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4.76.6  Religious Organizations

Manual Transmittal

October 24, 2014


(1) This transmits revised IRM 4.76.6, Exempt Organizations Examination Procedures, Religious Organizations.

Material Changes

(1) Converted this manual to plain language. For guidance on Public Law 111-274, the Plain Writing Act of 2010, see

(2) Replaced references to examination and examiner with audit and agent.

(3) Renamed IRM 4.76.6, Examination Guidelines for Religious Activities to IRM 4.76.6, Field/Office Correspondence Procedures. Created new sections IRM 4.76.5, Pre-audit Procedures, and IRM 4.76.8, Case Closing Procedures.

(4) Inserted an explanation as to the meaning of agent at IRM (4).

(5) Inserted a list of abbreviations used throughout this manual at IRM (5).

(6) Split IRM (2) in thirds after inserting a step list to emphasize the aspects of an integral part of a church and examples of church functions.

(7) Replaced IRM (5) (now (6) with revised phrasing taken from IRM (2) (Rev. 06-2004) to better explain First Amendment protections.

(8) Moved IRM (1) to (1), and (1) to (2), to put the audit procedures together. This results in a numbering of the rest of the manual, illustrated in the table below:

Old paragraph location New paragraph location (1) (1) (2) (2), (3) (3) (4) (1) (1) (2) (2), (3), (4) (3) (5) (4) (6) (5) (7) (1) (1) (1) (1), (2) (2) (3) (3) (4) (4) (5) (5) (6) (6) (7) (7) (8) (8) (9) (9) (10) (10) (12) (11) (13) (1) (2) (1) (4) (2) (2) (3) (3) (4) (4) (5) (5) (6) (6)

Effect on Other Documents

This material supersedes IRM 4.76.6, Religious Organizations, dated April 1, 2003.


Tax Exempt and Government Entities
Exempt Organizations

Effective Date


Tamera L. Ripperda
Director, Exempt Organizations
Tax Exempt and Government Entities  (10-24-2014)

  1. This IRM section contains specific audit guidelines and techniques for IRC 501(c)(3) religious organizations.

  2. These guidelines are not all-inclusive. This manual supplements the guidelines contained in:

    • IRM 4.75.10, Exempt Organizations Pre-Audit Procedures

    • IRM 4.75.11, On Site Examination Guidelines

    • IRM 4.75.12, Required Filing Checks

    • IRM 4.75.13, Issue Development

    • IRM 4.76.2, Special Features of IRC § 501(c)(3) Organizations

    • IRM 4.76.3, Public Charities

  3. This manual doesn't restrict the agent in identifying issues or using audit techniques not presented herein.

  4. This IRM contains basic technical information. For detailed technical information, see IRM 7.25.3, Religious, Charitable, Educational, Etc., Organizations. If the organization claims to be a church, follow the procedures contained in IRC 7611. (See IRM 4.76.7, Church Tax Inquiries and Examinations - IRC § 7611).

  5. The term agent refers to the EO employee assigned to the case, regardless of whether the employee is in the GS-0512, GS-0526, GS-592, or GS-987 series.

  6. The following abbreviations appear throughout this manual:

    • IRC (Internal Revenue Code)

    • Org (organization)

    • Reg (regulation)

    • RCCMS (Reporting Compliance Case Management System)

    • SEIN (Statistics of Income Exempt Organization Return Imaging Net)  (10-24-2014)
Religious Organizations – Overview

  1. Under the First Amendment, the IRS can't consider the content or sources of a doctrine alleged to constitute a particular religion. The IRS also can't evaluate the content of a doctrine an org claims is religious. This doesn't apply to rites or practices that violate federal, state or local law.

  2. The term "church" includes a religious order or a religious org if the order or org is an integral part of a church under IRC 6033 and Treas. Reg. 1.6033-2(h).

  3. If the org claims to be or appears to be a church, we are subject to the requirements of IRC 7611. Refer to IRM 4.76.7 for IRC 7611 procedures.

  4. IRC 501(c)(3) provides for the exemption of orgs organized and operated exclusively for "religious" purposes. Because activities often serve more than one purpose, an org "advancing religion" (Treas. Reg. 1.501(c)(3)-1(d)(2)) may also qualify under IRC 501(c)(3) as charitable org.

  5. Any religious org must satisfy the statutory requirements to be exempt under IRC 501(c)(3).

  6. The First Amendment prohibits the Government from restricting the free exercise of religion. The courts have held that the First Amendment provides for an absolute freedom of religious belief. However, actions undertaken due to religious beliefs are subject to government regulation when such actions implicate a compelling government interest. Such regulation is restricted to the extent needed to enforce that interest. Religiously motivated conduct that violates federal, state, or local law may be restricted or prohibited entirely.  (10-24-2014)
Prohibition on Political Campaign Intervention

  1. IRC 501(c)(3) doesn't prohibit all activity that might be commonly described as "political" . Rather, it prohibits an org from the following acts with respect to a candidate for elective public office:

    Act Method Choice Result
    Participating in any political campaign Directly For any candidate for public office Prohibited Act
    Against any candidate for public office
    Indirectly For any candidate for public office
    Against any candidate for public office
    Intervening in any political campaign Directly For any candidate for public office
    Against any candidate for public office
    Indirectly For any candidate for public office
    Against any candidate for public office
  2. Examples of prohibited acts include::

    • Contributions to political campaign funds

    • Public statements (verbal or non-verbal)

    If made by or on behalf of the org for or against any candidate for public office, the act violates the prohibition.

  3. Public forums involving candidates for public office may qualify as educational activities. If the org showed a bias for or against any candidate while holding the forums, the forums are a prohibited activity. forum held or conducted in a biased manner constitutes an intervention or participation in a political campaign.

  4. An IRC 501(c)(3) org may invite candidates to speak at an org event either in their capacity as a candidate or as an individual. The org won't participate or intervene in a political campaign if it ensures there is no indication of being for or against the candidate. Such actions include:

    1. Stating explicitly in any communications concerning the candidate’s attendance that it doesn't support or oppose the candidate.

    2. Stating explicitly when introducing the candidate that it doesn't support or oppose the candidate.

    3. Having absolutely no political fund-raising occurring at the event.

    4. Inviting all legally qualified candidates to speak.

  5. Other factors to consider are:

    1. Whether an independent nonpartisan panel prepares and presents questions for the candidate.

    2. Whether the candidates discuss topics covering a broad range of issues of interest to the public.

    3. Whether the org gives each candidate an equal opportunity to present his or her views on the issues discussed.

    4. Whether a moderator comments on the questions or otherwise makes comments that imply approval or disapproval of any of the candidates.

  6. The prohibition on campaign activities applies only to IRC 501(c)(3) orgs, not to the activities of individuals in their private capacity. The prohibition against political campaign activity doesn't prevent an org’s officials from being involved in a political campaign. The officials must not, in any way, utilize either the org’s financial resources, facilities, or personnel. When acting in an individual capacity, an official should clearly and unambiguously indicate that the actions he/she takes or the statements he/she makes are his/her own and not the org's.

  7. Sometimes we attribute the political activity of an individual to the org. We base such determinations on the facts and circumstances. In particular, when officials of an IRC 501(c)(3) org engage in political activity at official functions of the org or through the org’s official publications, attribute the actions of the officials to the org. If using the org’s financial resources, facilities or personnel, attribute the actions of the individual to the org.

  8. Officials engaging in a political campaign activity in an individual capacity outside of an official org function or official publication of the org may be identified as officials of the org. In such case the individual must make it clear:

    1. They are acting in their individual capacity.

    2. They are not acting on behalf of the org.

    3. They give their association with the org only for purposes of identification.

  9. An IRC 501(c)(3) org may act or communicate with others through the authorized actions of its employees or members. Attribute the actions of individuals to the org, if there is an actual or apparent authorization by the IRC 501(c)(3) org. In general, apply the principles of agency to determine whether an individual engaging in political activity was acting with the authorization of the IRC 501(c)(3) org. Generally, consider the actions of employees performing within the context of their employment as being authorized by the org.

  10. We may attribute unauthorized acts of individuals to the org if it explicitly or implicitly ratifies the actions. We might consider a failure to disavow the actions of individuals under apparent authorization from the 501(c)(3) org a ratification of the actions. To be effective, the org must disavow the action publicly, in a timely manner, and take steps to ensure that such unauthorized actions don’t reoccur.

  11. Whenever considering attributing the actions of an individual to an org, consult Area Counsel.

  12. In 1987 Congress enacted IRC 4955, which imposes an excise tax on political expenditures of IRC 501(c)(3) orgs. The regs indicate that the restriction on interventions in political campaigns remain an absolute prohibition. However, based on facts and circumstances, the Service may exercise its discretion to impose a tax under IRC 4955 and not seek revocation. (See the preamble to IRC 4955 regs and the legislative history of IRC 4955.) Considerations include the nature of the political intervention and the measures the org has taken to prevent recurrence.

  13. If the org sponsored a public forum or invited candidates to speak, review all publicity regarding the forum, including transcripts, if available, to identify any bias toward any candidate.


    Rev. Rul. 2007-41, 2007-25 IRB 1421 (June 18, 2007) provides situations of whether a 501(c)(3) organization has participated or intervened in a political campaign on behalf of or in opposition to any candidate for public office within the meaning of 501(c)(3).  (10-24-2014)
Specific Audit Objectives for Religious Organizations

  1. Determine during the audit if the org's activities further religious or other exempt purposes. Verify that it meets the requirements of IRC 501(c)(3). Consider:

    1. Inurement.

    2. Private benefit.

    3. Substantial legislative activities.

    4. Political activities.

    5. Operation primarily for business purposes.

    6. Operation in a commercial manner.


      IRM 7.25.3 discusses the requirements for exemption under IRC 501(c)(3).

  2. Any IRC 501(c)(3) religious org audit may have the following additional audit objectives:

    1. Determining that the org is both organized and operated for IRC 501(c)(3) purposes.

    2. Ensuring the org operates for public purposes rather than private interests.

    3. Ascertaining whether the org engages in any substantial nonexempt activity, such as trade or business, social or recreational activities.

    4. Ensuring the org’s assets are permanently dedicated to IRC 501(c)(3) purposes.

    5. Evaluating the org’s procedures to account for funds disbursed to individuals or non-IRC 501(c)(3) orgs.

    6. Determining if the org pays, directly or indirectly, any excessive compensation, fees, allowances, or taxable benefits.

    7. Determining whether the org has participated in any substantial legislative activities.

    8. Determining whether the org has intervened in any political campaign on behalf of or opposition to any candidate for public office.

    9. Verifying the org’s foundation status.

    .  (10-24-2014)
Pre-Audit Procedures

  1. Check IDRS (command code INOLES) for a cross reference Employer Identification Number (EIN). Use INOLES, BMFOLE/ENMOD, and/or BMFOLO to view the exempt status (or lack) of any cross reference entity. Such entity may be a church.

  2. Conduct the package audit on IDRS via command code BMFOLI. Check for:

    • Forms 990-T, Exempt Organization Business Income Tax Return

    • Forms 941, Employer's Quarterly Federal Tax Return

  3. If you find unusual returns, such as the following, deem them unusual and include them in your audit:

    • Form 11-C, Occupational Tax and Registration Return for Wagering

    • Form 945, Annual Return of Withheld Federal Income Tax

    • Form 720, Quarterly Federal Excise Tax Return

    • Form 730, Monthly Tax Return for Wagers

    • Form 2290, Heavy Highway Vehicle Use Tax Return

  4. Obtain the determination file from Cincinnati. Review the org’s articles of incorporation or other organizing document to ensure the org:

    • Is organized exclusively for IRC 501(c)(3) purposes as described in Treas. Reg. 1.501(c)(3)-1(b).

    • Permanently dedicates its assets to IRC 501(c)(3) purposes as described in Treas. Reg. 1.501(c)(3)-1(b).

  5. The org may or may not have a website. If you find one, review the entire website. Look for:

    • Evidence of an exempt religious purpose.

    • Indications of political activity.

    • Indications of non-exempt purposes or activities.

    • Contact information for the officers.

  6. Review the Form 990, Return of Organization Exempt From Income Tax or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax Perform a large, unusual, or questionable analysis on the form. Look for:

    • Descriptions of activities other than religious activities.

    • Unusual sources of income, such as sales of inventory or gaming.

    • Unusual expenses, such as professional fund-raiser fees.

    • Unusual position titles for key employees.

    • Questionable responses to the yes/no questions.

    • Unusual independent contractor services.

    • Missing schedules and statements.


    Forms 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990EZ provide little in information. During the field audit, verify all information reported.


    For exceptions to the Form 990 filing requirement, including integrated auxiliaries of churches, see For information on integrated auxiliaries of churches, see Pub 1828, Tax Guide for Churches & Religious Organizations.

  7. Check Online SEIN for prior and subsequent years Forms 990 or 990-EZ. Perform large, unusual, and questionable item analyses of those returns as well. (EO Select Check provides information from filed Forms 990-N.)

  8. Check Online SEIN for related Forms 990-T, if not present in RCCMS. Analyze the return. Determine the following:

    • What is the income source?

    • Are there large, unusual, or questionable expenses?

    • Does a type of expense appear in more than one place?

    • Do the total expenses match the Form 990 total expense amount?

    • Are there net operating losses?

  9. See IRM 4.75.10 for additional procedures.  (10-24-2014)
Field/Office Correspondence Procedures

  1. Perform the actions in this section in addition to those provided in:

    • IRM 4.75.11

    • IRM 4.75.12

    • IRM 4.75.13

  2. Review the minutes of the board of directors, brochures, and other publications. Ascertain whether the org:

    1. Engages in lobbying or political activities or supports candidates for public office.

    2. Sponsors public forums or invites candidates for political events.

    3. Engages in exclusively IRC 501(c)(3) activities.

    4. Engages in any activities that violate public policy, such as, illegal activities.

  3. Review the financial books and records, contracts and agreements. Determine if the org engages in any of the following kinds of transactions or activities:

    1. IRC 4958 excess benefit transactions.

    2. Other transactions generating inurement or private benefit.

    3. Lobbying or other attempts to influence legislation.

    4. Participation or intervention in a political campaign on behalf of, or in opposition to, a candidate for public office.

    5. Donations to political candidates for office.

    6. Unrelated trades or businesses.

    7. Fund-raising.


      See IRM, Quid Pro Quo Contributions.

  4. Determine if the org’s activities promote a substantial nonexempt purpose.

  5. Publishing literature is an important method of disseminating religious views. Publishing may also be a business operating in competition with commercial enterprises. Consider the following in determining whether or not the activity is an unrelated business:

    1. Does the org charge fees for its services and/or publications? If so, secure a schedule of fees charged.

    2. Does the org operate a bookstore?

    3. Does the org engage in publishing activities of any nature?

    4. What is the nature of the operations?

    5. Does the org make sales to the general public?

    6. What kind of literature is involved?

    7. How do such activities further the org’s exempt purposes?

    8. Does the org have literature of its own? If so, secure a list of several of the chief works, giving the author and title.

    9. Who selects any publishing projects and how are they selected?

    10. What are the criteria used for making selections?

    11. How are the publishing activities distinguishable from those of a for-profit enterprise?

    12. Is the literature distributed free of charge? If not, what basis is used in determining the sales price?

    13. How does the org distribute the literature?

    14. Is the literature copyrighted? If so, in whose name will the copyright be held?

  6. Broadcasting is an activity analogous to publishing. Determine:

    1. How the broadcasting activities further its exempt purposes.

    2. How the broadcasting activities are distinguishable from those of a for-profit enterprise.  (10-24-2014)
Case Closing Procedures

  1. Cases involving IRC 501(c)(3) religious orgs may involve the following possible closures:

    • No change/no change with advisory

    • Agreed/unagreed foundation status modification

    • Agreed/unagreed revocation

    • Agreed/unagreed tax assessment

    • Delinquent related return secured

  2. For cases involving no change/no change with advisory, refer to IRM, No Issues, IRM, Issues Under Tolerance (Written Advisory) and IRM 4.75.16, Case Closing Procedures, for the applicable closing letter and case closing procedures.

  3. For foundation status modifications, see IRM, Reclassification of Foundation Status, for the audit report procedures. Cases close to Mandatory Review. (IRM, Cases Subject to Mandatory Review)

  4. For revocations, see IRM, Revocations, for the audit report procedures. Cases close to Mandatory Review. (IRM

  5. For proposed tax assessments, see the following sections for the appropriate audit report procedures:

    • IRM, Unrelated Business Income Tax (UBIT)

    • IRM, Employment Taxes

    • IRM, Non-Private Foundation Excise Taxes

    Agreed cases close to ESS. Unagreed cases close to Mandatory Review. (IRM

  6. For secured delinquent returns, see IRM, Delinquent Return Received. If not opened for audit, and the case does not involve code section modifications, revocations, or unagreed tax assessments, close the case to ESS. If opened for audit, close the case as either a no change (delinquent return secured), agreed tax change, or unagreed tax change.

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