Will our congregation's tax status change if we endorse, promote, or sponsor a product or service?

Should our congregation profit by endorsing or promoting a product or service?

Third Party Fund-raising

From time to time, congregations are approached by third parties with requests for the congregation to sponsor, endorse, or promote a product or service.1 In return for the congregation’s efforts, a commission, fee, or percentage of profit is to be paid to the congregation. Congregations should be extremely wary of any such plan. The following is a list of legal and practical concerns to be reviewed by a congregation considering such a request.

• The church’s mission does not entail promoting commercial, secular third party ventures and sales.
• When the congregation becomes entangled with secular commercial ventures, they can take away from the true ministry and work of the congregation.
• Congregations typically have no way of evaluating or rating secular services or products, and, as such, it is not proper for them to endorse, sponsor, or otherwise promote products merely to raise some funds for the congregation.
• Once the door is open for endorsing, sponsoring, or receiving remuneration for a secular commercial venture, it becomes increasingly difficult to say "no" to other requests for congregational participation.
• The congregation's reputation and mission can be sullied by a poorly performing product, disputes between the vendor and the purchaser, collection actions, or even injuries involving the sponsored product.
• When members "contribute" by purchasing products or becoming involved in secular fund-raising plans, their commitment to charitable giving may diminish.
• When a congregation receives outside income from a secular source, it will need to take on additional record keeping, tax reporting requirements, and, potentially, tax payment requirements.
• If endorsement, promotion, or sponsorship is given, it is essential that the congregation have a legally reviewed disclaimer to protect itself from responsibility or liability.
• Typically, the funds raised for the congregation are not very significant; the secular enterprise is profiting with no extra effort.
• If two congregation members sell or provide the same product, conflict in the congregation may result.
• If the person selling the product wants to, he or she can certainly contribute a share of the sales directly to the congregation or a share of the sales that come from congregational member business.
• Depending upon the nature of the enterprise, the congregation may face unrelated business income tax, insurance, zoning issues, or similar complications.

1Different products and services may include toys, books, foodstuffs, health supplements, cleaning products, lawnmowers, home repair and improvements, real estate sales, etc.