Even when traditional giving is down, these methods can keep your cashflow up.
When people believe in the vision and mission of your ministry, they are generally inclined to support you financially. Yet, what happens when giving begins to decline?
According to Church Law & Tax, “Individual giving took a hit in 2018, with a decline from the previous year of 1.1 percent (or a decrease of 3.4 percent when adjusted for inflation), according to Giving USA 2019.” These statistics are intimidating and may seem downright disheartening.
But don’t let these facts deter you from fulfilling God’s call over your life. Most churches overlook the fact that fundraising can be done in more ways than just taking up tithes and offerings on Sunday mornings.
In this article, we’ll look at five fantastic ways your church or ministry can increase giving and raise the funds it needs to thrive.
Before we jump into fundraising strategies, it is important to acknowledge why raising money is so important. One of the requirements of maintaining tax-exempt status for a charity is to be publicly supported. Therefore, outside of needing funds to operate, nonprofits also need incoming funds from the general public to be tax-exempt.
According to Treasury Regulation 1.170A-9(f)(2), an organization is considered publicly supported if it normally receives a substantial part of its support directly or indirectly from the general public, from a governmental unit, or from a combination of these sources. The public support requirement is known as the public support test, and the term “substantial” in this instance means that at least 33 1/3% of the organization’s finances come from public support.
The public support test proves that a 501(c)(3) organization is not a private foundation and that it may receive charitable contributions.
Here are five out-of-the-box ideas to help you come up with ways to increase giving for your church.
1. Create multiple avenues for your church to receive donations. One of the most common ways for churches to receive donations is through the receiving of tithes and offerings during a worship service. For most churches, this means the passing of a collection plate or having a designated area where members, and nonmembers, can give their donation. In addition, many churches utilize today’s technology with online giving, giving kiosks and “text to give” options. In general, the more options given to your members, the more likely they are to give.
2. Start a thrift store that sells only items that are donated. According to IRC § 513(a)(3), “The selling of merchandise, substantially all of which has been received by the organization as gifts or contributions” isn’t subject to unrelated business income tax.”
Now, you must be thinking, Cool. What does that mean and how does that apply to my church and me? Essentially, proceeds or revenue that thrift stores receive from the sale of donated items is tax-exempt income that a church can receive. This is also a good fundraising option for outreach-focused ministries because it allows the needs of the community to be served, while also generating additional tax-exempt income.
3. Provide meals before and after service for the convenience of church members. Between work, school, church activities, sports and the myriad of activities that one family has to manage, many families are looking for an easy lunch option on Sundays. Some churches have found that providing meals before and/or after their services is not only a blessing to their members but also a way to generate additional income for the church. These meals are usually offered at an affordable price. Because the activity is offered for the convenience of the members and it coincides with church activities, the revenue made from the sale of these meals is tax-exempt to the church.
Take note, however, that because the members are receiving something in return (a meal) for the money given/paid, they may not claim that amount as a charitable contribution.
4. Operate a bookstore or coffee shop before and/or after service. Similarly, the sale of these items is related to the tax-exempt purpose of the church, and the service provided is for the benefit of church members. Aside from the extra cash the church can bring in, an added bonus to a coffee shop is having churchgoers be awake and energized during the early service.
5. Host the occasional Christian concert, or dinner, run by volunteer staff. Fundraisers that generate income from the sales of tickets are acceptable, as long as these activities do not take place on a regular basis. IRC § 513(a)(3) also states that when activities are carried out by volunteer staff (those who do not financially benefit from the profits), the income is not taxable.
How Much Is Too Much?
Though the IRS doesn’t specify a dollar amount as “too much,” it is important that certain fundraising activities not become substantial. According to IRC § 513(a), when a tax-exempt organization carries out a “trade or business” that is not “substantially related” to the organization’s exempt purpose, the income therefrom may be subject to unrelated business income tax, which can jeopardize an exempt organization’s tax-exempt status with the IRS.
Furthermore, IRC § 512(a)(1) states that “the term ‘unrelated business taxable income’ means the gross income derived by any organization from any unrelated trade or business … regularly carried on by it.” While all of these are excellent methods of fundraising, a steadier alternative might be investing in a for-profit arm.
This article first appeared on StartChurch.com. Used by permission.