I’m a pastor of a local church and have some questions about groups and individuals that come to the church to do musical performances. I’d like to know what our requirements are as a church regarding the legal and tax requirements. For example:
- Is it okay to collect an offering to offset expenses associated with the performance (travel, meals, and so on)?
- Can we collect the offering by any means we choose? That is, a collection plate that’s passed around, a collection at the door, and so on?
- Can we sell tickets to the performance in advance? What are the restrictions in this procedure?
- Are there rules about what we call the offering? Can we call it a “love offering,” a “suggested donation,” or whatever we like?
- Do we need to provide a receipt or 1099 to the performers if we give them all or part of the offering?
- Do we need to explain what the offering will be used for, or is there simply an assumption of the purpose of the offering?
Before allowing anyone to use your church’s facilities, you need to check with a competent tax adviser. The advice will need to consider whether the group is recognized as tax exempt (such as a university group) or a taxable entity.
The answer will again vary whether you compensate the group with one check or pay each performer individual.
Is this a church event or an event where the church is only providing the venue? Is the event religious or secular? Does a written agreement about the event exist? No one can provide you with a meaningful response without these answers and many more answers once you get into the analysis.
While churches may collect an offering to assist with offsetting the costs, the church should not agree to take an offering that will simply be given to the performers. The church cannot give the performers an unlimited offering.
For more help with love offerings and church tax compliance, check out the Church & Clergy Tax Guide.
