Should a house/simple/organic church register as a 501c3?

Dollar bills
"I think that God wants my wife and I to start up a network of house churches in a small town in northern South Australia. I am keen that these groups don't become inward looking, but give money (and time, energy, and prayer) away to needs within the local community and further afield. I'm of Baptist and Anglican background, and am keen to continue to be part of the wider "legacy church" if possible…  I'd be very interested if you could write something about how small informal organic churches can organise their finances to be transparent and above reproach, available to outside audit if requested. Also, the measures that would be appropriate to ensure accountability of the people with authority to access the money"

This comment by John Bethell to one of my previous posts echoes a question we are often asked. What should a house church do in terms of the practical side of finances? Should they take on a charitable status?

The way this is handled varies from country to country. For example, the situation regarding tax benefits in the UK was very different from that here in the USA. I'm sure Australia would be different still.

As always, when the Bible doesn't have anything specific regarding our situation, the answer is to listen to Jesus and respond to what he says. But here are a few pointers, more specific to this country:

  • Some people say that a church doesn't have to have 501c3 (charitable) status in order to gain the tax benefits. This is something of a gray area legally.
  • If you give to a 501c3 charity, there are tax benefits.
  • Groups who do not wish to go this route can give through other churches. For example, our simple churches at one stage gave via another network of churches who did have 501c3 status, with a separate account under their financial structure. This might help in John's quest to continue an involvement with the legacy church.
  • Another option is to use the financial umbrella of an organization such as the American Evangelistic Association.
  • The Evangelical Council for Financial Accountability is an accreditation agency that sets standards of financial accountability.
  • Financial transparency is essential if we are to be above reproach.

Some groups do not want the government to have any kind of access to their finances. These groups choose not to take the tax benefits involved in having a charitable status.

As always, the Lord will lead us clearly. It might also be good to take professional accounting advice.

Any thoughts?


House church finances

Stacked coins

Our friend, Steve Lyzenga of did his doctoral dissertation on releasing resources (both financial and personnel) towards completing the Great Commission. He compared how resources are used within a traditional church set up and house/simple/organic churches. I had the honor of being on his doctoral board, and so was closely involved in the whole process. His results (not large enough to be statistically significant, but giving some idea of what is going on)  fascinated me.

Here's a couple of the interesting results:

Of those surveyed, 51.6%  of those involved in organic/simple church gave 11%-25% of their income to charity, and 7.5% gave greater than 25%.  In other words, almost 60% of people are giving more than a tithe. 

The money spent on the internal administration of simple/organic churches is very low:  59.1%  of the participant's house/simple church spent less than 1% of their total annual proceeds on internal needs, and 15.1%  spent 2%-5%. In other words, more than 70% say their simple church spends less than 5% on administration costs.

(The typical American Christian gives less than 3% of their income to charity and the typical institutional church spends 85% of all church activity and funds directly toward the internal operations of the congregation, such as staff salaries, building payments, utility and operating expenses.)

People in simple/organic churches are giving more, but their churches are spending less on internal needs, so more money is made available for Kingdom purposes.

The question is, are we giving strategically? I would be interested to know what you think.