I think the parents are wise to be worried.  Just because a lot of people are engaging in a practice does not make it legal.

As I have said many times, an organization doesn’t get to use section 508(c)(1)(A) to avoid filing an application for recognition of tax exemption unless it first qualifies as a “church” under section 501(c)(3).  (See Reader’s Question: “What is the difference between 501(c)(3) and 508(c)(1)(A)?”)  If the organization doesn’t qualify as a church under section 501(c)(3) — and you say the parents say it doesn’t — it can’t rely on section 508(c)(1)(A) to avoid an application for exemption.  And if it isn’t exempt, the parents can’t take a charitable contribution deduction for gifts to a non-exempt entity.

There are a lot of people out there peddling the idea that 508(c)(1)(A) is a simple pathway to nirvana.  Reading some of their websites, it is clear that they don’t understand the basic law.  The IRS doesn’t have enough people to police the field as much as they ought to.  But if the parents want to be able to sleep well at night, they will listen to their gut and will not play the game.