By Bob Smeitana
Making the most of your building is a great move for churches, says Rob Hall, vice president of Chicago-based National Covenant Properties.
He’s spent 20 years helping churches find and acquire new facilities and loves to see a congregation thriving in its new home.
Still, he warns churches to be careful when they expand their programs beyond typical church activities such as worship services, youth groups, and Bible studies.
When deciding whether to rent to or partner with an outside group, churches should ask, “Does this fit our mission?” says Hall.
Hall suggests churches claim a broad charitable mission when they file incorporation papers.
“When I incorporate churches, I include a mission statement that includes religious, social, charitable, and educational purposes,” he says. Churches that have already incorporated with a narrower mission can easily go back and amend it.
Having that kind of broad mission gives a church leeway. If a church is incorporated solely for religious purposes, it could lose part or all of its property tax exemption by partnering with outside groups or having non-religious activities.
“The issue becomes, ‘Are we using the facility for our exempt purposes?’” Hall says. “You need to prove that your motivation is to advance your charitable purpose.”
If churches decide to expand their building use beyond typical ministry—by adding a fitness center, bookstore, or major outside rental, for example—Hall suggests they check ahead of time with the local government authority that determines property taxes. Doing this can help them avoid any unexpected headaches.
A church can have outside business income from secular rentals or other building use, says Hall. But this means the church may have to pay some taxes on that income or the property used for that rental.
Hall also recommends churches check with a lawyer before partnering with other organizations. The church’s governing board should approve any partnerships. And churches should keep minutes of meetings where those decisions are made.
Along with legal concerns, there are practical matters with church building use. More events in the church mean more cleaning and maintenance costs.
“It’s hard to share your building,” he says. “If you are motivated by ministry, it’s easier to put up with the hassles when an outside group makes a mess or there is a scheduling headache.”
Hall also suggests churches draft a standard partnership agreement. The agreement should include a statement of shared mission and clearly outline expectations and any details about payment for use of facilities.
Above all, he says, “Make sure you’re using the building for a ministry objective.”
BOB SMIETANA (@BobSmietana) is senior writer for Facts & Trends.
