Why Stephanos Ministries is Not a 501-C-3

Why Stephanos Ministries is Not a 501-C-3 Tax Exempt Corporation Legalities and Spiritual Convictions

In this blog I explain (for those interested) why as of July 2015, Stephanos Ministries ceased to be a 501-C-3 corporation with IRS pre-approval of donations. For decades we were a 501-C-3, so what follows is surely not a judgment or condemnation on anyone who currently maintains that status. For years I believed being a 501-C-3 was a benign and mutually beneficial exercise of Christian liberty. I do not judge those who maintain that conviction today.  However, in the light of recent political and legal trends in the world, I thought an explanation for our conviction and action in terminating our status might be helpful. Most believers I have met are very naïve and ill-informed on the “legal” aspects of operating a “church” or “ministry.” This is my attempt to inform and educate.

History

Prior to 1954, there was no such thing as 501-C-3 tax status in the United States. Think about that. For almost 2,000 years in the world, and for 178 years in America, the Body of Christ functioned just fine financially without government approval of its finances. The United States might not even exist today if the 501-C-3 laws had been in effect in 1776!  Pulpits across the land thundered against the king (Agree or disagree about the appropriateness of doing so, is not the point. They did.).

In 1954 then Texas senator, Lyndon Johnson, proposed this tax law in a very crafty way. Southern Democrats were viscerally opposed to the emerging civil rights movement. Black churches and most mainline Protestant churches were heavily involved in the embryonic civil rights movement. Southern Democrats were not happy with this involvement. Johnson concocted a way to limit the speech of these activist churches. The way to do it was to appeal to the money. Very crafty of him.

The “deal” was: We, the government, will sanction your offerings IN ADVANCE, and you in turn will forgo your right to engage in overt political speech and activity. It DOES NOT mean that money given to non-501-C-3 entities is not deductible. It just means that they are not PRE-APPROVED by the IRS. If the donations are ever challenged by the IRS for deductibility, it is up to the donor to “prove” the legitimacy of the entity to which they have claimed a tax deduction. This is normally done by using the 14 IRS “Common Law” rules of what constitutes a legitimate church. This is a chore that most people are simply not up to engaging.

Now, this restriction upon 501-C-3 corporations (churches) has always been “danced” around in practical application from the beginning. However, being a 501-C-3 comes with free speech and other restrictions of which a typical Christian or “pastor” has no idea. Seminaries and Bibles schools simple do not teach these things. Becoming incorporated and “getting your 501-C-3 status” is considered just the way “church is done.” Pastors and even denominational leaders are woefully under-educated on these things.

Corporate Legalities

As mentioned, most believers are ignorant on these things. I will briefly summarize some legalities here.

In order to be a 501-C-3, you must first incorporate in your home state. I will talk about the ethical implications in the next section. A corporation is a legal fictive person, a civil identity. When a corporation forms, it has legal standing as a person before the law. The government has legal, authoritative, and final jurisdiction over that fictive person, the corporation. The Scriptures are legally irrelevant.

Naïve believers think that the “Bible” governs how their church is run. That is not true if it is incorporated. The Constitution and bylaws of the corporation govern it.  As far as the government is concerned (to whom legal jurisdiction has been ceded), if a policy, belief, or practice, is not specifically enumerated in the constitution and bylaws, it does not exist. What the Bible may say is irrelevant. The bylaws, not the Bible govern the church. A mere sentence in the bylaws saying “the Bible is our guide,” is legally irrelevant. Courts have refused to engage in the specifics of Biblical interpretation and application, rightly so in my opinion.

Now, no one cares about these things when a church or community is running along fat, dumb, and happy (as the saying goes). But let things turn sour, let a conflict arise, and folks will discover that what I am saying here is true. I have unfortunately been involved in church conflicts and lawsuits (one that went all the way to the state supreme court). I can assure you, that if you incorporate you are giving the government legal jurisdiction into the affairs of your assembly. When conflict over church direction, money, property, assets etc., arises (and sooner or later it inevitably will), only the bylaws apply. Try introducing “what the Bible teaches” into a civil dispute in a court jurisdiction. It will be inadmissible as irrelevant. Only the constitution and bylaws govern the corporation, because the corporation belongs to the jurisdiction of the state.

In one situation in which I was involved, the denominational leaders with whom we were in conflict, agreed that our position was the biblical one. They blatantly said it didn’t matter. All that mattered was what was in the bylaws that had been written over one hundred years ago. All they wanted was the money and the property: the scriptures be damned. They pulled out the bylaws and that is all that mattered.

Normally, in spite of the jurisdictional drawbacks, incorporation is encouraged to protect the individual risk and liabilities of the members of the church. For example, if someone is hurt on an incorporated church property, that person cannot sue the pastor or the individual members for damages,  but must bring the lawsuit against the corporate fictive person and any assets that the corporation might have. The pros and cons of risk protection versus government intrusion into the church is a matter individuals will have to weigh in their own hearts and minds. There are ways to function legally that do not require incorporation and yet provide asset protection. It is beyond the scope of this blog to go into the matter in detail here.

Scriptural Convictions and Ethics

I find it oddly fascinating that those who scream the loudest for “only the Bible as our guide for faith and practice,” turn a blind eye when it comes to money and power in their churches and organizations.  How is it that those who howl about keeping the government out of religion, are fine with the government being involved in religion when it comes sanctioning their money? It is because all corrupt religion is based upon money, power, influence, and control–mammon (Click here for a fuller treatment.). Oh, we can opine about Jesus’ ethics, but when it comes to our money, it is with a wink and a nod toward the government.

Is Jesus our example in all things or not? Is He the pattern for our conduct, or not?  The idea that Jesus or the apostles needed not only Rome’s approval, but also partnership in their finances in order to operate, is of course, absurd. What biblicity exists for presidents, boards of directors, constitutions and bylaws in the scripture? Of course, there is none. Can you imagine the secretary of Caesar’s treasury defining what is and is not a church? Of course not.

The 501-C-3 is essentially a government kickback. If you give to the church/organization 501-C-3, the government gives you credit for it against your taxes as a deduction. I cannot imagine Jesus and the apostles operating with Caesar in that way. To me, it puts an ethical “stain” on our offerings. It undermines a pure motive of love in our giving. That is, “Well, I will give if I get a tax deduction for it.” That is not love. That is not charity. That is religious self-interest. That is love with a hook in it –  my charity has to accrue a benefit to me, or I am disincentivized to give. That is both troubling and sad to me.

Summary

By forming a legal alliance with the government as a 501-C-3 corporation, I believe the church loses its prophetic voice to be able to speak without restriction to anyone about any issue of the day. I believe the day is coming where the welcome mat is going to be pulled out on organized Christianity. The government will cash in its chips and require politically correct speech conformity, or it will come after the hundreds of billions of dollars of assets in incorporated churches for violating what will be categorized as “political speech” or illegal “hate speech” in violation of the 501-C-3 restrictions (Hate speech laws are already a legal fact in Great Britain and Christians have been prosecuted. We are about 20 years behind Great Britain in terms of cultural trends.). I do not think this is a totally a bad thing. If that day comes in the USA, the hearts, motives, and practices of those who profess Christ will be challenged and purified.

As for Rita and I, we are free: free to speak freely, free to love freely, and free to give and receive freely with no government intrusion. We welcome offerings and gifts to the ministry as the overflow of love and trust in relationship, with no other motive. Our “accountability” is with brothers and sisters with whom we are in loving relationship and to whom inquiries about our fiduciary ethics can be directed.

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Copyright 2016,  Dr. Stephen R. Crosby, www.stevecrosby.org. Would you like to partner with us in distributing our materials and perhaps generate some income for yourself?  Please go to www.stevecrosby.com for details of our Affiliate program. This ministry is sustained by the freewill offerings of those believe in the message of a radical grace in a new covenant understanding. If this article has been a blessing to you, would you prayerfully consider making a contribution through our Paypal button to help? Thank you and God bless you.

12 comments on “Why Stephanos Ministries is Not a 501-C-3 Tax Exempt Corporation Legalities and Spiritual Convictions

  1. Thank you, Stephen! I always had questions about the 501-C status and it is what I suspected and much more…..unfortunately, very few care. Thank you again!

  2. I’ve been conflicted about this for a while and now I’m wondering: “should my family not deduct the donations we give to church and charities?” My spouse says that basically we either give that money to the church/charity or it goes to the government–why not donate it rather than have the govt pocket more money? It’s a legal deduction.
    Honestly, I wish churches would stop accepting govt tax breaks.
    We’ve been homeschooling for years and learned early on that we didn’t want any help/tax breaks/free stuff from the public school district or any other govt agency b/c we wanted to homeschool independently.

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