I am a professional musician and recently accepted an organist/pianist position with a new church. I have been told by the finance person that allowing me to teach lessons to church members 2 afternoons a week in a room of the church would jeopardize the church's 501(c)(3) status. I have offered to pay rent, or fee, etc., but she stands negative on this matter. Is she correct?
No. The incidental use of the church facilities for such purposes would not jeopardize the federal tax-exempt status so long as the organization carries on a legitimate program of religious activities. At the worst, the net income might be taxable as unrelated business taxable income. But rental income is not taxable if the property is not mortgaged. Even if the building is mortgaged, or if your payment is treated as a licensing fee and not rent, it might be considered related income if the program is structured as an educational opportunity for members of the church.
A charity always needs to consider whether use by others might affect its local real estate tax exemption, and that is a matter of state law varying in each state. But, particularly if the program is limited to members of the church, it seems unlikely that a use such as you propose would jeopardize an exemption.
Comments
Would the answer be different if the choir director/organist was using the space to teach mostly others from the community who are not members of the church? And, of course, the choir director/organist is getting paid for those lessons by the participants - essentially running their on-the-side lesson business on their employer's tax exempt property.
Could the church possibly approach this as a ministry to the community - in which case I would think lesson fees would be paid to the church, not the instructor/director/organist. Maybe I'm thinking too much?
I agree with Don. In fact, I would be surprised if the church were not already using its space and grounds for Boy Scouts, athletic teams, day care, bridge groups, Zumba, community meetings, bible study, adult groups, singles groups, and on and on. Somehow, money from each of these activities is flowing from the group up to the treasurer and down to the janitor or groundskeeper.
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