Also known as a Faith Based Organization (FBO) is a corporation whose primary purpose or activities are religious or religiously motivated. Even better, anyone can set one up!
Judge Brattin, Eastern District of California, in Universal Life Church, Inc. vs. United States, 372 F. Supp. 770, 776 (E.D. Cal 1974) “…neither this court nor any branch of this government will consider the merits or fallacies of a religion. Nor will the court compare the beliefs, dogmas, and practices of a newly organized religion with those of an older, more established religion. Nor will the court praise or condemn a religion, however excellent or fanatical or preposterous it may seem. Were the court to do so, it would impinge upon the guarantee of the First Amendment.”
Congress enacted a particular rule to specifically except (not exempt, meaning to qualify for the status) churches from new requirements or the new legislation that would be in conflict with the Constitution. Section 508(c)(1)(A) was necessary to formally ensure that government did not accidentally entangle itself with the organization and operation of churches, ala Separation of Church and State.
A 508(c)(1)(A) FBO (Faith-Based Organizations) and its tax-exception status stems from the First Amendment and is not a government subsidy. FBO’s can be organized and operate under Section 508(c)(1)(A) of the Tax Code the same as they can be organized and operate under any other section of the Tax Code.
A 508(c)(1)(A) FBO has a constitutional and legal right to form; therefore, there is no required application to seek approval of as a tax-exempt organization. Since 508(c)(1)(A) organizations are already tax-excepted as a right they do not have to give up that right (religious exercise and free speech) as a condition of tax-exemption. All organizations seeking tax-exempt status must apply to the IRS, but FBO’s can be formed under Section 508(c)(1)(A) and enjoy “mandatory exceptions” from these requirements.
Section 508(c)(1)(A) was codified in the Internal Revenue Code (IRC) in order to formally establish the right to “free” exercise of religion which had been a tacit standard upon which America was founded and governed since it gained its independence. A 508(c)(1)(A) is, by the very nature of its creation, a religious, non-profit, tax-excepted organization.
Section 508 was part of the legislation passed in the Tax Reform Act of 1969 (H.R. 13270), codified as Public Law 91-17253 The intent of our U.S. Congress in passing Section 508(c)(1)(A) was to make sure that important First Amendment religious and speech rights were protected when they overhauled and authorized sweeping new changes to the Tax Code in 1969.
The Act included substantial changes in the treatment of private foundations and 501(c)(3) organizations. The changes included requirements that organizations [Churches are specifically excepted from these requirements] seeking tax-exempt status had to first apply, file a tax return annually, comply with rules and regulations that the IRS may from time to time prescribe, keep records of income and expenses, and render under oath statements about the organization.