In May 2020, the IRS released proposed updates to the rules for group exemptions. It’s important to understand these are currently only proposed changes.
We will continue to monitor this issue and pass along any important developments. In the meantime, we are here to help you. Please contact us via legal@gcfa.org if you have any questions.
Question: In addition to reading the article and being informed, what else should we do?
We strongly encourage any United Methodist organization that wants to apply for inclusion in the group exemption to do so as soon as possible. This will allow us to process the application under the current group exemption rules (which remain in effect until the IRS releases the final version of the new rules). To apply:
Local churches, districts, and annual conferences should visit org and utilize the website’s automated process to receive an inclusion letter (typically in 10 minutes or less).
United Methodist organizations (that are separate legal entities) connected to local churches, districts, and annual conferences should send an email to legal@gcfa.org, to start the application process.
Examples include foundations, daycares, preschools, food pantries, camps and retreat centers, etc.
Because the eligibility requirements for such organizations are more detailed, processing of these applications takes more time, and could result in the applicant making changes to its organizing documents before inclusion can be finalized. Thus, it is especially important that such applicants contact us as soon as possible.
Question: Is my local church at risk of losing its tax-exempt status?
No. While the general rule is that an organization must apply to the IRS to be recognized as tax-exempt, this application requirement does not apply to local churches (or to districts, annual conferences, and jurisdictions). A local church is tax-exempt because it is a church – it doesn’t need to apply to the IRS, nor does it need to be included in the group exemption. That is not changing. What may change is our ability to add local churches to the group exemption. That would impact a local church’s ability to obtain verification of its tax-exempt status, but it would not impact the local church’s status as a nonprofit organization.
Question: What are the downsides of not having verification of tax-exempt status through the group exemption?
The local church (or district, annual conference, or jurisdiction) would have to verify its status by citing the tax code provision that exempts it from the application requirement, rather than providing an inclusion letter from GCFA. The local church might also have to verify it is in fact a “church” when contacting organizations like Google, GuideStar, and Walmart for grants. Or, the local church would have to apply directly to the IRS for recognition, which could be costly and time intensive.