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May church rent to for-profit?

Your Legal Questions Answered

May church rent to for-profit?

We are a for-profit homeschool community (profit goes to pay reasonable salary to teachers and director) seeking to rent/borrow space from a local church. Churches seem nervous about lending or renting to us because we are not a nonprofit. Is this illegal or are they confused about just having to report rental income? Would it be legal for them to donate the use of their building once a week?

The church, like any other charity, is legally entitled to rent to a for-profit organization. Such a rental faces a couple of obstacles, however. If the church has a mortgage on its building, the rent is likely to produce unrelated business taxable income, but that just reduces the profit on the rental. More significantly, rental to a for-profit could cause the church to lose its real estate tax exemption, at least on the portion of the property leased to you. But that can be handled by making you pay the taxes. The biggest obstacle may be more subjective. You don’t have the halo of a nonprofit organization. Most charities are somewhat suspicious of for-profits and are wary when helping them out. They would face particular scrutiny, and possible legal and tax questions, if they were to donate significantly to your organization. Why should the church make a deal that allows someone else to make a lot of money?

That raises the question of why you are a for-profit. A nonprofit homeschool community should be able to obtain charitable exemption as an educational organization. It can certainly pay faculty and administrators to help with the educational program, just as every exempt private school and college does. If you change your tax status, you will probably find a lot more receptivity to your request.

Tuesday, April 1, 2014

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Thank for the info

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