IRS Denies Christian Coffee Shop Charity Tax-Exempt Status
The Internal Revenue Service has declined to give tax-exempt status to a Christian non-profit coffee shop founded with the purpose of evangelizing non-believers and the promise of donating 100 percent of its profits to ministries, charities and those in need.
According to an IRS private letter ruling issued earlier this this year, the coffee shop was co-founded by a pastor of a local church with the goal of providing not only a place where patrons can get a nice cup of java and some light fare but also a non-church facility where the Gospel can be shared with non-believers.
Since the private letter ruling is redacted, it is unknown as to where the religious-based coffee shop is located and exactly who is involved in the new enterprise.
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But what is known is that the coffee shop is not officially affiliated with the pastor's church but was given startup funding by the church in order to create a location "where believers could interact with non-believers in a safe and friendly environment to convey the Gospel in a non-confrontational manner in word and deed." Additionally, all the coffee shop's board members are members of the unnamed pastor's church.
The private letter ruling states that the coffee shop's executive summary explains that the coffee shop will give away 100 percent of its profits, not including the money needed for capital expenditures, "to community ministries, other local, national or international non-profits or organizations, or those in financial need."
Despite the evangelistic and charitable purpose behind the coffee shop, the IRS rejected the coffee shop's application to become a 501(c)(3) tax-exempt non-profit organization because the business model too closely mirrors that of a for-profit coffee shop.
"Specifically, the facts show you are not operated exclusively for Section 501(c)(3) purpose because a substantial portion of your activities consists of the operation of a coffee shop in a commercial manner," the letter ruling asserts.
"You are open to the public Monday through Friday from 6 a.m. to 8 p.m. and Saturday from 7 a.m. to 8 p.m. You have free WiFi and power outlets throughout for customer use. You have space that can be used for gatherings such as meetings and parties. You have a selection of food and beverage items that can be purchased at the coffee shop," the letter continued. "Your hours and menu can be found on your website and your Executive Summary indicates that you believe the location of the coffee shop is ideal because there are no other similar businesses downtown. Therefore, the operation of your coffee shop to raise funds is a commercial activity, not a charitable activity."
While some might find the IRS' decision to deny this coffee shop charity tax-exempt status surprising, the decision does not come as a surprise to Chuck Bomar, the pastor of the three-congregation Colossae Church in Oregon. Colossae Church runs its own affiliated coffee shop called Well & Good Coffee House in Tigard, Ore. and donates 100 percent of its profits towards needs in the city.
"The bottomline is that [such] a 501(c)(3)'s primary function has to be religious," Bomar told The Christian Post over the phone on Monday. "So, he was misinformed or he is living in an ideal world, whoever this person is. You can't do that. It was no surprise that he was denied, especially when everything lines up the exact same as every other for-profit coffee shop."
Bomar explained that although Well & Good Coffee House is technically a "Doing Business As" entity of Colossae Church, the coffee shop still pays income and property taxes because the coffee shop's primary function is commercial.
"The heart behind it doesn't matter to the government. It is a daily function that matters," Bomar explained. "Because the daily function isn't religious, the heart of it doesn't matter in the corporate structure of it."
