I recently inquired about renting a building from a local church that is organized as a 501c3. The building is a warehouse type building that is used for some church functions. The church officers fear that renting me the building could cause them to jeopardize there non profit status. I teach kids to hit baseballs, softball and do speed and agility training. I charge for my services and sometimes I make a profit.

I might suggest you post this over on the tax forum:
Taxes - Ask Me Help Desk

There are people over there whom I never see posting here - if they're here, they've been just lurking. :-) Most of the people posting here aren't even in the U.S. and wouldn't know non-profit tax laws like that. All accountants aren't tax experts. And non-profit is a specialized area. So I think you're really narrowing down your chances on this forum. (I've done work for non-profit organizations and am in the U.S. but I'm still not a tax expert, nor a non-profit expert.)

I don't think paying them rent in and of itself would hurt anything. Where the rent is coming from might, I don't know. But what you're doing could quality as non-profit as well. A lot of times people confuse what "profit" is in that context. But really... you need to go ask the tax experts. Or go straight to the source and call the IRS. They don't bite, really. ;)

Rental of property by a church or nonprofit organization will not cause the organization to lose its tax status.

However, you have to watch the unrelated business income rules that apply to non-profits. These rules make the profits from certain activities subject to tax. Generally, rental of real property is excluded from this so the income is not subject to tax. This is not always true in cases where the rented real property has debt-financing. You can review IRS Pub 598 for an explanation of these rules.

It will not effect their tax status, of non profit, but they will have to pay taxes on any non church related incomes

So everyone suddenly crawl out of the woodwork and make a liar of me. :eek:

I recently inquired about renting a building from a local church that is organized as a 501c3. The building is a warehouse type building that is used for some church functions. The church officers fear that renting me the building could cause them to jeopardize there non profit status. I teach kids to hit baseballs, softball and do speed and agility training. I charge for my services and sometimes I make a profit.

If the church gets a small amount of its income from taxable sources (which is what this is) it will not jeopardize their 501c(3) status. So if the amount of rent you are paying is only a few percent or so of their total income it won't be an issue. Only if their taxable income sources grow to be more than 10% or so of their total receipts it can be an issue - at that point they should consult a knowledgeable local tax accountant who works with non-profits. Also, your rental payments may trigger a requirement for them to file an income tax return on the income which is "unrelated" to their exempt purpose - this could include both federal and state/local filings.

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Originally Posted by soverby

I recently inquired about renting a building from a local church that is organized as a 501c3. The church officers fear that renting me the building could cause them to jeopardize there non profit status. I teach kids to hit baseballs, softball and do speed and agility training. I charge for my services and sometimes I make a profit.

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Hello s:

I don't know if renting a building from them will effect THEIR tax status or not. That's a problem THEY have to figure out with THEIR advisors. It's not really YOUR problem. For sure, how YOUR business is organized has NOTHING to do with THEIR tax status. Rent the building and make a LOT of money.

excon

All the points noted are, In my opinion, accurate, but Excon's is the most illuminating: Let the church worry about their tax status. I am sure you have enough on your hands as it is running your own business.