Several homeschool leaders have recently learned that the way that their homeschool groups are compensating the teachers (parents paying teachers directly) jeopardizes the property tax exemption of their host churches.
Some state laws limit churches renting their building for business purposes to only a few days a year.
One homeschool program was arranging for teachers to conduct classes for homeschooled children each week for about 30 weeks of the year. Each teacher was paid by the parents, so each teacher was essentially a business owner. That meant the church exceeded the state-set limit on business activities.
This situation can put a church’s property tax exemption in jeopardy. It is likely the church would no longer wish to host a homeschool organization. If churches cease hosting homeschool programs, it could mean the end of many homeschool programs hosted in churches.
What can a homeschool group do?
So here are some issues for all homeschool leaders who conduct classes in churches to consider:
- Research your state property tax exemption laws and the limits on business activities conducted by churches. This document titled Property Tax Exemptions: An Overview of State Constitutional and Statutory Provisions may help. Down load it here https://www.civicfed.org/file/4794/download?token=3ifCi8dI It lists the property tax exemptions for each state in great detail (it’s a pdf file that is 460 pages long!).
Or try googling “YOUR STATE nonprofit property tax exemption” or “YOUR STATE church property tax exemption.” The rules vary by state.
- Call your county property tax assessor and ask, “Can a church let a for-profit business use the church’s building on a regular basis without harming the church’s property tax exemption?”
- Talk to your host church about this issue. Ask what they know about limits on business activity for churches in your state.
- If your state’s property tax laws limit your host church, consider changing how your teachers are paid, so that the church is not renting space for business activities to for-profit businesses (i.e., individual teachers).
- Be sure your activities are in line with the religious and charitable purposes of your host church. Your organization may have to convert to a nonprofit organization to have a religious and educational purpose. Contact me for details on how to convert to a nonprofit organization.
Note that this affects churches’ property tax exemption, not their 501c3 income tax exemption at the federal or state levels.
I’ll keep an eye on this issue and keep you informed. Sign up for my email list (top right corner) to be notified of future blog posts on this issue.
Carol Topp, CPA