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October 26, 2014 | 2nd Cheshvan 5775
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IRS and Tax Exempt Status for Synagogues

Synagogues that meet the requirements of section 501(c)(3) of the federal tax code are automatically considered tax-exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.

Section 501(c) (3) imposes the following five requirements:

  1. A synagogue must be organized exclusively for exempt purposes;
  2. A synagogue must be operated exclusively for exempt purposes; 
  3. None of a synagogue's resources can "inure" to the benefit of a private individual, other than reasonable compensation for services performed; 
  4. The synagogue may not engage in substantial efforts to influence legislation.
  5. The synagogue may not intervene or participate in any political campaign on behalf of or in opposition to a candidate for public office.

Synagogues that satisfy these five requirements are automatically exempt from federal income taxes. They are not required to obtain official recognition of exemption from the IRS by submitting an exemption application form (Form 1023) like most other public charities.

Although there is no requirement to do so, synagogues seek recognition of tax-exempt status from the IRS because such recognition assures synagogue leadership, congregants, and other donors that the synagogue is recognized as exempt and qualifies for related tax benefits. For example, congregants who make charitable contributions to their synagogue that has been officially recognized as tax exempt would know that their contributions are tax-deductible to the fullest extent allowed by law.

In recent months, leaders from several synagogues have contacted us to see if the Union for Reform Judaism (URJ) has a group ruling with the IRS. In most instances, a foundation or a financial institution on behalf of a funder has asked the synagogue for proof of its 501(c) (3) status.

Parent organizations for several church denominations hold a group ruling, where the IRS may already recognize their individual churches as tax exempt. Under the group exemption process, the parent organization becomes the holder of a group ruling that identifies other "affiliated churches" or other affiliated organizations. A church is recognized as tax exempt if it is included in a list provided by the parent organization. 

As the URJ does not have operating control over its member congregations, it does not meet the criteria for such group exemption.

However, a congregation may contact the IRS which will issue a letter "LTR 4163C".  Such a letter will specifically indicate the name, address, and 9-digit Federal Tax ID number of the synagogue. It will also state that for federal income tax purposes only that the synagogue is treated as an organization described in section 501(c)(3) without applying for formal recognition.

To contact the Internal Revenue Service Call Center, call (877)829-5500.

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