By: Dr. Paul Raybon
Last time I wrote about how seeing your church facilities as a gift to be shared can change how you do ministry and how you relate with your community. Churches can also use that gift to generate alternate streams of income. As churches we are rightfully wary of becoming profit-oriented and even more wary of jeopardizing our non-profit status. But nonprofits always generate income, in fact that is often their purpose! So in times of diminishing tithes and tithers, we do well to think about what other resources we have been given that might provide funding for ministry. Some churches who don’t find ways to make their facilities help pay for ministry will find themselves without buildings at all.
Our possibilities can include renting parking lots to individuals and businesses, leasing building space to other nonprofits, renting property and housing, and generating solar energy. Examine your facilities and talk with leaders in your community. What assets does your church have that people in your area might be willing to pay to use?
Note: Before you begin generating any income, your church needs to consult with a local tax law professional that can guide you through the process of making sure you are complying with all applicable IRS and state laws. This article does not count!
In the meantime, here are some things to think about,
- You can charge fees to pay or defray costs for activities and services that your church provides as a ministry- conferences, classes, meals, childcare, sports leagues, etc.
- You can contract with a person or agency to provide activities and services that your church provides as a ministry. Follow laws regarding reporting, employees, contract labor and vendors.
- If you have income from rental property, parking lots, or tenants, or any other source that is not directly tied to a ministry of the church, it is “Unrelated Business Income” (UBI) that is taxable and must be reported. As long as you follow the law and pay your taxes, you are not jeopardizing your tax-exempt status.
Below are some additional resources I have found helpful.
Rev. Dr. Raybon, our partner in ministry in the Western Carolinas, is Co-Pastor of Hominy Baptist Church near Asheville, North Carolina and works with churches and leaders as a coach and consultant in communication, visioning, administration, and spiritual formation. Contact him for more information about how he can help you.