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Coffee Shop Founded by a Pastor Fails to Qualify for Tax-Exempt Status

A predominantly commercial enterprise will not qualify for tax-exempt status if its principal activities are indistinguishable from competing for-profit entities, even if it engages in occasional or insignificant activities in furtherance of its religious mission.

Last Reviewed: March 10, 2021
Federal
State:
Key point. The operation of a coffee shop as a church outreach to the community will not constitute a basis for tax-exempt status if the operation of the coffee shop is overly commercialized to the extent that the religious purpose is minimal.

The IRS ruled that a "coffee shop" founded by the pastor of a church for personal evangelism in an urban area did not qualify for tax-exempt status since it was indistinguishable in operation from secular, for-profit coffee shops.

A nonprofit corporation (the "Corporation") was formed for the following four purposes:

  1. Proclaim earnestly the gospel message and to urge its personal acceptance.
  2. Promote prayer, Bible study, missions, Christian fellowship, evangelism, Christian service and encouraging, in every possible way, a lifetime commitment to Christ.
  3. Provide a forum in which the Gospel of Jesus Christ can be discussed with non-believers outside of a formal church setting.

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Posted:
  • August 22, 2017
  • Last Reviewed: March 10, 2021

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