Church Mercy Ministry as Integrated Auxiliary
Let’s say a mercy ministry in your church grows to the point where it needs a more stable structure. How should you structure it?
One possibility is to structure the ministry as what the IRS calls an “integrated auxiliary” of a local church. This can strike the right balance between tethering ministry to a local congregation without de-prioritizing the gospel in the mission of that congregation.
At our church, we have used integrated auxiliaries to house 9Marks, a campus-based student ministry, an economic development company to assist overseas church planting efforts, and (potentially in the near future) a micro-loan non-profit. Redeemer Presbyterian Church in New York has structured Hope for New York as an integrated auxiliary “to provide volunteer and financial resources to organizations serving the poor and marginalized of New York City.”
WHY LEGAL STRUCTURE MATTERS—AND WHAT THE OPTIONS ARE
But before diving into the specifics of IRS terminology, let’s step back to consider why legal structure matters in the first place, and what the options are for structuring a ministry with respect to the church in which it was born.
A General Preference for Organic Ministry
Generally, mercy ministries start off small as the informal effort of a few church members. This is a good thing. For those who believe in the priesthood of all believers, “organic” ministry is healthier than “programmed” ministry.
That is, as church leaders, our desire is to preach the Word faithfully and then watch that Word bear fruit as Spirit-filled Christians identify the most strategic opportunities to proclaim the gospel, build up the church, love their neighbors, and generally “do good to all people, especially to those who belong to the family of believers” (Gal. 6:10). I believe this kind of “organic” ministry is preferable to “programmed” ministry where we effectively tell our people that living out the Christian life means signing up for some program that we have hardwired into our life as a church.
Options for Structuring Ministry when it Outgrows the Organic Stage
But even with this preference for organic ministry, there comes a time when a ministry’s growth requires some degree of infrastructure. Perhaps some volunteers should be hired as staff, a building purchased, funds solicited from outside the church, and a ministry budget put in place. When that point is reached, how should this ministry be structured with respect to the local church?
Generally, there are two available options:
1. Close-In. You could keep this ministry as part of the church. Ministry staff are church staff, ministry facilities are church facilities, and so forth. But talk to many pastors who have a Christian school bolted to their church like this and you will hear stories of the tail wagging the dog. Elders become engrossed in managing the details of the ministry and can become distracted from the business of the church. This is exactly what the apostles were trying to avoid in Acts 6. And if this distraction occurs, the church itself can become confused about what it means to be a church. Is the church’s mission as simple as Jesus’ instructions in Matthew 16, 18, and 28? Or does the church exist to make disciples and feed the hungry and seek political change and promote access to healthcare?
2. Arms-Length. Alternatively, you could set up the ministry as a separate, parachurch, 501(c)(3) corporation. But this option has downsides as well. It can be expensive, since maintaining a 501(c)(3) costs money every year. It also has disclosure requirements that might reveal more information about donors and staff than is wise (say, for a ministry assisting gospel work in closed countries). And without being tethered to a local church, parachurch ministries can sometimes lose the gospel focus with which they were founded.
Then there is a third option that can be a happy combination of the first two.
3. Integrated Auxiliary. Recognizing that churches sometimes form organizations to carry out legitimate ministry that falls outside the primary focus of churches themselves, in 1969 the U.S. Congress established the concept of an integrated auxiliary of a church. These integrated auxiliaries are structured as separate corporations from a local church, with their own governing boards and finances. Nonetheless, they are permitted to share the church’s special religious exemption from some filings (such as the 990 and 1023 forms) and are considered as integrated under the local church’s 501(c)(3) status. Think of it as a legal blurring—but not merging—of the ministry and the church. As outlined by the IRS, an organization must meet a number of qualifications if it is to be considered as an integrated auxiliary of a church. It must be affiliated with a local church (or church association); it must be described as both a 501(c)(3) charitable organization and a public charity (that is, not a private foundation); and it must either qualify as a mission society or show that it garners most of its financial support internally from the church. In general, a mercy ministry would meet these qualifications.
BENEFITS AND MANAGEMENT OF INTEGRATED AUXILIARIES
From a pastoral perspective, the integrated auxiliary structure has a number of benefits:
- It formally places the ministry under the authority of the local church. This helps ensure lasting gospel focus by tying the ministry to the institution Jesus designed to protect the integrity of the gospel: the local church.
- Yet: this structure creates a distinct identity and governance for the ministry that will (hopefully) minimize the chance that church leaders will be distracted from their primary calling to pastor the church.
- It relieves the ministry of some of the more onerous filing responsibilities of an ordinary 501(c)(3) organization.
In our church, we have done the following to structure our integrated auxiliaries:
- Authorization: At the elders’ recommendation, the congregation has voted to formally authorize the creation of each integrated auxiliary.
- Formal Governance: Our elders constitute the formal board of each integrated auxiliary. However, we generally limit the actions of the full elder board to hiring or firing an executive director and annually approving the integrated auxiliary’s budget.
- Informal Governance: Each integrated auxiliary has an informal board of advisors who meet roughly quarterly and provide closer oversight than would be wise for the full elder board to exercise. These informal boards include some elders and some non-elders. For integrated auxiliaries that partner with other churches, these advisory boards may include members of those partner churches.
- Reporting: Each members’ meeting, one integrated auxiliary will give a report to the congregation, and on a regular basis all our integrated auxiliaries formally submit a financial report to the congregation.
Being a pastor and not a lawyer or accountant, I’m not in a position to advise churches on the more legal and technical details of creating and maintaining integrated auxiliaries. (So please don’t send me questions about those matters, because I won’t be able to answer them!) But with the help of some of our church members who are lawyers, our church has found this legal structure to be of great pastoral benefit. It has helped us to take full advantage of the opportunities God has placed in front of us without deviating from the very specific mission we received from our Lord to “make disciples of all nations” (Matt. 28:19).
 With apologies to readers from outside the United States, the remainder of this article is very U.S.-specific. For a history of integrated auxiliaries, see “Governmental Definition of Religion: The Rise and Fall of the IRS Regulations on an ‘Integrated Auxiliary of a Church’” by Edward Gaffney, Jr. in the Valparaiso University Law Review, Vol. 25, No. 2 .
 Section 1.6033-2 of IRS Code of Regulations, 26 CFR, paragraph (h)
 Certain practices help argue that an organization is “affiliated” with a church:
- a corporate charter that shows the organization shares religious doctrine with the church;
- the church has authority to appoint or remove at least one of the organization’s officers or directors;
- the organization’s name indicates a relationship with the church;
- the organization reports at least annually on finances and operations to the church;
- the relationship between the organization and the church is affirmed by the church;
- and, in the event of its dissolution, the organization’s assets are required to go to the church.
The more of these practices that are in place, the greater the likelihood that the IRS will recognize the organization as an integrated auxiliary of the church.
 Under IRC sections 509(a)(1), (2), or (3).
 Youth groups, seminaries, and men’s and women’s organizations are also exempt from the “internal support” rule.