Competing for greater market share with the promise of better-than-ever coverage, cellular companies are constantly seeking new places to construct cell towers. This means pastors and church financial directors may frequently be approached by companies hoping to build antennas into steeples, disguise them as crosses or bell towers, or attach them to spires. For many, this raises the question: is cell tower leasing for churches a wise decision?
These arrangements often promise substantial lease fees—potentially hundreds or thousands of dollars per month—for cash-strapped churches. However, they also come with possible pitfalls, such as hidden tax burdens, community opposition, and restrictive leases that limit future property use. Below, we explore these key considerations in depth.
Pluses and Minuses of Cell Tower Leasing
While leasing church property for cell towers can provide significant income, it is not without its challenges. A quick internet search reveals examples of churches involved in disputes with neighbors over whether cell towers alter the neighborhood’s character. Others resist the towers due to concerns about electromagnetic radiation, though the federal government and numerous studies have largely dismissed these fears.
Despite initial opposition, many neighborhoods grow accustomed to cell towers over time. For example, Sarah Graham, financial administrator at The Church at Green Hills in La Habra, California, noted no controversy over the T-Mobile-operated tower on her church property, disguised as a cross, which generates $24,000 annually.
Maintaining Control of Church Property
Churches satisfied with their leasing arrangements often credit strong contracts that preserve their control over property. Casey Hale, an attorney specializing in church-related legal matters at Brown & Streza, warns that poorly negotiated agreements can create long-term issues. Churches might find themselves locked into unfavorable terms, limiting property use or resulting in below-market rental rates.
“In dealing with carriers, you want to be as shrewd as snakes,” said Steve Kazella, founder of Tower Genius, a cell tower lease consulting firm. Kazella recommends consulting experts with knowledge of zoning, tax codes, and the wireless industry to ensure favorable agreements.
Understanding IRS Rules and Tax Implications
On the tax side, issues often stem from property tax regulations, which vary by state, and the complexities of Internal Revenue Service (IRS) rules. Under IRS guidelines, income from activities unrelated to a church’s ministry may be subject to unrelated business income tax (UBIT). Dave Moja, a CPA and tax consultant, offers these key tips:
- Check with local government to determine whether property taxes apply to the area where the tower will be constructed.
- If the church owns the building outright and the IRS deems it “real property,” rental income may be exempt from UBIT.
- If the church rents land for a tower, it may owe UBIT if the property is debt-financed.
- Work with tax advisers to navigate local, state, and federal regulations effectively.
Dealing with Zoning Boards and Neighbors
Zoning and community acceptance are other important considerations. Kevin Donohue, partner at Tower Genius, notes that churches are often viewed favorably by zoning boards for cell tower projects, particularly when antennas are concealed. Addressing community concerns early can also smooth the process.
Seeking Expert Guidance
Churches should never enter cell tower agreements without consulting experts. Real estate agent Dominic Dutra, who advises nonprofits on cell tower leasing, cautions that poorly structured contracts can result in loss of property control, unexpected taxes, and insufficient income. Churches should thoroughly evaluate whether leasing aligns with their ministry goals and long-term plans.
“Does it do anything for us beyond the income?” Dutra advises asking. “Or does it constrain what we want to do with our property on a long-term basis?”
FAQs: Cell Tower Leasing for Churches
1. Are cell tower leases taxable for churches?
It depends. Churches may owe unrelated business income tax (UBIT) if the income is unrelated to their ministry, especially if the property is debt-financed.
2. Do cell towers lower property value?
Opinions vary, but well-disguised towers or antennas often have minimal impact on property values over time.
3. How much income can a church earn from a cell tower lease?
Lease income varies widely but can range from several hundred to several thousand dollars per month, depending on the location and carrier.
4. Should churches consult legal or tax experts before signing?
Yes, always. Experts can help navigate zoning, tax laws, and contract negotiations to protect the church’s interests.
By seeking expert advice and carefully weighing the pros and cons, churches can make informed decisions about cell tower leasing and ensure their property remains an asset to their ministry.