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May church promote funeral discounts?

Your Legal Questions Answered

May church promote funeral discounts?

We are a funeral industry supplier of monuments and memorial containers, etc.  May a church legally hand out "discount" coupons for a variety of products and services, combined with counseling on how to reduce the costs of the funeral process, that will assist their community?  If the provider of the "discount programs" also donates a portion of its receipts to the church?  If the donations are directly based on the provider’s revenue on an ongoing basis as a permanent fundraising program? 

You are correct in asking the questions on an iterative basis.  Where does this arrangement cross a line?

Presumably, the church (or any other community-based charity) can pass out discount coupons on pretty much anything that would be of assistance to its community, whether they be discounts on food at the supermarket, gas at the gas station, or caskets for a funeral.  So long as the help to the service provider does not rise to the level of private inurement or private benefit, it should be ok.

If the provider makes a truly voluntary contribution, the payment could presumably be claimed as a charitable contribution deduction by the provider and treated as a charitable contribution received by the church.

When there is an understanding that the “donation” will be based on a percentage of the receipts of the provider on a “permanent” basis, it doesn’t sound much like a contribution any more and a lot more like a straight business transaction.  The provider doesn’t care because the commission would be deductible as a business expense.  But the church would not only have business income, it could easily be considered unrelated business taxable income, setting off a requirement for paying unrelated business income tax.  Sounds to me that a line was crossed at this point.

Tuesday, April 23, 2019

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