Complete checklist of requirements for establishing and operating a legally compliant church organization.

Formation Compliance

  • Articles of Incorporation filed with state

    • Religious/charitable purpose statement
    • Initial board of directors listed
    • IRS-required 501(c)(3) provisions:
      • Exclusive religious/charitable purpose clause
      • No private inurement clause
      • Dissolution clause (assets to another 501(c)(3))

  • Employer Identification Number (EIN) obtained

    • Required for banking, employment, and donations
    • Free from IRS via Form SS-4 or online

  • Church bylaws adopted

    • Membership requirements
    • Board structure and elections
    • Meeting procedures
    • Financial management policies
    • Amendment procedures
    • Conflict of interest policy
    • Dissolution clause

Governance Structure

  • Board of directors established (minimum 3 members)

    • Family/business associates cannot be majority
    • Regular meeting schedule established
    • Minutes documented for all meetings

  • Officers designated

    • President/Chair
    • Secretary
    • Treasurer
    • Separation of duties (pastor should not control finances alone)

  • Statement of faith/doctrine documented

    • Core beliefs articulated
    • Religious purpose clearly defined

Federal Tax Compliance

  • 501(c)(3) status determined

    • Churches: Automatic (no application required)
    • Religious organizations: Must file Form 1023 or 1023-EZ

  • IRS determination letter obtained (recommended)

    • Provides credibility for donors and banking
    • Required for many grants
    • Simplifies state tax exemption in some states

State Tax Compliance

  • State tax exemption applied for

    • Not automatic in all states (California requires application)
    • California: File Form 3500 or 3500A with FTB
    • Check your state’s specific requirements

  • Sales tax exemption obtained (if applicable)

    • Requirements vary by state
    • May need separate application

  • Property tax exemption applied for (if applicable)

    • For owned church property
    • May require IRS determination letter

State Reporting

  • Annual report requirements checked

    • Many states require annual Secretary of State filings
    • Note deadlines to avoid penalties

  • Charitable solicitation registration (if applicable)

    • Required in some states for fundraising
    • Churches often exempt but verify

Operational Compliance

Financial Management

  • Church bank account established

    • Separate from personal accounts
    • Multiple signatories required

  • Accounting system implemented

    • Track all income and expenses
    • Maintain supporting documentation

  • Budget adopted

    • Annual budget approved by board
    • Regular financial reporting to board

  • Contribution acknowledgment system

    • Written acknowledgment for donations $250+
    • Include date, amount, and no goods/services statement
    • Annual giving statements for donors

Employment Compliance

  • Payroll tax obligations understood

    • Withhold federal income tax (Form W-4)
    • FICA taxes (7.65% employee + 7.65% employer)
    • Churches exempt from FUTA
    • Ministers may opt out of Social Security

  • Employment policies documented

    • Employee handbook
    • Job descriptions
    • Religious qualifications for positions (if applicable)

  • I-9 forms completed for all employees

    • Verify employment eligibility
    • Retain for required period

  • Workers’ compensation insurance obtained

    • Required in most states for employees
    • Check state-specific requirements

Political Activity Restrictions

  • No political campaign activity

    • Cannot support or oppose candidates
    • Cannot make campaign contributions
    • Cannot make political endorsements

  • Limited lobbying only

    • Cannot be substantial part of activities
    • Track any lobbying expenses

Insurance Requirements

  • General liability insurance ($1M+ recommended)

    • Covers bodily injury and property damage
    • Protects against visitor claims

  • Directors & Officers (D&O) insurance

    • Protects board from governance decisions
    • Covers legal defense costs

  • Sexual misconduct liability ($250K+ minimum)

    • Essential for any organization working with minors
    • Covers defense costs even for allegations

  • Auto insurance ($1M liability recommended)

    • For church-owned vehicles
    • Consider hired/non-owned auto coverage

  • Property insurance (if applicable)

    • For owned buildings and contents
    • Consider flood/earthquake based on location

Child/Youth Protection

  • Background check policy implemented

    • Screen all workers with minors
    • Retain documentation indefinitely

  • Child protection policy adopted

    • Two-adult rule
    • Reporting procedures
    • Training requirements

  • Signed participation agreements for activities

    • Permission slips
    • Medical information
    • Liability waivers

Record Keeping Requirements

Permanent Records (Keep Indefinitely)

  • Articles of Incorporation
  • Bylaws (all versions)
  • Board and congregation meeting minutes
  • Financial statements and general ledgers
  • Tax-exempt documents and IRS correspondence
  • Insurance policies and claim records
  • W-2s, W-3s, 1099s, 1096s
  • Background check documentation
  • Property records and deeds

Seven-Year Records

  • Payroll tax records and registers
  • Bank statements, checks, and reconciliations
  • Accounts payable/receivable records
  • Contribution records
  • Expense receipts and invoices
  • Contracts and agreements

Employment Records

  • Employee files (7 years after termination)
  • I-9 forms (3 years after hire or 1 year after termination)
  • Benefits records (may require longer retention)

Record Storage

  • Digital backup system implemented

    • Cloud storage for accessibility
    • Encrypted for sensitive documents
    • Regular backup schedule

  • Physical records secured

    • Locked storage for sensitive documents
    • Fire-safe for permanent records

  • Records retention policy adopted

    • Clear guidelines documented
    • Designated records manager appointed

Compliance Quick Reference

RequirementFrequencyDue Date
Board meetingsQuarterly minimumPer bylaws
Financial reviewMonthly/QuarterlyPer board
State annual reportAnnualVaries by state
Form 5578 (if school)AnnualJanuary 31
Form 990-T (if UBIT)AnnualMay 15
Contribution statementsAnnualJanuary 31
Bylaw reviewEvery 3-5 yearsAs needed
Insurance reviewAnnualBefore renewal
Background check renewalPer policyVaries

Sources

  1. Churches & Religious Organizations | IRS
  2. Tax Guide for Churches and Religious Organizations | IRS Publication 1828
  3. Filing Requirements for Churches | IRS
  4. Church Bylaws & Board Requirements | Form1023.org
  5. 501(c)(3) Requirements Checklist | IRS Tax App
  6. What Legal Requirements for Religious Nonprofits | Wolters Kluwer
  7. Church Insurance Liability Coverage | AGFinancial
  8. Records Retention for Ministries | ECAP
  9. 10 Documents Church Leaders Should Know | Charitable Allies