If we want to tithe on our income (from registration fees and donations) are there any restrictions, red tape, or regulations we should know about? Do you have advice or thoughts on tithing by a 501(c)(3) tax exempt organization?
Homeschool leader in Idaho
The only restrictions is that the purpose of recipient of your tithe must be in line with your exempt purposes (charitable, educational and religious for this particular group).
So you shouldn’t give any part of your tithe to a for-profit business or to a nonprofit whose mission is outside of your purpose as you indicated to the IRS when you applied for 501(c)(3) tax exempt status (say an animal shelter).
Most 501(c)(3)s do not tithe because they consider themselves as recipients or stewards of donations for their specific mission. But some organizations do tithe. My church, for example, budgets 13% of our income to missions. We consider that part of a tithe.
From a Biblical perspective, it’s unclear if nonprofits should tithe.
Here’s a blog post from a pro-life group LifeMatters Worldwide with food for thought:
Should your ministry give a portion of your budget to the Lord’s work? That sounds good, but isn’t 100 percent of your budget already dedicated to advancing the Kingdom to your particular target audience? If you believe that a nonprofit organization should give because God will bless you in a special way, why stop at 10 percent?
Your board should discuss these questions:
- If you choose to tithe, where would you direct the funds?
- Would you give to a church? That could be problematic.
- Would you only give to other similar agencies? Donors who give to your nonprofit expect that 100 percent of their gift will be used to support your mission.
- What if you choose an organization that your donors don’t believe in?
- Would they quit supporting you if they knew that a portion of their gift ultimately supported another organization that they don’t like? Their reason for not liking the other organization doesn’t have to be doctrinal or philosophical. Maybe they don’t like the director, or maybe they simply aren’t interested in that particular cause.
The blog post writer concludes with this:
When a nonprofit decides to give to other nonprofits, in a sense they become mutual fund managers. You are deciding for your donors how to spend a portion of their gift that is not directly connected to your ministry. As a donor, I’m writing a check because I want to support the impact your organization is making. If I wanted to support the organization that you choose for me, I would give to them directly.
The biblical instructions about tithing and giving primarily apply to individuals. Business owners may choose to tithe their income, but a nonprofit ministry should not view giving from the same perspective.
There is one critical difference — nonprofit organizations don’t earn income, you are merely stewards of the gifts someone has entrusted to your care to accomplish your mission. When you look at nonprofit tithing from a donor’s perspective, it doesn’t make sense to give something away that isn’t really yours.
I think that will give your board something to discuss!
Carol Topp, CPA
Carol’s book Money Management in a Homeschool Organization will help your homeschool organization create a budget and live by it!