FB8. Can a church that is a registered charity take advantage of an under- used asset to generate some additional revenue?

FB8. Can a church that is a registered charity take advantage of an under- used asset to generate some additional revenue?


Short Answer

Yes, this is sometimes possible. The CRA, in its policy about related businesses and registered charities, has listed the use of excess capacity as one of the four links that indicate that a business is related to a charity’s purpose and subordinate to that purpose.

Long Answer

EXAMPLE
Our church has a very large and easily accessible parking lot, located next to the church is a crowded urban environment. Except for Sunday services, it often sits mostly empty. Recently our Board of Directors was approached with a request to rent the parking lot on weekdays. Can the church do this and still maintain its charitable status?

Yes, it is likely that the CRA will regard the lease of the large parking lot as a related business. The church constructed the parking lot at the time the church was built as a necessary component in providing its charitable activities.

However, the use must be reasonable and proportionate. There may, for example, be an obligation on the charity to dispose of the excess property over the longer term, if it no longer serves or will not in the foreseeable future contribute to the charity’s work. This might be the case, for instance, if the size of the congregation has shrunk and only a small part of the parking lot is needed to accommodate congregants on Sunday. If that is the case, it no longer continues to be reasonable for the church to hold on to the entire parking lot, which is well in excess of its needs.

More information, see:

What is a Related Business: Use of excess capacity (section 25, III)
www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-019-eng.html