Nonprofit Compliance for Mosques

Under Section 501(c)(3) of the Internal Revenue Code (IRC), mosques, like other religious organizations, are granted tax-exempt status by the federal government. While this status provides significant financial advantages, it also comes with certain restrictions and requirements that mosques must adhere to in order to maintain their exemption. Understanding what mosques can and cannot do under 501(c)(3) is essential to ensure they remain compliant with tax laws and retain their status. 

First and foremost, mosques can engage in religious, educational, and charitable activities. These activities align with the core purposes of most 501(c)(3) organizations, which must be organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes. For mosques, this typically includes conducting daily prayers, sermons, religious services, offering religious education, and running charitable programs such as food pantries or disaster relief efforts. 

Mosques are also allowed to engage in certain types of fundraising activities, as long as these activities are in line with their exempt purpose. This might include donations for general operating costs, specific religious or educational programs, or community service projects. Such fundraising must be free from undue commercial activity and must not benefit any private individual or shareholder, as any private inurement or benefit would jeopardize the mosque’s tax-exempt status. 

Additionally, mosques can engage in some political and lobbying activities, but with significant limitations. The IRS allows religious organizations to engage in limited lobbying as long as it is not a “substantial” part of their activities. This means that while a mosque may advocate for specific policies or issues related to its religious or moral teachings, it cannot participate in direct political campaigns or endorse candidates for office. 

While mosques enjoy the benefits of tax exemption, they are prohibited from engaging in certain activities that would endanger their 501(c)(3) status. A critical restriction is the prohibition on political campaigning. Mosques, like all 501(c)(3) organizations, are forbidden from endorsing or opposing political candidates or participating in any political campaigns. Even indirect support, such as distributing partisan literature or making financial contributions to candidates, is prohibited. “The government has a compelling interest in maintaining the integrity of the tax system and in not subsidizing partisan political activity, and Section 501(c)(3) is the least restrictive means of accomplishing that purpose.” Branch Ministries, Inc. v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000). 

This case involves the IRS’s revocation of the tax-exempt status of Branch Ministries, a religious organization, for violating 501(c)(3) restrictions, specifically regarding political campaign activity. 

Another restriction is that mosques cannot engage in excessive lobbying. While they are permitted to advocate for particular issues, their lobbying efforts must not become a primary part of their activities. The IRS generally evaluates whether lobbying is “substantial” by considering factors such as the amount of time, effort, and resources dedicated to lobbying in comparison to the organization’s overall activities. If lobbying is deemed too substantial, it could jeopardize the mosque’s tax-exempt status. 

Additionally, mosques cannot distribute profits to private individuals. This means that no part of their income may be used to benefit the members, officers, or directors of the mosque. The principle of non-inurement is a fundamental aspect of maintaining 501(c)(3) status. The mosque’s assets must be used exclusively for its charitable or religious purposes. 

In summary, under Section 501(c)(3) of the IRC, mosques have the freedom to engage in a wide array of religious, educational, and charitable activities. However, they must adhere to strict rules regarding political involvement, lobbying, and financial operations. Understanding these limitations is crucial for mosques to maintain their tax-exempt status and continue serving their communities without risking penalties or losing their privileged status. By staying within the bounds of the law, mosques can focus on fulfilling their religious and charitable missions while enjoying the financial benefits of 501(c)(3) status.