Can a church operating as a non-profit corporation with 501c3 tax-exempt status, rent space in its building for social events without losing its tax-exempt status?

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Can a church operating as a non-profit corporation with 501c3 tax-exempt status, rent space in its building for social events without losing its tax-exempt status?

Will the proceeds from such rentals be classified as taxable, unrelated business income? The proceeds from these rentals will be used for funding various spiritual programs of the church and for paying the debt on the building. The church has a mortgage on the property.

Asked on May 31, 2013 under Business Law, California

Answers:

Anne Brady / Law Office of Anne Brady

Answered 8 years ago | Contributor

Yes, a 501(c)(3) can rent out its buildings for social events without losing its tax-exempt status, especially to pay for spiritual programs and pay the debt on its church building.  The important thing is the purpose of the organization, not the method by which it raises money to fund that purpose.


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