The Roman Catholic Church recently restated its view that Protestant churches are not “churches in the proper sense.” Some Protestants take offense. But we need not. The word church in Catholic parlance refers to those bodies that have bishops in apostolic succession and that recognize the presence of Christ in the Eucharist. The statement is aimed not primarily at Protestants but at certain liberal and conservative Catholic interpreters of Vatican II (see "Not-so-fully church," by Jared Wicks, S.J.).
The fact is that many Protestants don’t hold to the real presence of Christ in the Eucharist, and no Protestant body (except for the Anglicans) insists on having bishops in apostolic succession. Nor do Protestants accept the primacy of the pope. In a way, the Vatican has simply stated the obvious: Christians remain divided—separated by, among other things, different views of what is essential for church to be church.
Protestants have their own various means of identifying the church in the present state of ecclesial division. For Lutheran and Reformed traditions the church is where the Word is properly preached and the sacraments rightly administered. Wesleyans and Methodists look for the presence of personal and social holiness as the mark of the true church. Believers’ churches see the church as the assembly of those who have accepted the call to follow Christ.
At the same time, most Protestants would affirm, with Augustine (and against the Donatists), that the church exists by God’s grace, sometimes in spite of human efforts.
Part of the cogency of the Protestant stance is that it recognizes the breadth and mystery of the Spirit’s activity. Protestants can acknowledge that the church is present in the many places in which the gospel is preached, Spirit-enabled holiness arises and Christ is followed as Lord. Protestants can recognize all this among our Catholic brethren. Ironically, in this sense Protestants can be more “catholic” than Catholics.
The Protestant conception of church lets no one off the hook. It continually raises questions: Are we true churches? Are we preaching the gospel? Are we following the Lord in the power of the Spirit? Are we preaching good news to the poor? Whenever and wherever these things happen, there is church, and at that we can rejoice.