Something to Consider…

We previously asked church leaders about the following situation:

At some churches, members can borrow items for their personal use. Things such as folding tables and chairs, and 25-cup coffee makers are loaned with the understanding that they will be returned a few days later.

Which approaches to loaning equipment are acceptable?

Part of a Church’s calling is to minister to its members and attenders, but is loaning church equipment a ministry the church should be involved in? Before you as a pastor or church leader decide, we suggest that you take four things into consideration: liability, private benefit, inurement and shrinkage.


If an item of church equipment is taken from your church’s premises, the church’s liability for that piece of equipment goes along with it. It doesn’t matter if the equipment is being used for a church related activity or for an activity that has nothing to do with the church.

The difference that is important for you to be aware of is that your insurance coverage most likely will be in force if church equipment is away from the premises for a church activity, but most likely won’t be if it isn’t. In such a situation, the best that you can expect from your insurance company is help with your legal costs. But any judgment against the church will have to be paid for with church funds.

You may ask what kind of liability situation could come up. Let’s say someone borrows a few of your church’s 8-foot folding tables for a garage sale at their home. They use the family pickup truck to transport the tables, but while driving down the highway the latch on the truck’s tailgate disengages and the tables spill out on to the roadway. Now imagine that one of the tables strikes a car following behind the pickup. It damages the car and maybe even injures the car’s driver, sending him to the hospital. The church, as owner of the table, would likely be included on the list of those who are liable for the damage and injuries it caused.

Private benefit

In IRS publication 1828, Tax Guide for Churches and Religious Organizations, it’s noted that an exempt organization’s activities must be directed exclusively toward charitable, educational, religious, or other exempt purposes.

In addition, the only times a private individual or organization may receive a benefit from an exempt organization is if they are recognized as worthy of charity or if they are members of the community at large and are served by the conduct of religious services or the promotion of religion. Fortunately, it notes that the exempt organization’s status isn’t jeopardized unless the private benefit is substantial.


While a private benefit is not very likely to jeopardize an exempt organization’s status, the same cannot be said when the benefit rises to the level of inurement. This becomes the case when the person receiving the benefit is an individual the IRS considers an insider of the exempt organization.

In Publication 1828 it states, Churches and religious organizations, like all exempt organizations…are prohibited from engaging in activities that result in inurement of the church’s…assets to insiders (i.e., persons having a personal and private interest in the activities of the organization). Insiders could include the minister, church board members, officers, and in certain circumstances, employees.

It continues, The prohibition against inurement to insiders is absolute; therefore, any amount of inurement is, potentially, grounds for loss of tax-exempt status. In addition, the insider involved may be subject to excise taxes.

Even though the IRS states that the prohibition against inurement is absolute, in 1996 Congress empowered the IRS with the option of assessing intermediate sanctions in the form of substantial excise taxes against insiders, also called disqualified persons. As a result intermediate sanctions are the more likely result when it’s found that a disqualified person borrows church equipment. The 1996 law also allows the excise taxes to be assessed against the charity’s board members as well as the disqualified person who received the benefit.

The definition of disqualified person is important. Not only does it include voting members of a governing board, treasurers and chief financial officers, and top level paid staff it also includes their family members. Affected family members include spouses, siblings and their spouses; children, grandchildren and great-grandchildren and their spouses.

Pastor, the next time your wife wants to borrow the church’s 25-cup coffee maker, we suggest that it would be better if she borrows one from a friend or rents one from a party rental business in your community.


Every time an item at the church is used, either at the church or off the premises, it is susceptible to damage or loss. Such damage or loss could result in the church’s loss of its ability to benefit from the damaged or lost item. An accounting term used to describe this situation is shrinkage.

Your church probably was able to take ownership of its equipment in the first place because of the generous contributions of its members. It’s frustrating enough to have to replace items prematurely that were worn out or lost because of use by church ministries and programs, but it’s got to be even more frustrating if it’s from being borrowed by church members for non-church, private activities.

While a church may have a policy that its equipment never leaves the church’s premises or campus, we suggest that such a policy could be excessively restrictive on the church’s ministries. Instead we consider having good accountability of equipment that is used by the church’s ministries, regardless of its location, a wise utilization of contributor’s gifts. However, as we believe we’ve outlined here, private use of church assets would be less so.

Please Note: This information is provided with the understanding that Church Administrative Professionals is not rendering professional advice or service.

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Deborah Miller, cca

Charles Kneyse

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