The Roadmap for Reclassification from Private Foundation to Denomination
Kotoku Krivello, Treasurer
When Soto Zen N. A first applied for and received 501(c)(3) tax-exempt status in 2022, the IRS classified the new organization as a private foundation. This was not done because of error or omission; this is the standard “default” classification used when a religious body is in its earliest organizational stages. At that time, Soto Zen N. A. did not yet have the formal structures in place required to be recognized as a denomination or an “association of churches” (the official IRS designation of a denomination). While the “private foundation” designation does allow Soto Zen N. A. to begin work on formal structures both legally and responsibly, remaining classified as a "private foundation" for long is ill advised, since private foundations face stringent IRS reporting requirements—even if they are religious organizations.
How the IRS understands “denomination”
It is helpful to know that the IRS does not use the word "denomination" as a formal classification. Instead, it recognizes what it calls a “convention or association of churches.” This describes a religious body that is:
What has changed
Since receiving 501(c)(3) status, Soto Zen N.A. has continued to develop in important and meaningful ways. Since initial IRS recognition, the organization has been working on establishing or has set up the following:
These meet the operational criteria for recognition as a convention or association of churches.
Reclassification process
The reclassification process begins with the filing of IRS Form 8940 (Request for Miscellaneous Determination). This filing requests that the IRS update the organization’s classification to reflect the current and intended structure.
Purpose of reclassification
The administrative aims of this process are to:
This filing is not a new application for tax-exempt status. The organization is still recognized as a 501(c)(3) nonprofit corporation. Associated temples and Zen centers will be requested to provide:
No temple loses its independence. Each temple or Zen center remains as its own legal and spiritual entity while undertaking a formal relationship with Soto Zen N.A.
The reclassification process will require Soto Zen N.A to demonstrate to the IRS:
Transition period
Reclassification from a private foundation to an organization of churches requires a five-year reporting structure where Soto Zen N. A proves compliance and operational stability. While the IRS reviews the reclassification request, the organization will continue to:
Purpose of the timeline
This 5-year timeline outlines the IRS-required process for transitioning from private foundation status to recognition as a public charity classified as an association of churches.
Administrative Timeline: Five-Year Public Support Test (2025–2030)
The organization remains tax-exempt throughout the process. Affiliated temples remain legally and financially independent.
2026: Transition Beginning Year
Status: Private Foundation (existing classification)
Key Actions:
IRS Acknowledgment / Transition Operations
IRS Context
The organization is now in the transition. This year counts toward the five-year public support test.
2027: Year 1 of Documented Public Support
This is the first full year of measurable public and temple-based support, with continued documentation of financial participation from affiliated temples. We must maintain consistency of governance and denominational oversight.
2028: Year 2 of Public Support Documentation
The IRS is now looking for consistent and measurable processes and procedures rather than reviewing a single year of reporting.
2030 — Completion of Five-Year Public Support Test
Status: Eligible for Final Reclassification
Key Actions:
2031 — Final Determination and Operational Change
Status: Public Charity (Association of Churches)
Key Actions:
When Soto Zen N. A first applied for and received 501(c)(3) tax-exempt status in 2022, the IRS classified the new organization as a private foundation. This was not done because of error or omission; this is the standard “default” classification used when a religious body is in its earliest organizational stages. At that time, Soto Zen N. A. did not yet have the formal structures in place required to be recognized as a denomination or an “association of churches” (the official IRS designation of a denomination). While the “private foundation” designation does allow Soto Zen N. A. to begin work on formal structures both legally and responsibly, remaining classified as a "private foundation" for long is ill advised, since private foundations face stringent IRS reporting requirements—even if they are religious organizations.
How the IRS understands “denomination”
It is helpful to know that the IRS does not use the word "denomination" as a formal classification. Instead, it recognizes what it calls a “convention or association of churches.” This describes a religious body that is:
- Built from the ground up, e.g. composed of independent congregations or temples that are formally affiliated with a central governing body.
- United through shared governance, doctrine, teaching, and mutual accountability etc.
What has changed
Since receiving 501(c)(3) status, Soto Zen N.A. has continued to develop in important and meaningful ways. Since initial IRS recognition, the organization has been working on establishing or has set up the following:
- A duly elected Board of Directors
- A Denominational Council
- Formal affiliation with independent Soto Zen temples and Zen centers
- Defined governance, oversight, and accountability structures
These meet the operational criteria for recognition as a convention or association of churches.
Reclassification process
The reclassification process begins with the filing of IRS Form 8940 (Request for Miscellaneous Determination). This filing requests that the IRS update the organization’s classification to reflect the current and intended structure.
Purpose of reclassification
The administrative aims of this process are to:
- Align with IRS classification as an association of churches.
- Support long-term compliance and financial transparency.
- Provide a legal and stable framework for affiliated temples to work within.
- Recognize the established organization.
This filing is not a new application for tax-exempt status. The organization is still recognized as a 501(c)(3) nonprofit corporation. Associated temples and Zen centers will be requested to provide:
- Confirmation of denominational affiliation
- Employer Identification Numbers (EINs) for IRS documentation
- Acknowledgment of participation in shared governance and accountability structures
No temple loses its independence. Each temple or Zen center remains as its own legal and spiritual entity while undertaking a formal relationship with Soto Zen N.A.
The reclassification process will require Soto Zen N.A to demonstrate to the IRS:
- Uniform governance structure and oversight across the organization.
- A defined relationship with affiliated temples and centers.
- Detailed religious activities and organizational purpose.
- Sources of financial support,
Transition period
Reclassification from a private foundation to an organization of churches requires a five-year reporting structure where Soto Zen N. A proves compliance and operational stability. While the IRS reviews the reclassification request, the organization will continue to:
- Work under its current classification.
- File required IRS returns consistent with existing status.
- Document financial support from affiliated temples and the broader public (sangha); this is the essence of the Five-Year Public Support Test.
Purpose of the timeline
This 5-year timeline outlines the IRS-required process for transitioning from private foundation status to recognition as a public charity classified as an association of churches.
Administrative Timeline: Five-Year Public Support Test (2025–2030)
The organization remains tax-exempt throughout the process. Affiliated temples remain legally and financially independent.
2026: Transition Beginning Year
Status: Private Foundation (existing classification)
Key Actions:
- Board of Directors formally authorizes reclassification process
- Complete IRS Form 8940 filed requesting reclassification as an association of churches
- Documentation submitted describing governance structure, Denominational Council, affiliated temples and Zen centers (with EINs)
IRS Acknowledgment / Transition Operations
- IRS acknowledges receipt of Form 8940
- Organization operates functionally as a public charity
- Continued filing of Form 990-PF, as required
- Begin systematic tracking of temple dues, donations and public contributions
IRS Context
The organization is now in the transition. This year counts toward the five-year public support test.
2027: Year 1 of Documented Public Support
This is the first full year of measurable public and temple-based support, with continued documentation of financial participation from affiliated temples. We must maintain consistency of governance and denominational oversight.
2028: Year 2 of Public Support Documentation
- Ongoing tracking of diversified support sources
- Continued affiliation of temples under shared governance
- Internal compliance review to ensure IRS requirements are being met
- Maintain compliance and documentation
- Prepare preliminary financial summaries for reclassification review
- Confirm stability of temple participation and contributions
The IRS is now looking for consistent and measurable processes and procedures rather than reviewing a single year of reporting.
2030 — Completion of Five-Year Public Support Test
Status: Eligible for Final Reclassification
Key Actions:
- Compile five-year reporting records
- Submit updated Form 8940, including demonstration of consistent “public” support (providing financial statements if requested), and a governance and structure consistent with the stated mission.
- Request final determination as a public charity/association of churches
2031 — Final Determination and Operational Change
Status: Public Charity (Association of Churches)
Key Actions:
- Receive IRS determination letter
- Transition from Form 990-PF to Form 990
- Operate fully under public charity classification