Unintended Consequences: What Every House of Worship Should Know About Facility Rentals and Tax Exposure
At first glance, it may seem like an easy decision to rent your church or nonprofit facility to outside groups or individuals. But a second – or even third – glance is in order.
Opening your church building to outside groups can result in goodwill and surplus income. It could also lead to insurance claims, damage to your reputation and the loss of property tax exemptions. Get the facts, then decide.
Thinking of renting your facility?
What if doing so could result in the loss of some or all of your organization’s property tax exemption? A large commercial building, such as a church, could end up owing thousands or even millions of dollars. In most cases, it is possible to rent your facility without risking tax penalties. But there are exceptions. You may be surprised to discover what they are.
Other issues:
If your property is debt financed, leasing or renting could lead to Unrelated Business Income and Tax (UBIT). Learn why the choice of tenant might be critical.
Insurance coverage needs to support outside groups using your facility.
Some uses of tax-exempt property can result in what the government terms a “private benefit” and can lead to excise taxes.
There is great potential for churches and nonprofits to serve their communities and share their facilities, which often sit idle between Monday and Saturday. However, it must be done wisely. Ignorance of the law won’t be excused, so join us to learn how to lease and share your property in a way that provides the most benefit to both the church and its community.
Our Expert
MAX HERR
Max Herr is president of Church & Ministry Compliance Consulting. He has more than 25 years of experience in insurance, financial services, compliance and governance, including more than 10 years as a church treasurer. Max served as a church compliance specialist for the California Southern Baptist Convention for six years.
