LifeSpirit Chart of Church Funds

Information for Ministers:  Appropriate Church Funds & Expenditures

             A. FUNDS

             1. Exempt Donations or Exempt Passive Income


            Gifts:  Donations*, Gifts, Grants

Passive Income: Dividends, Interest, Royalties & Capital Gains

             2. Active Income (sometimes exempt)


- Income from debt-financed property: exempt to the extent not debt-financed

- Income from unencumbered realty - Exempt

- Funds from church-related activities - Exempt

- Unrelated business income - Not usually Exempt

- Work performed by Minister or Religious under Letter of Direction on behalf of Church - Usually exempt

            As a church-related Healing Ministry, service fees are usually exempt.

* Written receipts for donations over $75.00

            B. EXPENDITURES

             1. Religious Activities (Not taxable to minister or church)

                       Examples:  costs of religious services and observances (including group meals), flowers, candles, incense for altars, religious statuary and images, etc.

             2. Charitable Activities (Not taxable to minister or church)

                       Examples:  donating funds or things to needy persons or to charities

             3. Educational & Research Activities (Not taxable to minister or church)

                       Examples:  costs of educational programs, minister’s continuing education, church library, research equipment, educational trips, equipment, materials, expenses, operation of church auxiliaries and affiliated organizations (sponsoring education, wellness programs and the like)

             4. Minister’s Professional Expenses (Not taxable to minister or church)

                       Examples:  office expenses, ministerial travel & professional entertainment

             5. Parsonage Allowance (Not taxable to minister or church)

                       Examples:  mortgage, rent, utilities, maintenance and enhancements to parsonage

             6. Minister’s Stipend

                       (May be taxable to minister if exceeds minimum to file; not taxable to church)

             7. Church Administrative Activities & Expenses (Not taxable to minister or church)

           Examples:  church office location, equipment, utilities; insurance for church; handling church accounts; overseeing of church and retirement funds.


            Churches may carry on ordinarily non-exempt "business" activities. If these "business" activities are church related (such as publication of religious books and periodicals, or carrying-on a Healing Ministry) they are also exempt from federal income taxes.

[Whether an activity is “church related” depends on the Church’s expressive association – that is, what it communicates about itself – LifeSpirit teaches that a Healing Ministry is part of the Mission of the religious NGO and thus, it is so.]

            Certain types of "passive" income of churches are also exempt (this category includes dividends, interest, royalties and capital gains -- thus permitting Churches to accumulate a Patrimony through donation and passive investment).

            Even income from Church owned real estate can be tax-exempt, to the extent that the property is not debt financed.

            The Law favors passive income for exempt organizations. Thus, the primary strategy for asset management for charitable purposes is to seek passive income sources for the religious organization, while also being aware that related or business activities, though not passive like dividends, interest royalties and capital gains, can also be exempt.

            Such related business activities must contribute substantially to the exempt purposes of the exempt organization. 

Activities primarily for members' benefit, or carried on by volunteers are also usually exempt.

08 Jan 2020