5 Simple Fundraising Ideas That Will Work For Churches

Written by Raul Rivera on Sep 08, 2016 in Church Management

When people believe in the vision and mission of your ministry, they are generally inclined to support you financially. Yet, what happens when this support begins to decline or drop a little?

Most churches and ministries heavily rely upon tithes and offerings received each Sunday in order to operate on a monthly, and sometimes weekly, basis. In addition to standard operating costs, there are times when funding is needed in order for the church to expand its reach within the community. Because of this, many ministers experience stress and loss of sleep.

However, it does not have to be this way.

In this post, I want to give you some fundraising ideas that will help raise financial support for your church. Then lastly, I want to introduce to you a strategic move that will help release your church from solely relying upon tithes and offerings.

But first, let’s take a look at why being publicly supported is important for tax-exempt organizations.

The importance of being publicly supported

Common knowledge tells us that fundraising is important to your church because, without financial support you would not be able to function in the manner you desire.

But did you know that being publicly supported is a requirement of maintaining tax-exempt status for public charities such as churches?

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 may receive charitable contributions.

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5 fundraising ideas

Now that we know the importance of being publicly supported, I want to give you 5 fundraising ideas to help you meet the public support test mentioned above.

  1. Create multiple avenues for your church to receive donations. Perhaps the most common way for churches to receive donations is through the receiving of tithes and offerings during a worship service. This may be done through the passing of a collection plate, or you can designate an area where members of your church 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” is not subject to unrelated business income tax. Therefore, it can be reasoned that the 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 you to serve the needs of the community, while also generating additional tax-exempt income.
  3. Provide meals before and after service for convenience of members. With the busy schedules of families today, many churches provide meals before and/or after their services. These meals are usually offered as a convenience to the members and at an affordable price. It is because they are offered for the convenience of the members that the revenue made from the sale of these meals is tax-exempt income 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. Operating a bookstore or coffee shop before and/or after service. This is also permissible because 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.
  5. Host the occasional christian concert, or dinner, run by volunteer staff. Fundraisers that generate income from the sales of tickets are okay 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.

Jeopardizing your tax-exempt status from fundraising

Although fundraisers are a perfectly acceptable way for churches and ministries to raise money, it is important that these 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”. Therefore, while I am not discouraging any church or ministry to forget the ways of fundraising, I want to tell you about a strategy that can be far more beneficial than fundraisers, and it is a completely legal practice.

(For more information on unrelated business income, please check out a previous blog by clicking here.)

When fundraising is not enough

Sometimes the fundraisers and general offerings may not cover all of the additional income your church or ministry needs in order to carry out its goals and projects. At this point all is not lost. There is a lesser known but very beneficial option called a for-profit arm.

Section 502 of the Internal Revenue Code allows tax-exempt organizations to own the majority interest in a for-profit business and receive non-taxable income from the shares held in that business.

A church could start a videography or event-planning business that transfers the profits, after all taxes and business expenses have been paid, to your church through the shares it owns. By being majority shareholder, the nonprofit may control how that organization operates. Remember that the business itself is responsible to comply with state and federal regulations regarding for-profit corporations.

Funding to move forward

We have discussed some key pieces to helping you keep your ministry going and growing. A for-profit arm just might be the strategic component your ministry needs to have a steady stream of income that relieves financial stress and allows you to focus on what really matters; meeting the needs of your members and community at large.

If you are looking for more help in establishing some of the strategies discussed in this blog, our team is standing by to serve you in any way possible.

I also want to invite you to attend one of our conferences where we discuss the for-profit arm and other strategies that you will find beneficial to your church.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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