The Jonesing Archives: Online Churches and The Associational Requirement

A private letter ruling asserts that congregational meetings are required for “church” status and that online churches cannot satisfy the requirement.

In a private letter ruling published last week, the Service seemingly elevated the “associational test” to a minimum indispensable requirement for church status. Whatever else happens, according to PLR 202514006, an organization must involve humans worshipping together in person. What’s more, the ruling states that online worship organizations cannot qualify as churches for tax exemption purposes. No kidding.

A Congressional Research Service report issued about 18 months ago discusses the “associational test,” and the view that it might be the preeminent of all the 14 Kurtz factors typically relied on to determine whether an organization is a church:

Associational Test

While the IRS has stated no one factor has controlling weight, some courts have ruled that a religious organization must serve an associational role to qualify as a church. In the frequently cited case, American Guidance Foundation, Inc. v. United States, 490 F. Supp. 304 (D.D.C. 1980), a district court articulated the associational test: “At a minimum, a church includes a body of believers or communicants that assembles regularly in order to worship.” The district court explained, “[u]nless the organization is reasonably available to the public in its conduct of worship, its educational instruction, and its promulgation of doctrine, it cannot fulfill this associational role.”

Several courts have since adopted this threshold standard and fine-tuned it. When the Tax Court applied the associational test in Foundation I, it clarified that, “[w]hen bringing people together for worship is only an incidental part of the activities of a religious organization, those limited activities are insufficient to label the entire organization a church.”

The remarkable aspect of the PLR is that it explicitly adopts the congregational requirement as a minimum threshold requirement — the Courts haven’t been as uniformly definite about it — and asserts that only in-person gatherings will suffice. The facts, as described in the PLR, were pretty easy because the purported church’s only visible activity was holding rental properties. But the proponents sought to explain that their activities were associational because of television broadcasts: “The Church’s information return states that the lives of millions of people have been touched by the broadcast of the gospel message. People have been saved, healed, and ministered to in countless ways through this television network.” The Service responded with the suggestion, if not the explicit assertion that neither broadcast nor online church is enough:

In a more recent case, the Court of Federal Claims, and subsequently the Federal Circuit Court, was faced with the question of whether an entity qualified as a church if its “services” were predominantly carried on through the internet and radio. The Court of Federal Claims found that:

“The weight of persuasive authority, further discussed below, holds that radio and internet broadcasts lack critical associational aspects characteristic of religious services and are therefore instead properly regarded as simply broadcasting and publishing insufficient to qualify as a religious organization for church status.

I am actually kinda surprised at the suggestion that online churches cannot ever satisfy the associational requirement, but the quotation — from Foundation of Human Understanding v. United States — says what it says.  I searched online and found Grace Revolution Church, an exclusively online church. It has a dot-com web address and its donation page doesn’t state whether donations are deductible so I can’t tell whether it claims tax exemption. If it doesn’t it should because people “associate” for all sorts of purposes online these days.

Read this very good article from the North Carolina Law Review for a longer discussion of whether online-only houses of worship can qualify for church tax exemption.

From this week’s Jonesing on Nonprofits.