Answer:  Unrelated Business Income (UBI) for most organizations is income produced by activity (and subject to unrelated business income tax) that meets all three requirements:

1. It is a trade or business.
2. It is regularly carried on.
3. It is not substantially related to furthering the exempt purpose of the organization.

When UBI exceeds $1,000 in a calendar year, then a reporting requirement is triggered.

Answer:
That is a noble and creative idea but it is really outside the purposes of a church’s charter (to propagate the Gospel.) It would also be operating beyond the church’s 501(c)3 charitable designation and not-for-profit status.

Whoever, prayed and heard God’s direction on starting a business would really be the person or group to start their own business. It should be completely separate from the church.

Answer:
I will assume that the daycare is church owned. Essentially you do not have to do anything from an IRS perspective. You will not violate your 501(c)3 status. Daycares have long been designated as a ministry of the church. They religiously educate the little ones and assist the families by providing safe care.

Typically the daycare may operate with a positive cash flow but it will not typically be profitable. After paying for salaries, equipment & supplies there may still be a positive cash flow. However, a church would not typically pay itself for mortgage/rent, insurance, utilities, common area maintenance (CAM), etc. If they did they would quickly eat up the remaining positive cash flow and find it at a break-even or loss. Our church has a 170 student preschool & elementary. We operate on a slightly positive cash flow basis, however, we would show a loss if I allocated costs to them for facilities and overhead.

In our denomination, we need to have denominational approval. There are special applications, as well as, annual requirements & reports that must be filed with them. You will also want to fully understand your state & local daycare laws. They will be the ones who present you with the flaming hoops to jump through. According to NC state law if I operate our preschool for no more than 4 hours per day, I do not have to comply with the most stringent state daycare requirements. Do you research.

Answer:
A church can rent from anyone. If this arrangement is more about running a business to facilitate a ministry then there can be some real complications. To simplify the arrangement, the business needs to be the official owner/leasee of the facilities. Then the church can simply share or sublet from the business. In my denomination (Foursquare) it will still require Board approval.

Answer:
I am not aware of a specific salary scale or survey in our denomination (Foursquare). They do suggest that churches keep total personnel costs below 40% of our titheable income. Total personnel costs include salary, housing, taxes, and all other benefits.

Typically pay scales vary more by congregational size, annual budget and/or region of the country. I can recommend two possible resources:
1. Compensation Handbook for Church Staff put out by Church Law & Tax Report (Richard Hammar & James Cobble).
2. The one I prefer is a resource of NACBA (National Association of Church Business Administrators). It is online at www.ministrypay.com. I like that you can drill down to find data for your size church…in your area of the county. If you are willing to participate you can actually save $65 on the survey.

One last thought…At Grace Covenant our preference is to not have the highest paid pastors nor the lowest paid pastors for each position. So we worked on a method that would allow us to come back to the MinistryPay survey every two years and re-populate our salary ranges. It keeps us current without having to rework our rationale each time.