We have a 501(c)(3) church. We are looking for ways to earn revenue. Could we set up a nonprofit 501(c)(3) housing corporation that buys and flips houses and donates that money to the church?
A church or any other public charity can form a subsidiary to operate a business for its own benefit. But the business may not necessarily be a 501(c)(3) charitable organization.
If your housing corporation is going to buy houses and flip them to young professionals or others who pay market rates, you probably don't qualify for 501(c)(3) status. To obtain charitable status you probably need to provide housing at below market rates or below actual cost to low-income people. The economics of a 501(c)(3) housing corporation do not normally provide profitable margins to split with others.
You can always run a housing corporation as a for-profit business and dividend the profits, after payment of income tax, to a controlling charity. But I generally don’t recommend that a charity undertake a business activity that is not closely related to its exempt purpose. It is hard enough for for-profit entrepreneurs to make a business profitable. It is a lot harder for those whose experience has been in the nonprofit sector to run a business that turns a significant profit.
Wow, this is huge! My company favorhomesolutions.com is used to flip houses to fund ministry. This is a great article and perspective for me. Thank you so much!!!! This definitely helps me and my ministry know how we can proceed with what we do.