Are churches automatically 501(c)(3) tax-exempt, or should a church file IRS Form 1023?

Under Internal Revenue Code Section 508(c)(1)(A), bona fide churches are automatically tax-exempt under Section 501(c)(3) without filing IRS Form 1023, provided they meet all statutory requirements and obey restrictions on private inurement and political campaign intervention. However, most churches apply for an official IRS 501(c)(3) determination letter to verify deductibility for major donors, qualify for state property and sales tax exemptions, and obtain church financing. The Church Lawyers guides church plants and ministries through incorporation, church-specific bylaws, and IRS 501(c)(3) recognition.

How does a church properly set up a pastoral housing allowance under IRC Section 107?

Under Internal Revenue Code Section 107, a credentialed minister can exclude a properly designated housing allowance from federal gross income. A pastoral housing allowance cannot be designated retroactively: the church board must adopt a written resolution before the calendar year begins (or prior to a new pastor's start date), and the exclusion cannot exceed the lesser of the designated amount, actual housing expenses, or the fair rental value of the furnished home plus utilities.

How often should a church review or revise its bylaws, and what clauses are essential?

A church should conduct a legal review of its bylaws every two to three years, or immediately before a leadership transition, campus expansion, real estate purchase, or governance restructuring. Well-drafted church bylaws clearly define board and pastoral authority, voting membership vs. board-governed structures, removal and discipline procedures, statement of faith and facility policies, indemnification, conflict of interest rules, and ecclesiastical dispute resolution clauses.

What employment laws apply when a church reaches 15 or more employees, and how does the ministerial exception work?

When a church reaches 15 or more employees (for 20 or more calendar weeks), federal laws such as Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA) generally apply, alongside the Fair Labor Standards Act (FLSA). However, churches retain two vital protections: (1) Title VII Section 702 religious organization exemptions allowing churches to hire employees who share their religious beliefs and conduct standards, and (2) the First Amendment ministerial exception (Hosanna-Tabor and Our Lady of Guadalupe), which bars employment discrimination claims by employees who perform vital religious duties.

How should a church handle real estate purchases, construction contracts, and property tax exemptions?

Church real estate and construction projects (especially $1M to $10M+ campus builds, expansions, and commercial leases) require specialized legal review of purchase agreements, title commitments, zoning rights under RLUIPA, lender loan covenants, and AIA construction contracts (such as A101/A201) to cap liability, require payment and performance bonds, and collect statutory lien waivers while preserving state religious property tax exemptions.

Who does The Church Lawyers represent, where are you located, and how does the TCL Client Membership program work?

The Church Lawyers is headquartered at 611 S. Main Street, Suite 500, Grapevine, Texas 76051 (Dallas-Fort Worth) and represents over 3,000 churches, ministries, denomination networks, religious schools, and nonprofits across all 50 U.S. states, Mexico, and Canada. The TCL Client Membership program gives churches ongoing access to experienced church attorneys for day-to-day legal questions, document and policy reviews, annual compliance checkups, and preferred rates for major transactions.

About Us | Church & Nonprofit Attorneys

About The Church Lawyers

The Church Lawyers provides legal counsel focused on churches, ministries, and religious nonprofits. We help faith-based organizations address formation, governance, employment, tax, real estate, and other legal needs with practical guidance.

Founded by David Middlebrook, The Church Lawyers serves churches and ministries across the United States, Mexico, and Canada. Based in Grapevine, Texas, the firm works with leaders who want clear legal support and a proactive partner for their mission.

OUR APPROACH

A Legal Partner for Your Mission

Ministry leaders call us when they are starting something new, restructuring, hiring, buying property, or facing a crisis. Our team of attorneys, support staff, and special counsel works with churches, ministries, religious nonprofits, and related charitable organizations from our office in Grapevine.

We believe in preventing legal problems before they arise, giving leaders the policies, structures, and knowledge they need to focus on their calling. A new church plant gets the same care as a multi-site ministry, whether you need a single project or ongoing general counsel.

Founder David Middlebrook has been licensed in Texas since 1989 and is the author of Nonprofit Law for Religious Organizations (Wiley).

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