We made a big donation to our child's school’s fundraising gala recently, but our accountant has discovered that although they do appear to have 501(c)(3) charitable exempt status, they are registered with the IRS as a church and not a school. They don't file 990s. It's not a church. It never has been. We donated to the school; we would never have donated to it as a church, especially as we know nothing about it being a "church". How can this be legal? What can we do about it? And how do we get our money back?
It is actually not all that unusual for a school to be a part of a church or an “integrated auxiliary” of a church and obtain its 501(c)(3) exemption as such. It depends primarily on the governance structure and relationship with a church entity. As a church, it is true that it doesn’t have to file Form 990 tax information returns and financial information may be hard to come by. That classification is perfectly legal, however, and there is not much you can do about it. Individuals have no standing to challenge the tax-exempt status of any organization, and although you can complain to the IRS, you will need a lot of evidence (which may be impossible to obtain) that the classification is improper even to get the IRS to take a look.
You can always ask for your money back, but it doesn’t sound as though there has been an affirmative misrepresentation that would give any credence to a legal claim. The organization is running a school and presumably asked for money for a school. I am not sure why you would want your money back, however, if your child is attending the school and getting a good education. What difference does the technical classification make if you are happy enough with the program to make a big gift to it?
Comments
If they are concerned about getting a tax donation receipt, wouldn't they still be able to get that through the church? I get a record of my giving every year from my church, it shouldn't be any different whether it was donated to a "church" or school... C.B.V via e-mail
I agree. They should be able to get a receipt and claim the deduction. The donor seems to be more concerned about not knowing that the organization is classified as a church, however. --Don Kramer
We had similar situation at our school and a lot of us were upset about it. Our school was also not a church but was,and might still be, registered with the IRS as one. It had no affiliation or connection with any church or other religious body. It is only a school. It being a church isn't mentioned on any school literature or on the website or anywhere else. We were annoyed about this too but were about to leave the school so didn't make a fuss. Is it legal for a school to claim to be a church when it isn't part of a church. I understand how this would be ok for a school connected with an established church but that wasn't the case with our school. It really was just a school. That might be what the problem is. --P.R via e-mail
Only the IRS can challenge the determination of classification. --Don Kramer
There might be state and municipal laws and regulations that advantage a "church" over a "school". Whether this institution is entitled to be classified as a church by property and other local tax standards, or for land-use purposes, may matter a great deal, and is worth investigating. The results may not lead to any refunds of donations, but they might lead to correcting mistakes in administrative classifications that would, in the long-run, benefit all concerned.
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