Q. "Do we have to be a 501c3? I read we can be a 'government-free 508c1a,' not be accountable to the IRS, and operate as a nonprofit independently from government oversight."
Answer:
Although some websites and authors offer to instruct organizations on how to set up a nonprofit as a “508” instead of a “501”, promising it provides freedom from government interference, HR Ministry Solutions does not recognize these efforts as legitimate.
Section 508 of the US tax code is simply the part of the law that spells out how 501(c)(3)s go about applying for tax-exempt status. 508(c)(1)(a) is the section that addresses the automatic recognition of churches as 501(c)(3)s but is not a legitimate status of its own. The law already provides the freedom and ability of a church to operate as a tax-exempt charitable nonprofit without applying for an official status or receiving a 501(c)(3) determination letter.
As a reminder, non-profit status only applies to an organization’s ability to be tax-exempt and accept tax-deductible gifts. It does not apply to employment practices. For more details, please refer to our resource “Nonprofits & Religious Organizations”.