "corpse" from the
same word as corporation. This "artificial person" is
actually a creation of the government that
incorporated it. In short, the government is the
creator and "head" of all corporations.

Conversely, the Bible teaches us that Jesus Christ is
the head of the church (Ephesians 5:23). While this
delineation may seem to be hair-splitting, an
incorporated church is in every sense under the
control and direction of its creator--the government.
By every sense I mean legally, ethically, morally,
financially, and even spiritually. After all, the
aforementioned belief of non-involvement in government
is a doctrine imposed on the corporate church by its
creator, the state.

Because our God places a great deal of emphasis on the
law, and judges mankind based on conformity or
rebellion relative to the law of God (I John 3:4),
this has profound spiritual consequences.

When the church leaders apply to receive the tax
exemption, they are actually forfeiting their tax
immunity under the constitution. The difference
between immunity and exemption is subtle. To be immune
from state regulation is to be completely free from
the power of the state to regulate or affect one's
behaviour in any way. To be exempt is to submit to
that power with the promise of exemption from portions
of that power. In effect, the churches are saying to
the government, `we agree you have power over us, but
in exchange for your exempting us from your lawful
right to tax us, we will agree not to oppose your
power.' In essence, they have voluntarily traded their
birthright for a bowl of soup.

The book of Romans, which is widely misinterpreted as
teaching we should submit everything to government
(chapter 13) actually teaches the opposite. Paul
writes "Know ye not, that to whom ye yield yourselves
servants to obey, his servants ye are to whom ye obey;
whether of sin unto death, or of obedience unto
righteousness?" (Romans 6:16).

Because the basic structure of the "Christian" church
is now inextricably interconnected with government,
the overwhelming majority of Christians leaders,
pastors, and teachers refuse to receive this teaching.
The church is closely aligned with the beast
governments of the world through their fundamental
structure. This issue supercedes doctrine. Indeed, it
is the single common denominator between every
religious institution in the entire world.

The Bible tells us in the end times, all religion will
be seduced to the degree that it is characterized in
the image of a harlot woman that is seen riding on the
beast of government (Revelation 13). She is named
Mystery Babylon, and true believers are
uncompromisingly instructed to "come out of her." This
issue may be destined to become one of the most
significant aspects of end-times survival as Jesus
instructs his remnant church in how He wants us to
proceed through the dangerous times in which we now
find ourselves.