How to Start a Church-Run School

By Raul Rivera

After the first year, Pastor John was glad they did it.

For five years, his church staff urged him to consider starting a Christian school through the church that would provide an engaging learning experience for children, and in a place where their beliefs were honored and strengthened, not mocked.

For the first year or two, Pastor John didn’t believe it was necessary. His children had a great experience in the local schools. But Pastor John soon learned that not all schools were equal. He even heard of a few incidents where the faith of some Christian students had been openly challenged by some of the teachers.

Though alarming, that was not his main reason for starting a school. There had been an increase in gang violence and drop-out rates in the community the past several years. Some of the “problem” children just weren’t getting the focus and attention they needed to thrive in all areas of life.

So, Pastor John worked with his staff and other church leaders to develop a Christian school program.

It was decided that they would offer grants and scholarships to those who were less privileged. They would also begin sports and music programs in the afternoons that would be open to the public. This would allow more children in the community to not only have opportunities to learn of God, but to also develop skills and talents that would increase their chances and having stable careers in adulthood.

And it worked.

Through a lot of prayer, pain, tears, and planning, they started their first school year with 20 students. Their after school program had an additional 40 kids registered.

In total, 30 students in the after school program became Christians, 5 dropped out of gangs, and 10 teens who wanted to leave school decided to stay. His heart was full and he couldn’t wait to see what the next years would bring.

Education as a calling

Does the story above move you? Have you considered that your church could play a greater role in the education of kids in your church and community?

Each week we have the honor of speaking with pastors all across the country, at our conferences and on the phone, who not only want to see children and teenagers grow in their walk with the Lord, but also educationally.

If you have a passion to create an educational institution that provides great, affordable education in a godly environment, we have good news for you!

The tax code allows you to establish a 501(c)(3) nonprofit corporation organized for educational purposes. This means that churches can offer accredited education founded on a religious principles for children of all ages.

Nonprofit schools have an added benefit. Section 170(b)(1)(A)(ii) allows tax-deductible donations to educational organizations. This means that rather than relying solely on tuition, your school can be funded by donations and grants.

This can significantly reduce the amount of tuition charged to students and can help allow your school to serve a broader range of students.

What qualifies as a school?

For tax purposes, a school is considered an educational organization that provides formal education administered by a qualified staff.

These organizations are expected to have an official enrollment of a student body and a scheduled curriculum. In general, these institutions will also have a place where educational activities are regularly held.

In addition, online and correspondence versions of these schools can also qualify for a classification as a school for federal tax-exempt purposes.

Examples of schools are:

• Public, charter, and private K-12 schools
• Colleges
• Universities
• Trade schools
• Seminaries & theological colleges

The educational system is strictly governed in the U.S. Although, your organization may qualify for federal tax-exempt status as a school, you should also research your state’s laws to ensure your school will meet state operational requirements as well.

Certain organizations, though educational, do not qualify as a school for federal tax-exemption purposes. However, these organization can still apply for tax-exempt status.

These organizations include:

• Homeschool co-ops
• Youth mentorship programs
• Workshops
• Ministry training schools
• Correspondence course seminaries
• Church planting training programs

In some instances these organizations may need to tweak some aspects of their programs to qualify as a school for tax-exempt purposes.

A must-have policy for schools

The IRS’ main preoccupation with organizations applying for classification as a school is that each school provide fair, educational opportunities for students of any race.

"Train up a child in the way he should go, and when he is old, he will not depart from it." Proverbs 22:6

The IRS requires that every school, whether private or public, to publish a racial nondiscriminatory policy.

Merely having students of different ethnicities in attendance is not enough to satisfy this requirement.

This policy is a very big deal. The federal government has several requirements for schools to regulate nondiscrimination on the basis of race.

They are as follows:

1. Schools are required to file Form 990 and must complete Schedule E each year, which requires them to prove that they continually operate without racial discrimination. Private schools not required to file Form 990 (i.e. churches that have a school as an activity, or schools that are integrated auxiliaries of churches) must file Form 5578 annually to certify that they comply with racial nondiscriminatory practices.
2. Schools must have the nondiscriminatory policy adopted in a governing instrument (such as the bylaws) or a resolution to which the board of directors must adhere.
3. The same racial nondiscriminatory policy must be published in all brochures and catalogues dealing with student admissions, programs, and scholarships.
4. Schools must publish a racial nondiscrimination policy in a local newspaper that is widely circulated in the area. 
5. Schools must also be able to show that they operate their facilities in a nondiscriminatory manner.
6. Steps should be taken to ensure that scholarships and loans are given without regard to race and not in a way that disqualifies a particular race.
7. And even if you do not have many minority students in your school, you must show that you promote your school in a nondiscriminatory manner.

As noted above, the IRS’ main concern is fair education for all students. If your school can follow these guidelines to promote equal education opportunities, you will be set.

Religious freedom is permitted for private schools

If you are opting to begin a Christian private school that holds worship services, offers Bible lessons, and requires biblical disciplines of students, you are free to admit or not admit students on the basis of religion.

This means that, though you must admit students of all ethnicities, your school may be operated based on Christian principles and may openly be a Christian school.

However, remember that your legal documents grant you the protection that having a religious foundation provides. It is imperative that your articles of incorporation note that you are a religious school, or that your church will operate a school, and that you have a statement of faith in your bylaws to show that your corporation is governed by religious principles.

Of course, if you are choosing to have a non-religious private school, you certainly have this option.

7 steps to start your church-run school

There are some important steps to take to get your school up and running smoothly. Here are some definite steps every church- run school should take to ensure compliance and a healthy start.

1. Choose at start date, along with your calendar and tax year. Some schools operate on a fiscal year of January to December, and others choose June to May. Choose the fiscal year that works for you and be sure this is noted in your bylaws.

2. Choose your educational philosophy and curriculum. Be sure that your curriculum is consistent with your state’s requirements for matriculation and receiving a diploma for grade schools. For colleges and universities, your accreditation process may affect your curriculum choices. You can also consider extracurricular activities like foreign languages, arts, music, sports, and more.

3. Create a working budget. This will let you know how big or small you can start. You may want to start with only a few grades or a limited number of students. You can always add more grades and more students as your school grows in funding and staff.

4. Determine the staff you need to get started. How many teachers and administrators can you hire with your current budget? This may require you to fine tune your enrollment. Be sure that you take into consideration your state’s requirements for student teacher ratios for private schools.

5. Make sure your church has the required language in its articles of incorporation. For some of you this may mean that you need to amend your church’s articles of incorporation. If you are unsure about that or need any assistance, give us a call at 877-494-4655 and we’ll be happy to help.

6. Research state laws to be sure that your school is compliant with regulations overseeing the operation of private schools.

7. Follow the IRS guidelines for nondiscriminatory practices. The IRS provides great resources for schools, to help you comply with federal regulations; they are: Publication 557, Form 5788 and instructions, and Schedule E of Form 990 for schools and its instructions.

Train up a child

The story at the beginning of this article can be your reality. Not all are called to education, but many churches are meant for it.

Proverbs 22:6 says, “Train up a child in the way he should go, and when he is old, he will not depart from it.” The steps listed above are a launch pad, the basics of beginning a nonprofit school.

Once you start to dream and implement the vision, you can do much more. Not only can you provide excellent education, but you can foster children’s spiritual growth and help them to become all that God has created them to be.

If you are in the planning stages of beginning a church-run school, we can help. Call today to find out what the next steps are for you and your church.

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