Our churches have long sought ways to build relationships with organizations and businesses in their neighborhoods. Renting church space to musicians, schools, and community programs provides congregations with an opportunity for ministry, as well as a valuable source of income. It also opens the doors to connections based in common values and purpose within their neighborhoods.
“Stewardship of church property isn’t just about preserving and maintaining a beautiful structure,” says Martin Elfert, Rector of Grace Memorial Episcopal Church in a Congregation Close-up article from June 2017. “It’s also about recognizing that the property has a ministry to proclaim the Gospel.”
Things to consider
There are many considerations churches must keep in mind as they navigate these business relationships:
- Maintenance and clean-up
Specific details as well as a sample Facility Usage Policy are included in the diocesan Policies & Procedures Manual.
Additionally, and the cautionary part, is the importance of churches knowing the tax implications of these property use arrangements. Improper contracts with for-profit businesses can result in a church losing their tax-exempt status for property tax and being required to pay back taxes.
What can go wrong
In 2018 First Presbyterian Church in Miami, Florida received a $7.1 million tax bill by the Miami-Dade Property Appraiser. Claiming that the church’s leases to a private religious school and food trucks violates its religious exemption status, back taxes plus interest and fines were assessed for the years 2009-2017.
First Presbyterian Church responded with a lawsuit claiming religious discrimination on the part of the county. “What’s happening to this church is the ultimate nightmare scenario,” said Franklin Zemel, a lawyer quoted in a Miami Herald article covering First Presbyterian’s taxes and the lawsuit.
Though the church claims the operation of the for-profit school “is motivated by the Church’s sincere religious beliefs,” Zemel’s assessment is that the county acted appropriately in charging a church that is making money without paying what they owe. Had the school been a non-profit, with its own tax-exempt status, the result would have been very different. The taxing authority would not have looked to the church for tax payments.
What to do
Churches in the Episcopal Diocese of Oregon who enter into partnerships with for-profit businesses must ensure that they operate within their tax-exempt status. The income must be directly tied to mission and ministry or tax consequences can result. Any church engaged in such property use agreements must consult with their legal counsel or the diocesan chancellor, and the chancellor’s office must approve the document.