How Your Church Website is Breaking the Law
Today's 21st century church is so dramatically different from the church that we knew just a few years back that, outside of the unchanging message of salvation, it is hardly recognizable. Today churches meet in homes, restaurants, schools, senior living facilities, and yes, you said it...online. With the Internet being such a powerful tool, many pastors and leaders have used it to keep in regular communication with their congregants. Many pastors have personal blogs, and others use social media. These can all be very good tools, but they do not come without legal hurdles and challenges.
The way a church website can break the law
This year, being an election year, the IRS will do more to monitor church websites. However, as with any type of monitoring, they may find other issues that exist with your website. So, a fair question to ask yourself is, "If the IRS were to review my website, will it be 100% compliant?" Let me give the three most areas where they may find significant issues.
1. What is your church selling online? The IRS is catching up to the increasing number of churches selling things on their websites. Section 512 was authored by Congress to make the carrying on of a trade or business a taxable activity. Currently, if a church has a bookstore, its sales are not taxable if they occur during their regularly scheduled church worship activities. However, if the church has a bookstore that is opened during regular business hours, those sales are considered non-related business income and they become taxable. But now, the IRS is catching churches that have online bookstores. The question is, "Are those sales considered unrelated business income?" Like any other business activity, if those sales compete with other legitimate online bookstores, then they are taxable and the church must pay income tax for those sales because they are not considered substantially related to the nonprofit's exempt purpose. How about banner ads? Are they subject to unrelated taxable income tax? The answer lies between them being advertisers or corporate sponsors. With a little bit of strategy, you can make them corporate sponsors and it will not be taxable. See item three below.
2. The pastor's blog: Many pastors today are taking advantage of blogging. For many, it is a way to stay connected with the congregation during the week. I know of several pastors that send out a blog on an almost daily basis and a good number of the members of the congregation read it and leave comments. These pastors make efforts to reply to each comment personally. Every Sunday, many of the members feel that they have had a personal conversation that week with their pastor because if the blog. Now, the million-dollar question is whether a pastor's personal blog is legal, and under what circumstances can it be illegal? The answer requires a long explanation. To find the answer, please read a blog I wrote on this by clicking here.
3. Selling ads versus corporate sponsorship: Many churches these days raise extra revenue by selling ads in their church bulletin, on their website, and in other materials. Any paid promotion of a private business is classified as advertising and an unrelated business activity. The good news is that the IRS has created a safe harbor for churches to raise advertising revenues by selling ads known as corporate sponsorships. There is a legal difference between selling ads and selling corporate sponsorships. The IRS allows tax-free corporate sponsorships so long as they meet certain criteria such as publishing their logo, or slogan, website address and their telephone number, and as long as they do not contain qualitative or comparative descriptions of the sponsors' products or services. What you must not do is publish the sponsors' prices, or other wording that promotes savings, value or endorsement.
There is one more area that i am not mentioning here because it requires a very long write up. It is political speech. soon you will see more on this topic.
The do's and don'ts
We all know that it is very beneficial to have a church website, but when the time comes for your church to start a website, be sure to get all the facts regarding the do's and don'ts for church websites. We will discuss this topic at our next set of conferences. Always keep this in mind. When it comes to your church website, what you do not know, can hurt your church.