Churches and other religious organizations are qualified for tax-exemption status in Arizona and the rest of the United States. The reason is their nonprofit and religious nature.
501(c)(3) Status
Churches and religious organizations often seek recognition under section 501(c)(3) of the Internal Revenue Code to qualify for tax exemption. The Internal Revenue Service (IRS) processes these tax exemptions. This applies nationally.
State Tax Exemption for Churches
Churches and other religious institutions in Arizona qualify for state tax exemptions from:
- State income tax
- Property tax
State tax exemptions are filed with the Arizona Department of Revenue (ADOR). There are requirements that must be met to qualify.
Property Tax Exemption
The property tax exemption eligibility applies on real property of a church or religious organization used for:
- Religious activities
- Charitable events, or
- Educational purposes
Remember to apply for tax exemption of the property within the county assessor’s office jurisdiction.
Sales Tax Exemption
Arizona exempts churches and religious groups from paying sales taxes on items principally connected to their religious and charity operations. Exemptions may apply to the acquisition of religious books, religious artifacts, and materials used for charity or religious reasons.
Charitable Contributions
Donations to churches and religious groups in Arizona are tax deductible. Federal and state tax rules and regulations apply.
Record-Keeping and Compliance
Maintaining tax-exempt status requires:
- Strict compliance with all relevant federal and state laws
- Record-keeping
- Financial reporting
- Annual filing requirements
Unrelated Business Income
Money earned from unrelated commercial activity can be taxed. Understand and follow the IRS requirements for unrelated business income to maintain tax-exempt status.
Churches and other religious organizations must abide by all applicable federal and state regulations, including those pertaining to record-keeping and reporting. Requirements and application procedures may change. Seek advice from legal and tax specialists who specialize in nonprofit and religious organizations to guarantee compliance with all relevant rules.
