When is a church not a church?

An Oregon-based religious group that once qualified as a “church” for tax-exempt purposes recently lost its church status in a ruling by the Court of Federal Claims.

Late last month, The Foundation of Human Understanding in Grants Pass was told that it no longer qualified under IRC 170(b) because the extent to which it “brings people together to worship [became] incidental to its main mission…[of] dissemination of its religious message through radio and Internet broadcasts, coupled with written publications.”

The Foundation failed to meet the association test as set out in the IRS Internal Revenue Manual , according to the court.

To qualify as a church, "an organization must serve an associational role in accomplishing its religious purpose."

The Foundation argued that its broadcasts constitute a religious service and fulfill the associational threshold.

The court said the broadcasts "lack critical associational aspects characteristic of religious services and are therefore instead properly regarded simply as broadcasting and publishing services insufficient to qualify a religious organization for church status.”

The case is Foundation of Human Understanding v. U.S. (July 21, 2009) (available on LEXIS in the Tax Analysts at 2009 TNT 139-8).