Tax Administration:

Tax Law Compliance of Churches and Tax-Exempt Religious Organizations

GGD-88-84: Published: Aug 11, 1988. Publicly Released: Sep 13, 1988.

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Pursuant to a congressional request, GAO examined: (1) how the Internal Revenue Service (IRS) reviews tax law compliance for churches and other religious organizations; and (2) the difficulties IRS has in ensuring that churches comply with tax laws.

GAO found that: (1) IRS monitors compliance of tax-exempt religious organizations which are not churches and other charitable tax-exempt organizations by requiring them to apply for tax-exempt status and to file annual information returns; (2) from fiscal years 1981 through 1987, religious organizations other than churches comprised about 2 to 3 percent of all exempt organizations that IRS examined; and (3) IRS does not require churches to file for tax-exempt status or file annual information returns, but requires them to file tax returns if they have income in excess of $1,000 from sources substantially unrelated to their exempt purposes. GAO also found that IRS has difficulty detecting church noncompliance with tax laws because of the: (1) lack of information from churches; (2) special church audit procedures restricting its ability to administer the tax law; and (3) complexity of issues common to all tax-exempt organizations.

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