To register a church in Texas, you incorporate as a nonprofit corporation with the Secretary of State, obtain a federal Employer Identification Number, and then apply for tax-exempt status at the federal and state levels. The state filing fee is $25, incorporation can be processed in a matter of days, and the full federal exemption process may take several months. Doing each step correctly the first time avoids trouble later with the IRS, the Texas Comptroller, and your county appraisal district.
File a Certificate of Formation With the Secretary of State
Texas churches almost always incorporate as nonprofit corporations. Incorporation creates a legal entity separate from its founders, lets the church hold property and sign contracts in its own name, and shields directors and members from personal liability for the church’s obligations.
The filing itself is Form 202, the Certificate of Formation for a Nonprofit Corporation. A few pieces of it need care.
Entity Name
Your church’s name must be distinguishable from every other entity already on file with the Secretary of State.1Office of the Texas Secretary of State. Form 202 – Instructions for Certificate of Formation – Nonprofit Corporation Run a preliminary search on the Secretary of State’s website before filing, but understand that passing the online search does not guarantee approval. The final determination is made when the document is processed.
Registered Agent
Every Texas nonprofit must designate a registered agent with a physical street address in the state to receive legal documents and official correspondence. A P.O. Box does not qualify. The agent can be a church leader, a member, or a commercial registered agent service.
Directors
Texas requires at least three directors for a nonprofit corporation, and each director’s name and address must be listed on the Certificate of Formation.2Texas Secretary of State. Certificate of Formation Nonprofit Corporation These individuals govern the church until successors are elected.
Purpose and Dissolution Language
If you plan to apply for 501(c)(3) status, the language in your Certificate of Formation matters. The IRS expects your organizing documents to limit the organization’s purposes to those recognized under Section 501(c)(3), such as religious, charitable, or educational purposes, and to prohibit distribution of earnings to private individuals.3Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations Form 202 includes a text area for this additional tax-exempt language.2Texas Secretary of State. Certificate of Formation Nonprofit Corporation
You also need a dissolution clause stating that if the church ever dissolves, its remaining assets will go to another 501(c)(3) organization or to a government entity for a public purpose. The IRS provides sample dissolution language and will reject applications without this provision.4Internal Revenue Service. Does the Organizing Document Contain the Dissolution Provision Required Under Section 501(c)(3) Include it now to avoid amending the document later.
Filing and Fee
Submit Form 202 online through the SOSDirect portal or by mail to the Austin office. The filing fee is $25.5Texas Secretary of State. Business Filings and Trademarks Fee Schedule Online filing is faster. Once approved, the Secretary of State issues an acknowledgment of filing, which is your proof that the church exists as a Texas nonprofit corporation.
Adopt Bylaws
Bylaws are the church’s internal operating rules. They are not filed with the state, but the IRS will ask for them when you apply for tax-exempt status, and they govern day-to-day decisions long after incorporation. At a minimum, bylaws should address:
- Whether the church has formal members, and if so, their voting rights and how membership is granted or removed.
- How directors are elected, their term length, and how vacancies are filled.
- Officer roles for president, secretary, and treasurer, and the authority of each.
- How often the board meets, what constitutes a quorum, and how meetings are called.
- A conflict of interest policy requiring board members to disclose financial conflicts and abstain from voting on matters where they have a personal interest.
- How the bylaws themselves can be amended.
Get an Employer Identification Number
Once the church is incorporated, apply for an Employer Identification Number from the IRS. The EIN is a nine-digit number that identifies the organization for tax purposes and is required to open a bank account, hire employees, and apply for tax-exempt recognition.6Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN)
The application is free. Applying online through the IRS website is fastest and issues the number immediately. Form SS-4 can also be submitted by mail or fax, though both take longer.7Internal Revenue Service. Instructions for Form SS-4
Federal 501(c)(3) Recognition
Churches are in an unusual position among nonprofits. Under federal law, a church that meets the requirements of Section 501(c)(3) is automatically considered tax-exempt and is not required to apply for or obtain formal recognition from the IRS.8Internal Revenue Service. Churches, Integrated Auxiliaries and Conventions or Associations of Churches Section 508 of the Internal Revenue Code specifically exempts churches from the application requirement that applies to most other 501(c)(3) organizations.9Office of the Law Revision Counsel. 26 USC 508 – Special Rules With Respect to Section 501(c)(3) Organizations
Even so, most churches file for a formal determination letter. The letter is verifiable proof of exempt status for donors, banks, and grantmakers who would otherwise have to rely on the church’s own assertion. It also smooths the state tax exemption process, since the Texas Comptroller will grant sales and franchise tax exemptions based on a federal 501(c)(3) letter.
Form 1023 and the Fee
Churches that want a determination letter must file the full Form 1023. The streamlined Form 1023-EZ is not available to churches; the IRS instructions direct churches to use Form 1023 instead.10Internal Revenue Service. Instructions for Form 1023-EZ Expect to submit your Certificate of Formation, bylaws, a description of activities, financial data (actual or projected), and compensation arrangements for officers and key employees.
The user fee is $600 and is nonrefundable, whether the application is approved or not.11Internal Revenue Service. Form 1023 and 1023-EZ – Amount of User Fee
The 27-Month Window
Timing matters. If you file Form 1023 within 27 months of the end of the month in which the church was formed, the IRS can recognize your exempt status retroactively to the date of formation.12Internal Revenue Service. Form 1023 – Purpose of Questions About Organization Applying More Than 27 Months After Date of Formation File later and exempt status will generally apply only from the filing date forward, which creates complications for both the church and any donors who gave during the gap.
Texas State Tax Exemptions
Federal exemption covers income tax. Texas imposes its own taxes that require separate applications.
Sales, Hotel Occupancy, and Franchise Tax
Religious organizations apply to the Texas Comptroller for exemption from state sales tax, hotel occupancy tax, and franchise tax by filing Form AP-209.13Texas Comptroller. Religious Organizations If you have an IRS determination letter, the Comptroller will grant the exemption based on that federal status.
Without a federal letter, the Comptroller evaluates the application independently. To qualify as a religious organization under Texas law, the church must be an organized group that regularly meets at a specific location with an established congregation for the primary purpose of holding religious worship services.14Texas Comptroller. Form AP-209, Application for Exemption – Religious Organizations The application asks for your statement of faith, a description of your typical worship service, evidence that services are open to the public, and a description of your worship facility. Standalone Bible study or prayer groups without an established congregation do not qualify.
Property Tax
Property tax exemption is handled at the county level, not through the Comptroller. Under Texas Tax Code Section 11.20, a qualifying religious organization is entitled to exemption on real property used primarily as a place of regular worship, personal property reasonably necessary for worship, and clergy residences of up to one acre per residence that produce no revenue for the organization. Occasional non-religious use of the worship property does not disqualify it, as long as the primary use remains worship and any income from the secondary use goes toward maintaining the property.
You file the application with your county’s appraisal district. The organization must be operated on a nonprofit basis, direct its assets toward religious functions, and include a dissolution clause in its governing documents that sends remaining assets to another qualifying organization upon dissolution.
Once the Church Pays a Pastor
Two tax rules catch new churches off guard as soon as they compensate a minister, and both require action from the board rather than the pastor alone.
Under 26 U.S.C. ยง 107, an ordained, licensed, or commissioned minister can exclude from gross income either the rental value of a home provided by the church or a housing allowance paid as part of compensation, to the extent it covers actual housing costs and does not exceed the home’s fair rental value.15Office of the Law Revision Counsel. 26 USC 107 – Rental Value of Parsonages The church board must officially designate the housing allowance amount in advance. A pastor cannot claim it on their own return without prior board action.
Payroll taxes also work differently for clergy. Ordained ministers are generally treated as self-employed for Social Security and Medicare purposes and pay self-employment tax at 15.3% rather than splitting FICA with the church. The church does not withhold Social Security or Medicare taxes from a minister’s paycheck. Lay employees such as administrative staff are treated like employees of any other organization, with standard FICA withholding split between employee and employer.
Keeping the Church in Good Standing
Registration is not a one-time event.
Texas Periodic Reports
The Secretary of State periodically requires nonprofit corporations to file a report confirming current information. The notice goes to your registered agent’s address. If the report is not filed within 30 days of the notice, the church forfeits its right to conduct business in Texas. If it still is not filed within 120 days after a forfeiture notice, the state can involuntarily terminate the corporation.16Legal Information Institute. 1 Texas Admin Code 79.27 – Nonprofit Corporation Periodic Reports Keep your registered agent information current so you actually receive these notices.
Form 990
Churches are exempt from filing the annual Form 990 that most other tax-exempt organizations must submit, and this exemption also extends to integrated auxiliaries and conventions of churches.8Internal Revenue Service. Churches, Integrated Auxiliaries and Conventions or Associations of Churches Unlike other nonprofits, a church will not lose exempt status for failing to file a Form 990.
Unrelated Business Income
Exempt status does not cover every dollar. If the church earns income from a trade or business it runs regularly and that is not substantially related to its religious purpose, that income is subject to unrelated business income tax. A church that generates $1,000 or more in gross unrelated business income must file Form 990-T.17Internal Revenue Service. Unrelated Business Income Tax Common examples include renting out parking lots on weekdays or operating a commercial business on church property. Occasional fundraisers like bake sales or car washes generally do not trigger the tax.