The following guidelines provide background information on the most common types of filings and the related exemptions for nonprofit religious corporations in California.
Religious corporations are generally not required to register and report with the California Attorney General. However, when engaging in fundraising activities, religious corporations must make required disclosures under California law. While California does not require specific language when conducting charitable solicitations (unless the organization is working with a professional fundraiser), organizations should disclose all material information regarding the solicitation, including, but not limited to, (1) disclosure of non-tax exempt status if not exempt from federal and state tax laws, (2) name and address of the organization, or if none exists, the manner in which the donation will be used for a charitable purpose, and (3) the percentage of the gift that can be deducted as a charitable contribution under federal and state law(donors must be informed if no tax-deduction is available). There are additional requirements if the solicitation involves law enforcement, veterans, safety personnel as well as for online and telephone requests.
California nonprofit organizations are required to register with the Attorney General’s Registry of Charitable Trusts (Registry) and file an Annual Registration Renewal Fee Report (Form RRF-1). However, exceptions to these requirements are available for religious corporations or other organizations that hold property for religious purposes. Accordingly, if a California nonprofit organization is formed as a nonprofit religious corporation, it is automatically exempted from registration and reporting with the California Attorney General.
Note that religious corporations may opt to register and report with the California Attorney General, notwithstanding the exemption, to promote transparency. However, religious corporations should consult with an attorney or accountant regarding the scope of additional disclosure to which this registration would subject the organization.
For foreign nonprofit organizations, registration and reporting requirements generally apply. However, foreign religious corporations may apply for an exemption with the California Attorney General. To apply for an exemption, foreign religious corporations should submit supporting documentation, including, but not limited to, copies of its founding documents, federal tax exemption application (IRS Form 1023 or Form 1023-EZ), and IRS determination letter, along with a cover letter explaining the basis for such exemption request.
If an exemption is not granted, foreign religious corporations must file the Registry’s Initial Registration Form (Form CT-1) within 30 days of conducting business in California, which includes activities such as solicitation of donations by phone, email or email, or holding charitable assets in or from California. Once registered, annual reporting requirements apply.
To obtain a federal tax exemption, nonprofit organizations must file a Form 1023 (or, if applicable, a Form 1023-EZ) with the Internal Revenue Service (IRS). Additionally, nonprofit organizations operating in California must file a Form 3500 or Form 3500A (if the organization has already received recognition of its tax-exempt status from the IRS) with the California Franchise Tax Board (FTB) in order to be exempt from state income tax.
Provided tax-exempt recognition is received from both the IRS and FTB, churches and certain religious corporations are not required to file any annual/information returns with either the IRS or FTB. However, please note that an organization otherwise exempt from federal and state income tax is still subject to tax on any unrelated business income. Further information regarding the imposition of the unrelated business taxable income (UBTI) should be sought through an attorney or a certified public accountant.
Employment Taxes: Even though certain California nonprofit organizations, including religious corporations, may be exempt from federal and state income taxes, compliance with wage reporting, withholding requirements, and payment of employment taxes is still required at both the federal and California levels.
Property Taxes: Real property and certain tangible personal property are taxed in California. However, religious organizations can qualify for a property tax exemption under one of three exemptions—a church exemption, religious exemption, or welfare exemption—depending on the nature of the property use. Please see California State Board of Equalization Publication 48 for more information and links to application materials.
All California nonprofit organizations, including nonprofit religious corporations, must register with the California Secretary of State (CASOS) by filing articles of incorporation. Additionally, California nonprofit organizations must file a Statement of Information (Form SI-100) with the CASOS within 90 days of filing articles of incorporation. Thereafter, a Statement of Information must be re-filed every two years.
Foreign nonprofit corporations (those formed outside of California) also have reporting requirements with the CASOS. To transact business in California and receive a certificate of qualification, a foreign nonprofit corporation must file a Statement and Designation by Foreign Corporation (Form S&DCS/N) and show proof that the organization is a nonprofit in good standing by obtaining certification of such from a public official in the corporation’s home jurisdiction. Like California nonprofit organizations, foreign nonprofit corporations must also file a Statement of Information (Form SI-550) within 90 days of qualification. However, unlike California nonprofit organizations, foreign nonprofit corporations must re-file a Statement of Information annually.
Attorney General’s Guide to Charities in California: https://oag.ca.gov/sites/all/files/agweb/pdfs/charities/publications/guide_for_charities.pdf
Nonprofits Compliance Checklist – Cal Nonprofits (California Association of Nonprofits): https://calnonprofits.org/resources/nonprofit-compliance-checklist
Instructions for filing Articles of Incorporation of a Nonprofit Religious Corporation with Secretary of State: https://bpd.cdn.sos.ca.gov/corp/pdf/articles/arts-re.pdf
Requirements for Qualification of Foreign Nonprofit Corporations (Statement and Designation by Foreign Corporation (Form S&DCS/N)): http://www.cacorporatefiling.com/PDF/Corp/foreignCorp/corp-s&dcnp.pdf
California Secretary of State Statement of Information (SOI) Registration: https://www.sos.ca.gov/business-programs/business-entities/statements/
California Secretary of State Statement of Information (SOI) - Instructions for filing SI-100 (California Nonprofits): https://bpd.cdn.sos.ca.gov/corp/pdf/so/corp_so100.pdf
California Secretary of State Statement of Information (SOI) - Instructions for filing SI-550 (Foreign Corporations): https://bpd.cdn.sos.ca.gov/corp/pdf/so/corp_so550.pdf
California Attorney General Registry: https://oag.ca.gov/charities/initial-reg
California Franchise Tax Board (FTB)-Charities and Nonprofits: https://www.ftb.ca.gov/file/business/types/charities-nonprofits/index.html
IRS Publication 15 (2020), (Circular E), Employer’s Tax Guide: https://www.irs.gov/publications/p15
California Employment Development Department 2020 Employer’s Guide: https://edd.ca.gov/pdf_pub_ctr/de44.pdf
California State Board of Equalization Welfare Exemption Website: https://www.boe.ca.gov/proptaxes/welfarevets.htm
California State Board of Equalization Publication 48: https://www.boe.ca.gov/proptaxes/pdf/pub48.pdf
California Property Welfare Exemption Publication 149: https://www.boe.ca.gov/proptaxes/pdf/pub149.pdf
California Nonprofit’s Guide to Sales and Use Tax Law and Regulations: https://www.cdtfa.ca.gov/formspubs/pub18.pdf
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.