Can One Federal Judge Issue a Nationwide Injunction?
Church leaders need to know: Can one federal judge issue a ruling that binds all 50 states? The answer matters—especially when clergy housing allowances are at stake.
The issue is again in the national spotlight as the Trump administration pushes to block what it believes to be judicial overreach by federal judges who are resisting the president’s agenda by issuing national injunctions.
Not just a political question
The question of a nationwide injunction is not restricted to the political realm.
A federal district court raised it in a 2013 case (Freedom From Religion Foundation, Inc. v. Lew, 983 F. Supp. 2d 1031 (W.D. Wis. 2013)) challenging the constitutionality of the clergy housing allowance.
A federal district judge in Wisconsin issued a nationwide injunction barring the Internal Revenue Service (IRS) from recognizing the clergy housing allowance.
A federal appeals court eventually reversed this case, but the larger issue remains unresolved.
Some members of Congress want to pass a law to address it.Senate Judiciary Committee chairman Chuck Grassley (R- Iowa), for example, has introduced the Judicial Relief Clarification Act that would limit the ability of federal courts to issue national injunctions.
For now, ministers should recognize that any one of about 700 federal district judges has the authority to issue a national injunction binding in all 50 states. This remains true unless changed by Congress or a decision by a federal appeals court or the United States Supreme Court.
This theoretically means someone could bring a future legal challenge regarding the constitutionality of the clergy housing allowance. This, in turn, could lead to a federal judge again issuing a national injunction rendering it unconstitutional and unenforceable.
Note: This is an unlikely result given the compelling and unanimous decision by the three-judge federal appeals court in 2019 affirming the constitutionality of the housing allowance.
FAQ
1. Can a federal judge issue a nationwide injunction?
Yes—any one of roughly 700 federal district judges has the authority to issue a nationwide injunction that binds all 50 states. However, such broad injunctions are relatively rare and legally contested.
2. Has a nationwide injunction ever affected churches?
Yes. In 2013, a federal district judge in Wisconsin ruled the clergy housing allowance was unconstitutional and issued a nationwide injunction. The ruling was later reversed on appeal, and the housing allowance remains constitutional.
3. Could Congress or the courts change this authority?
Possibly. Some members of Congress have proposed legislation to limit federal judges’ ability to issue nationwide injunctions. The issue remains unresolved at the federal level.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: gettyimages/Fat Camera
Why Your VBS Needs the Two-Adult Rule for Child Protection
Vacation Bible School creates exciting ministry moments—but also unique risks. Learn why the two-adult rule is vital to your child protection strategy.
Vacation Bible School (VBS) is an early summer tradition for many churches across the country.
As you recruit staff and volunteers to support your church’s VBS, it’s important to keep a holistic abuse-prevention plan in view, even when pursuing last-minute help.
That starts with staff and volunteer training that covers all of the needed screening, selection, and supervision efforts, such as Church Law & Tax’s Reducing the Risk available for Advantage Members.
One supervision angle that matters greatly and can easily get overlooked at VBS merits specific attention: the two-adult rule.
What Is The Two-Adult Rule?
The core idea behind the two-adult rule is that no child should ever be alone with an unrelated adult during church activities, including VBS.
Church leadership should establish the rule and make it applicable to all church property and church functions, notes Richard Hammar, attorney and senior editor of Church Law & Tax.
For churches that use underage teenage volunteers for ministry, including VBS, the rule also applies. Leaders must make certain at least one adult is present with a teenager while working with kids (thus maintaining the presence of at least two people—and once children are no longer present, the adult and teenager must then join other adults to maintain the two-adult rule with the teenager).
Tip: The presence of multiple children is an asset. “Some churches follow public school models, allowing one adult with multiple children in a classroom during regular hours,” Hammar says. “This is generally seen as legally acceptable.”
When Can Violations Arise?
Here are common ways the two-adult rule gets compromised during VBS:
Scenario: A VBS mostly functions outdoors and includes multiple activity stations. Groups of kids, segmented by age, rotate through activities. Shortly after one group arrives at the craft station, one child suddenly needs to use a restroom in the building.
Solution: The craft station leader monitors the group’s remaining kids, while the group’s two adult leaders walk with the child to the restroom. Alternatively, the leaders can ask if other kids need to use the restroom and one adult leader can accompany multiple kids to the restrooms. (Note: The adults should not go with the child into the restroom. For guidance on how to assist young children with bathroom needs, consult with your local school district’s policies to see how such situations get handled.)
Scenario: At the end of the day’s activities, one child’s parent is running late to pick him up. Staff and volunteers are packing up to leave and all the other kids are gone.
Solution: The two adult leaders for the child’s group should remain present with the child until he gets picked up. If one or both adults need to leave, then they should communicate with the children’s ministry director to ensure at least two other trained adults remain with the child until the parent arrives.
Scenario: A child’s parent cannot pick her up, due to the parent’s unexpected work conflict.
Solution: This scenario presents an especially high risk. Ideally, your church has already established policies for transportation that include:
(1) Written consent from parents or guardians,
(2) Review of insurance coverage with the church’s insurance carrier,
(3) Screening drivers for suitability.
Beyond this, two trained adults and other children should be present in a vehicle to provide the child a ride, assuming the child will be dropped off to a parent or approved guardian.
The bottom line: One adult providing one child a ride should be prohibited, including scenarios where one adult drives multiple children to their destinations, thus eventually leaving one child alone with the adult. Safe Kids Thrive, an organization serving Massachusetts, offers additional helpful tips regarding transportation.
Why The Two-Adult Rule Exists
Some might believe the two-adult rule is excessive–even unrealistic–given the challenges of finding enough volunteer help for children’s ministries and VBS.
But countless cases of abuse involving church leaders and minors could have been prevented by the two-adult rule. That includes the rape of a 13-year-old by a church volunteer who was supposed to drive her to a church activity, and the rape of a 14-year-old by a youth pastor who conducted events as the only adult present.
That’s why adopting and following a two-adult rule should be central to every church’s child-abuse prevention efforts. As your church readies itself for VBS and other ministry activities, take time now to ensure you have the rule–and everyone knows how to comply with it.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Church Law & Tax members can watch the full Religious Land Use & the Church: Virtual Roundtable series, which includes an insightful discussion with leading attorneys, a companion PDF guide, and another video case study featuring a church that faced government challenges to a property it planned to purchase.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Religious Land Use & The Church: A Virtual Roundtable — Segment 5
RLUIPA provides critical protections when churches encounter opposition over land use. In this insightful video series, legal experts and pastors walk through real examples of how congregations defended their rights—and what steps your ministry can take today to be prepared.
Featuring attorneys Midgett Parker, John Mauck, Noel Sterrett, Eric Treene, and Matthew Branaugh
The Religious Land Use and Institutionalized Persons Act (RLUIPA) was passed unanimously in 2000 by the US Congress and signed into law by President Bill Clinton. However, many church leaders remain unaware of how this law can help them avoid—or at least navigate—challenges posed by governments, agencies, and associations regarding the purchase or use of property for worship and other religious purposes.
This five-segment virtual roundtable features attorneys Midgett Parker, John Mauck, Noel Sterrett, and Eric Treene. It explores why every church should understand the ins and outs of this valuable law. It is particularly key when confronting obstacles from local government or zoning officials or neighborhood associations.
In addition, Matthew Branaugh, an attorney and editor for Church Law & Tax, shares two video case studies regarding how RLUIPA helped two pastors successfully overcome obstacles presented by their local officials.
To get the most out of the roundtable, we suggest you download this PDF. It will help guide you through the video series and offer helpful notes and highlights for future reference.
Segment 5: How RLUIPA May Help Your Church in the Future
Religious Land Use & The Church: A Virtual Roundtable — Segment 4
Zoning disputes and government restrictions can threaten your church’s ability to grow. In this five-part roundtable, legal experts and ministry leaders explain how RLUIPA works—and how it has helped churches overcome land use challenges and preserve their rights.
Featuring attorneys Midgett Parker, John Mauck, Noel Sterrett, Eric Treene, and Matthew Branaugh
The Religious Land Use and Institutionalized Persons Act (RLUIPA) was passed unanimously in 2000 by the US Congress and signed into law by President Bill Clinton. However, many church leaders remain unaware of how this law can help them avoid—or at least navigate—challenges posed by governments, agencies, and associations regarding the purchase or use of property for worship and other religious purposes.
This five-segment virtual roundtable features attorneys Midgett Parker, John Mauck, Noel Sterrett, and Eric Treene. It explores why every church should understand the ins and outs of this valuable law. It is particularly key when confronting obstacles from local government or zoning officials or neighborhood associations.
In addition, Matthew Branaugh, an attorney and editor for Church Law & Tax, shares two video case studies regarding how RLUIPA helped two pastors successfully overcome obstacles presented by their local officials.
To get the most out of the roundtable, we suggest you download this PDF. It will help guide you through the video series and offer helpful notes and highlights for future reference.
Religious Land Use & The Church: A Virtual Roundtable — Segment 3
Churches often face resistance when buying or using property. This expert-led video roundtable unpacks how RLUIPA helps protect your church’s rights—and why leaders should understand the law before issues arise.
Featuring attorneys Midgett Parker, John Mauck, Noel Sterrett, Eric Treene, and Matthew Branaugh
The Religious Land Use and Institutionalized Persons Act (RLUIPA) was passed unanimously in 2000 by the US Congress and signed into law by President Bill Clinton. However, many church leaders remain unaware of how this law can help them avoid—or at least navigate—challenges posed by governments, agencies, and associations regarding the purchase or use of property for worship and other religious purposes.
This five-segment virtual roundtable features attorneys Midgett Parker, John Mauck, Noel Sterrett, and Eric Treene. It explores why every church should understand the ins and outs of this valuable law. It is particularly key when confronting obstacles from local government or zoning officials or neighborhood associations.
In addition, Matthew Branaugh, an attorney and editor for Church Law & Tax, shares two video case studies regarding how RLUIPA helped two pastors successfully overcome obstacles presented by their local officials.
To get the most out of the roundtable, we suggest you download this PDF. It will help guide you through the video series and offer helpful notes and highlights for future reference.
Religious Land Use & The Church: A Virtual Roundtable — Segment 2
This five-part video roundtable explains how the Religious Land Use and Institutionalized Persons Act (RLUIPA) protects your church’s property rights. Legal experts and real-world case studies reveal how this underused federal law can help you respond to zoning conflicts and government pushback.
Featuring attorneys Midgett Parker, John Mauck, Noel Sterrett, Eric Treene, and Matthew Branaugh
The Religious Land Use and Institutionalized Persons Act (RLUIPA) was passed unanimously in 2000 by the US Congress and signed into law by President Bill Clinton. However, many church leaders remain unaware of how this law can help them avoid—or at least navigate—challenges posed by governments, agencies, and associations regarding the purchase or use of property for worship and other religious purposes.
This five-segment virtual roundtable features attorneys Midgett Parker, John Mauck, Noel Sterrett, and Eric Treene. It explores why every church should understand the ins and outs of this valuable law. It is particularly key when confronting obstacles from local government or zoning officials or neighborhood associations.
In addition, Matthew Branaugh, an attorney and editor for Church Law & Tax, shares two video case studies regarding how RLUIPA helped two pastors successfully overcome obstacles presented by their local officials.
To get the most out of the roundtable, we suggest you download this PDF. It will help guide you through the video series and offer helpful notes and highlights for future reference.
Attorney Richard Hammar was among the first to caution Protestant churches about the need to protect kids and use screening and selection processes for the people who work with children and youth in their care.
When he crafted the Reducing the Risk abuse-prevention awareness training program in the early 1990s, Hammar recommended a five-step checklist. Three of those steps–a written application, interview, and reference checks–occurred before a person even set foot in a Sunday school classroom or youth-group gathering.
Over time, Hammar has expanded the checklist to 14 steps. The checklist is based on new research, new best practices, and input from law enforcement and courts.
One example: requiring applicants to provide reference checks from institutions, rather than personal acquaintances.
FBI insights
For years, personal references seemed adequate. Churches, already scrambling to find eligible volunteers and staff, could ask applicants for the names of two people and quickly contact them to confirm the applicants’ suitability to work with children and youth.
Then Hammar came across research from the Federal Bureau of Investigation (FBI).
As he explained in an issue of Church Law & Tax Report, “(u)sually, church leaders are not familiar with personal references, and so they are of limited value. Further, the FBI profile on pedophiles states that the only adult friends of pedophiles tend to be other pedophiles. This further diminishes the value of personal references.”
From that point forward, Hammar recommended institutional references, not personal ones.
What is an institutional reference?
So, what is an “institutional reference”? An institutional reference is one provided by someone at an institution where the applicant has previously worked with children or youth.
It might be another church’s children’s ministry or a youth sports program. It might be a school.
“(O)btaining a positive reference from one or more other institutions that have actually observed the applicant interact with minors is the gold standard in screening prospective youth and children’s workers,” Hammar notes.
Your church should ask “whether the institution is aware of any information indicating that the applicant poses a risk of harm to minors,” he adds.
In some instances, an applicant may not have previous experience volunteering or working with a youth-serving organization. When that happens, Hammar recommends limiting the applicant’s personal references to “members of the church, or to members of other churches that are well known to church leadership.”
Be thorough
When contacting an institutional reference, the date and time of the conversation should be logged. So should the name of the person contacted, the questions asked, and a summary of the responses. Careful written notes should be made and retained permanently with the applicant’s file.
If possible, include a second person on the call who can sign the notes as a witness.
Thoroughness doesn’t stop there, however. Hammar’s full 14-step list includes, among other things, interviewing the applicant and running a criminal background check with a service that reviews local, state, and federal databases.
Though Hammar’s process may appear excessive, the well-being of children hangs in the balance. Abuse does not only affect the victim, but their family. There’s also the effects on a church congregation along with the existential threat of a civil lawsuit.
A church that has not taken steps is particularly susceptible to civil lawsuits that come with significant financial risks. Damages may exceed a church’s insurance coverage, assuming the policy even covers abuse claims. Many general liability policies do not.
After the Penn State University football program scandal in the early 2010s, the #MeToo and #ChurchToo movements in 2017, and the widespread effort of many states to temporarily or permanently pause the statutes of limitation to bring civil claims, the risk is too great for church leaders to take the threat of abuse too lightly.
“The public (your potential “jury pool”) is increasingly intolerant of the inadequate response by churches and other youth-serving charities to incidents of child sexual abuse,” Hammar says. “Church leaders need to review current policies and be prepared to take additional steps to protect minors.”
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: getty/FatCamera
Mandatory Child Abuse Reporting Laws: What Church Leaders Must Know
Every state has child abuse reporting laws—and many apply to clergy. Learn what your church needs to know, how to comply, and why immediate action is critical.
Every state has a mandatory child-abuse reporting law on the books.
But many pastors and church leaders are unaware of these statutes, let alone their need to comply with them.
Since April is National Child Abuse Prevention Month, now is a smart time for church leaders to familiarize themselves with these laws, how they work, and what to do if the unthinkable–a suspected case of child abuse–ever arises.
Abuse allegations consistently rank first among the reasons churches go to court each year, so the gravity of the situation alone merits the highest of priorities.
What is a mandatory abuse-reporting law?
Mandatory abuse-reporting laws first emerged in the early 1960s, mainly in response to growing research regarding the immense harm suffered by children through ongoing physical, emotional, or sexual abuse, and neglect.
Researchers increasingly found that persons in positions of trust often had opportunities to intervene on a child’s behalf, but didn’t, leading state lawmakers to begin passing legislation compelling them to do so.
The ultimate goal: increase action and reduce abuse.
In the decades since these laws first surfaced, every state has adopted one, and most states have modified them multiple times to expand the list of named professionals required to report.
The penalties for failing to comply are notable. Most laws recognize criminal liability for the person who fails to report, with penalties ranging from misdemeanors and small fines to jail time and hefty fines.
At least eight states also recognize civil liability, which means a victim can personally sue the person who failed to meet their reporting obligation.
What church leaders should know
Church Law & Tax regularly updates its 50-state survey of abuse-reporting laws, and recently did so again.
Upgrade to Advantage Membership to access our 50-state survey of abuse-reporting laws.
The report offers specific guidance on whether laws include clergy and other church-related positions, plus other requirements a state’s law imposes, including:
The state’s definition of abuse;
The process for reporting suspected abuse;
The deadline for reporting (usually within 24 hours to 48 hours);
The state’s position on how a clergy member should handle information potentially received through a conversation protected by the clergy-penitent privilege;
The phone and website contact points for reporting; and,
The criminal and/or civil liability faced for failing to report.
When the #MeToo movement erupted on social media in 2017, numerous states enacted broad-sweeping changes to their reporting laws. That activity has subsided during the past two years, with the most notable changes coming in the phone numbers or website links that mandatory reporters must use to report.
When in doubt, report
Pastors and church leaders often become aware of abuse either because they learn a child has been harmed by a person within the church or by someone outside the church.
Regardless of who has perpetrated the suspected abuse and where it occurred, pastors and leaders must respond.
Regrettably, though, many hesitate.
Sometimes it’s because they believe a situation can be handled within the church. Other times it’s because they aren’t sure whether they need to verify the credibility of a case.
Neither are good reasons.
The laws simply state “reasonably suspected cases of abuse,” and that standard–though seemingly ambiguous–is not difficult to meet. The laws do not require further inquiry on the part of the mandatory reporter, or for the mandatory reporter to present specific evidence.
Furthermore, states offer immunity to an individual who makes a good-faith report that is later deemed to be inaccurate, underscoring just how much the state wants persons in positions of trust to act.
As attorney Richard Hammar, the co-founder of Church Law & Tax, has recommended for years, “When in doubt, report.” A child’s well-being hangs in the balance.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: Getty/marekuliasz
3 Tax Preparation Software Cautions Every Minister Should Know
Tax preparation software may seem like a quick fix for ministers during tax season, but it often overlooks key clergy-specific rules. Learn the top three issues to watch for—and when to seek help from a tax professional.
It’s the home stretch for the 2025 tax season, and for ministers who are struggling to get their federal and state returns done–or worse, haven’t even started yet–they may be getting anxious.
When that happens, it’s natural to look for help.
And, in the tax industry, preparation software is a common solution.
Whether TurboTax, TaxAct, or H&R Block, these programs are relatively inexpensive compared to hiring a qualified tax preparer. They also tend to take only a few hours to complete from start to finish.
But ministers need to note three cautions before using one of these programs.
Three cautions
Ministers have unique rules and benefits that make their tax reporting different from most people. Three of them aren’t addressed well by tax preparation software.
Michele Wales, Sophie Chevalier, and Jessica Hebb from national CPA firm Batts, Morrison, Wales & Lee outlined them for Church Law & Tax, and ministers should note where to work cautiously if they use a software program:
The “dual tax status” of ministers: Ministers are treated as employees for income tax purposes, but they are treated as self-employed for purposes of Social Security and Medicare.
Housing and parsonage allowances: Qualified ministers are eligible to have a portion of their incomes designated, tax-free, to cover eligible housing or parsonage costs. But tax prep software isn’t tailored to account for such allowances.
Business expenses. Many tax software options do not automatically calculate the nondeductible portion of business expenses allocable to the tax-free portion of a minister’s income. This means a manual adjustment must be made.
What to do?
That’s not to say tax prep software is off-limits to ministers. The options can be used if proper caution is applied to these three topics.
But as Wales, Chevalier, and Hebb note, it is still wise to have a qualified tax preparer review the returns. Do this before filing them.
Ministers have options with finding that qualified person who can help. Along with CPAs, enrolled agents may be a viable–and possibly less expensive–path.
Our Church & Clergy Tax Guide addresses tax status of ministers, the housing and parsonage allowances, and business expenses.
Similarly, the companion 2025 Clergy Tax Prep Guide–a downloadable resource–walks ministers step-by-step through their federal Form 1040s.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: AdobeStock/ iQoncept
Why Churches Must Adopt Accountable Reimbursement Arrangements
Many church employees and ministers face unexpected tax bills—often because their churches haven’t set up accountable reimbursement arrangements. Learn how this simple policy change can prevent unnecessary tax burdens and keep reimbursements tax-free.
Here’s what it means: absent an accountable reimbursement arrangement, the Internal Revenue Service (IRS) views any reimbursed business expenses paid by an employer to an employee as nonaccountable. And this creates taxable income for the employee.
This may seem unfair. After all, ministers and employees may use their personal vehicles for church-related matters and deserve reimbursements for their miles. Or they may incur charges on personal credit cards for meals or other purchases officially tied to church business.
So, if they get reimbursed for these common church-related expenses, why should they then owe the government taxes on those reimbursements?
A common mistake
As unfair as it may seem, the rationale makes sense.
That an expense and corresponding reimbursement are legitimate is not enough for the IRS. If the church does not adopt a recognized way to handle them, the IRS will tax them.
In theory, this approach helps cut down on misuses of reimbursements for personal gain.
Richard Hammar, senior editor of Church Law & Tax, explained the seven common tax mistakes that churches and ministers make. And not adopting an accountable reimbursement arrangement is near the top of the list.
A provision in the Tax Cuts and Jobs Act of 2017 prohibits taxpayers from itemizing business expense deductions. This makes the adoption of an accountable reimbursement arrangement even more important.
This provision expires at the end of 2025. There is speculation that it will not be renewed as part of larger tax reform.
An easy fix
Fortunately, churches can easily fix this problem now by adopting an accountable reimbursement arrangement.
An arrangement is accountable when it meets these requirements:
Only business expenses are reimbursed and include documentation (receipts) and explanations (business justifications);
Reimbursement requests are submitted within 60 days;
Any excess reimbursements inadvertently paid to the minister or employee are paid back to the church within 120 days; and,
The employer pays reimbursements out of its funds, not by reducing the minister or employee’s salary.
Such a plan means the minister or employee reports and documents the business expenses in a timely way—and they’re verified—with the church. The reimbursements are not reported as income to the employee.
Accountable reimbursement arrangements are the best way for churches to handle business expense reimbursements for ministers and employees. To go deeper, chapter 7 of Hammar’s 2025 Church & Clergy Tax Guide offers more details, explanations, and illustrations.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: AdobeStock/N7
Church Conferences for 2025
These church conferences offer connections, networking, inspiration, and practical guidance for church leaders.
This year promises to be as busy as ever, but these church conferences for 2025 are worth considering. After all, leading a church does not mean one can’t carve out time for ongoing education and training.
A commitment to learning is the hallmark of effective leadership, and this list is geared for church pastors, board members, and volunteers.
Join Church Law & Tax Today—More than Four Decades of church legal, tax, financial, HR, and governance at your fingertips
Choose your church management conference for 2025 with care
But choose wisely. Not all church management conferences are created equal. Many demand significant investments of both time and money. Others involve unscrupulous individuals who sometimes target churches with erroneous, inaccurate, or misleading information.
Let us help take some of the guesswork out of it by recommending these six conferences and seminars (organized in chronological order).
All involve individuals and organizations connected with Church Law & Tax. Church Law & Tax editors and staff have attended these events over the years, and can vouch for the accuracy and ministry-minded focus that each offer.
The Church Network National Conference
The Church Network (TCN) hosts the longest-running national conference serving church business administrators. The 2025 event again will offer multiple days with general keynote speakers, a wide range of workshops, and an exhibit hall with vendors that serve the church market.
Can’t make it? TCN also has more than 80 local chapters that meet monthly. These chapters offer guest speakers who cover various topics related to church administration.
CPA firm Batts Morrison Wales & Lee covers recent developments and trends on tax, financial, and regulatory topics affecting nonprofit organizations and churches this annual event. CPA Michael Batts, managing partner of the firm, is a senior editorial advisor for Church Law & Tax, and CPA Kaylyn Varnum, a partner at the firm, is an advisor-at-large for Church Law & Tax.
Attorney Erika Cole, a senior editorial advisor for Church Law & Tax, will host this one-day conference for pastors and church leaders, including executive pastors, trustees, church administrators, and finance officers.
Date: Sept. 18
Location: Virtual. In-person component is TBD.
Registration cost: TBD
Christian Legal Society National Conference
The Christian Legal Society (CLS) is the largest national organization serving attorneys and law students who are Christians. The CLS conference provides training and encouragement to legal professionals, including those who serve churches, ministries, and nonprofits.
Dates: Oct. 9-12
Location: New Orleans
Registration cost: Varies based on the individual’s membership status with the organization.
The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.
Image: AdobeStock/arhendrix
Legal Issues Churches Should Watch During President Trump’s Second Term
Discover key legal issues affecting churches under President Trump’s second term, including tax policies, employment law, and religious freedom rights.
President Trump has returned to the Oval Office for a second term, and Republicans again have control over both houses of Congress. As President Trump’s administration moves swiftly in its early days to pursue significant changes, Church Law & Tax is watching several key legal issues that will be shaped or reshaped over these next four years:
Tax law and policy
During his first term, President Trump and a Republican-controlled Congress ushered in sweeping changes with the Tax Cuts and Jobs Act of 2017 (TCJA).
This came primarily through reduced tax rates and modified credits and deductions for individuals and businesses.
Many of the act’s provisions will expire in 2025, notes Ted Batson, a tax attorney with CapinCrouse. Batson is also an editorial advisor for Church Law & Tax.
Among those about to sunset:
The increase of the limit on deductions for charitable contributions from 50 percent of adjusted gross income to 60 percent of adjusted gross income
The elimination of the personal and dependency deduction
The increase of the standard deduction
The elimination of the deduction for miscellaneous itemized deductions
The reduction of the highest marginal income tax rate from 39.6 percent to 37 percent and analogous reductions to lower income tax brackets
The increase in the estate and gift tax exemption
The limitation of the deduction for state and local taxes, including income and property taxes, to $10,000
The higher standard deduction and the limitations on itemized deductions have affected charitable giving, adds CPA Michael Batts. The result: fewer taxpayers itemizing deductions.
“Before the Tax Cuts and Jobs Act became law, about 30 percent of American taxpayers itemized deductions,” Batts, a Church Law & Tax senior editorial advisor, explains. “Under the TCJA, about 10 percent of taxpayers itemize deductions. Under current law, taxpayers receive a tax deduction for their charitable giving only if they itemize deductions.”
But proposals might allow taxpayers to deduct charitable contributions “at least at some level, even if they don’t itemize deductions,” Batts adds.
Other tax-related issues to follow
Beyond the TCJA, Batts says other tax-related laws and policies will likely get closer looks, too.
Congress may again pass legislation enabling clergy members who have elected out of Social Security coverage to opt back in.
Congress also may revisit the “Johnson Amendment,” a controversial provision in Section 501(c)(3) of the Internal Revenue Code. The amendment prohibits churches and tax-exempt organizations from endorsing or opposing political candidates or engaging in extensive lobbying.
Employee classifications and overtime laws
It’s been a volatile eight years for federal employment law, including how employers classify employees and independent contractors.
Also in flux are the thresholds that determine whether an exempt employee can still get overtime pay.
In 2021, the US Department of Labor (DOL) under President Trump released a new “Independent Contractor Rule.” Four months later, the DOL under President Biden rolled it back.
Then, in March of 2024, the DOL issued a new rule under President Biden.
A similar yo-yo effect occurred with overtime pay. In 2024, DOL changes began taking effect to increase minimum salary thresholds for exempt employees.
The made thousands of workers—including many holding nonministerial positions at churches—eligible for overtime compensation.
But a Texas-based federal district court later tossed those rules out before another increase was set to start this year.
Now that President Trump has returned to office, there is a chance another change will come.
However, until a new secretary of labor is confirmed, it’s hard to say what changes might come.
This is because the presidents nominee to head the Department of Labor hasn’t yet taken positions on these issues.
Religious freedom rights for churches, businesses, and individuals
President Trump has signed executive orders recognizing only two genders and eliminating federal “diversity, equity, and inclusion” (DEI) offices.
This “may signal that churches may follow their sincerely held religious beliefs regarding gender as applied to nonministerial employees,” says CPA and Attorney Frank Sommerville adds.
But Attorney and Assistant Law Professor Erik Stanley, a Church Law & Tax editorial advisor, is not sure whether such trends will continue.
“There may be a ‘halo-like’ effect where the conservative control of the federal branches of government embolden state legislators to push for RFRAs or similar religious freedom protections in their states,” Stanley says. “But ultimately, whether more of these pass will come down to each state and its legislative makeup.”
Immigration law and policy
President Trump has also signed several executive orders related to immigration. While legal challenges have already begun, there are implications for churches on multiple fronts.
Congregational impacts. Legal and illegal immigration shifts may create challenges for immigrant congregations and their leaders. The National Association of Evangelicals (NAE) issued a statement shortly after the first immigration executive orders were released, noting the importance of border security and the rule of law. But the group, representing thousands of churches from 40 denominations, also said it believes “some of the administration’s immigration proposals go beyond border security, including policies that risk leading to family separation and a near-total ban on resettlement of refugees who are thoroughly vetted.”
Attorney and Church Law & Tax Editorial Advisor Lina Yen Hughes notes that delays and rejections for visa renewals may arise. “The visa process will cost more time and expense to hire foreign pastors to shepherd immigrant congregations,” she explains. “Moreover, religious workers may be grounded from international trips for mission work or visits to parents back home for fear they may get stuck overseas.”
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Advantage Member Webinar: Mastering the 2025 Tax Season with CPA Elaine Sommerville
Put yourself on a path to mastering the 2025 tax season with CPA Elaine Sommerville, one of the nation’s leading experts in church and nonprofit tax compliance.
The Editors
Mastering the 2025 tax season just got alot easier, thanks to this 75-minute webinar hosted by Church Law & Tax editor and attorney Matthew Branaugh. Spend some time hitting the highlights, and kickstart the 2025 tax season for church leaders and clergy members.
Creating a balanced church budget is essential for maintaining financial stability and flexibility, especially when considering mortgage loans. This guide offers insights into managing salaries and operational expenses to keep your church on track.
Key Takeaways:
Church salaries can typically be around 35 percent of the operating budget but can rise as high as 55 percent.
Salaries and debt should not exceed 65 percent of total income.
Maintaining flexibility in your budget is key for long-term financial health.
How should a church budget balance salaries and expenses? A healthy range for salaries is about 35 percent of operating expenses, with total salaries and debt not exceeding 65 percent of income. This approach ensures flexibility and financial stability.
Understanding Salaries as a Percentage of a Church Budget
Church salaries can heavily influence the overall budget. Salaries that are too high in proportion to income can strain cash flow and hinder ministry operations. Conversely, allocating too little for staff compensation may lead to dissatisfaction and retention issues.
Expert Insights on Budget Balancing
Mark Holbrook, former President and CEO of the Evangelical Christian Credit Union (ECCU) (now Adelfi), highlights common challenges churches face during mortgage loan applications:
Staffing levels may be disproportionately high relative to the church’s income.
Senior leadership salaries might be excessive compared to overall cash flow.
Recommended Salary and Debt Ratios
Mike Koch, Adelfi’s Senior Vice President and CFO, suggests the following guidelines for a balanced church budget:
Salaries: Aim to keep staff salaries and benefits at about 35 percent of the operating budget.
Debt and Salary Combined: Ensure these do not exceed 65 percent of total income.
Debt Leverage: Limit debt to approximately 20 percent of income to maintain financial flexibility.
Did You Know? A well-structured church budget not only ensures operational efficiency but also strengthens your case when applying for mortgage loans.
Keeping these ratios in check allows churches to plan for unforeseen circumstances and allocate funds to other vital areas, such as ministry programs and community outreach. If salaries and debt exceed these thresholds, it’s crucial to ask:
Why does our church differ from the recommended ratios?
How can we justify and manage these differences effectively?
Steps to Create a Healthy Church Budget
Evaluate current salary and expense ratios regularly to ensure alignment with best practices.
Consult financial experts or church-focused credit unions to assess budget health.
Keep a detailed record of income, expenses, and long-term financial obligations.
The following has been added to the original content to maintain accuracy and relevancy:
FAQs: Common Questions About Church Budgets
What percentage of a church budget should go to salaries? Experts recommend allocating around 35% of the church’s operating budget to salaries.
How much debt should a church take on? Debt should typically not exceed 20% of the church’s income to ensure financial flexibility.
Why is budgeting important for churches? A well-planned budget helps maintain financial stability, fund ministry activities, and prepare for unexpected costs.
How can churches improve their budgeting process? Regular reviews, expert consultations, and aligning with recommended ratios can enhance budgeting effectiveness.
Maintaining a balanced church budget is vital for operational success and long-term sustainability. By keeping salary and debt ratios within recommended thresholds, your church can ensure financial health and focus on its ministry goals.
Q: Our church has several employees who opt out of group health insurance and instead elect to participate in a group “health sharing plan.” It is my understanding that any out-of-pocket health expenses incurred by an employee are eligible for a Flexible Spending Account (FSA), provided they are included on the Internal Revenue Service’s (IRS) list of eligible reimbursed expenses.
Could you please clarify if the monthly “subscription” or “membership” cost for a health sharing plan paid by these employees could be covered as an FSA reimbursement?
And, more generally speaking, are there any situations in which a church pays the membership fee for a health sharing plan as a part of any tax-free fringe benefit plan?
Flexible Spending Accounts (FSAs) provide tax advantages for employees to cover eligible medical expenses. This article breaks down what qualifies for reimbursement and how churches can navigate these guidelines effectively.
Key Takeaways:
FSAs reimburse eligible medical expenses as defined by IRS guidelines.
Health sharing plan membership fees are not typically FSA-eligible unless under specific self-insured arrangements.
Churches must consult legal experts for compliance with health plan regulations.
FSAs are designed to reimburse employees for eligible medical expenses. But are membership fees or subscriptions to health sharing plans eligible for reimbursement? The short answer is no, except under specific self-insured arrangements. Here’s what you need to know about what is eligible for FSA reimbursement.
What Is Considered an Eligible FSA Expense?
Eligible FSA expenses are defined by the IRS and generally include costs directly related to medical care. Common qualifying expenses include:
Co-payments and deductibles
Prescription medications
Medical devices, such as crutches or blood sugar monitors
Dental and vision care
For a full list, refer to the IRS Publication 502, which outlines deductible medical expenses.
Are Health Sharing Plan Costs FSA Eligible?
Membership fees or subscription costs to faith-based health sharing plans are not considered “medical expenses” under IRS guidelines. As a result, these costs are typically ineligible for FSA reimbursement.
However, there may be exceptions if a church incorporates these plans into a qualifying self-insured health plan. For this to work, the church must draft a comprehensive health benefit plan that complies with the Affordable Care Act (ACA). Consulting a benefits attorney is essential to ensure compliance.
Potential Rule Changes on Health Sharing Plans
In 2020, the IRS proposed regulations that might redefine “insurance” to include health sharing plan arrangements, making them FSA-eligible. However, these proposed rules remain unpublished, leaving the long-standing guidance unchanged. Churches should stay informed about future regulatory updates.
Pro Tip: Ensure your FSA plan documents clearly define eligible expenses to avoid compliance issues.
Steps for Churches to Navigate FSA Guidelines
Consult with a qualified benefits attorney when establishing self-insured health plans.
Keep detailed records of employee health benefits and plan documentation.
Regularly review IRS guidance and updates regarding FSAs and health sharing plans.
The following has been added to the original content to maintain accuracy and relevancy:
FAQs: Common Questions About FSA Reimbursement
What medical expenses qualify for FSA reimbursement? Generally, expenses directly related to medical care, such as prescriptions, medical devices, and co-payments, qualify. Refer to IRS guidelines for more details.
Can over-the-counter medications be reimbursed? Yes, over-the-counter medications without a prescription became FSA-eligible in 2020 under the CARES Act.
Are gym memberships or wellness programs FSA-eligible? Typically, no. However, they may qualify if prescribed for a specific medical condition.
Can churches include health sharing plans in FSAs? Only under specific self-insured arrangements that meet ACA compliance requirements.
Churches navigating FSA eligibility rules must remain vigilant about IRS guidelines. Whether managing traditional medical expenses or exploring innovative health plan strategies, understanding eligibility is crucial to ensuring compliance and maximizing benefits for employees.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
Image: AdobeStock/Mariakray
Court Tosses Out Labor Department’s Overtime Pay Rules
Court’s ruling reverses phased Labor Department’s overtime pay rules, meaning churches need only comply with previous minimum salary threshold.
A federal court in Texas halted key new overtime pay rules set by the US Department of Labor (DOL), relieving private employers—including churches—from paying potentially significantly more in personnel costs.
Earlier this year, the department instituted a phased plan to increase the minimum compensation that exempt employees must receive in order to not be owed overtime pay under the federal Fair Labor Standards Act (FLSA).
In Texas v. DOL, (E.D. Tex.), the State of Texas and private employers separately sued the DOL, asking the court to void the DOL regulation.
Under the phased DOL rule, the minimum salary went from $684 per week, or $35,568 per year, to $844 per week, or $43,888 per year starting July 1, 2024.
On January 1, 2025, it was scheduled to increase to $1,125 per week, or $58,656 per year. Automatic indexing then would start in 2027.
The plaintiffs claimed DOL’s new minimum salaries exceeded the authority granted to the agency by Congress. They also claimed automatic indexing was not authorized by Congress.
In its ruling issued November 15, 2024, the Texas federal court agreed with the plaintiffs, voiding both salary increases and the automatic indexing.
For now, this decision means that churches and ministries need only comply with the DOL’s previous minimum salary threshold of $684 per week, or $35,568 per year.
It’s possible the DOL will appeal the ruling to the United States Fifth Circuit Court of Appeals. However, success appears unlikely. In 2016, the Fifth Circuit affirmed a lower federal court decision that voided similar DOL attempts to increase the minimum salary threshold for exempt employees at that time.
Any appeal now to the US Supreme Court also would likely lead to an affirmation of the decision, said national nonprofit accounting firm CapinCrouse. And the DOL under the Trump Administration taking office on January 20, 2025, isn’t likely to pursue such an appeal anyway, the firm noted.
Too little, too late?
This outcome potentially relieves churches in two ways, although for those that already made changes to comply with the DOL’s new rule, the decision may prove to be too little, too late.
Before the July 1, 2024, threshold took effect, a church needed to determine which nonministerial positions would need to change from exempt to nonexempt under the new minimum salary test. The church then would need to decide whether to re-classify these workers as nonexempt or increase their compensation to meet the new threshold levels taking effect on July 1, 2024, and January 1, 2025, respectively.
Many churches made changes. With the Texas federal court’s decision, those changes now prove unnecessary.
Those churches could opt to undo those changes, but as CapinCrouse also notes, those churches need to ensure such moves do not violate state laws.
Furthermore, the firm said, churches must consider the negative impact on employee morale that such reversals could cause.
A tug-of-war
The Texas federal court’s decision continues a seemingly constant tug-of-war between employers and the DOL.
On one side, the DOL wants a bright-line salary test between exempt and nonexempt employees. On the other side, employers object to subjecting executive, administrative, and professional employees to overtime simply because they make less money than the DOL requires for the exempt classification.
The Texas federal court reasoned that the DOL’s minimum salary changes gave priority to pay levels over the duties test used under FLSA for determining exempt employee classification. The statute defines exempt-from-overtime status in terms of the duties required for executive, administrative, and professional employees and does not include a minimum salary test.
According to the court, while salary can be a factor in the analysis, the failure to pay the proposed minimum salary should not preclude an employee from qualifying as exempt.
Key takeaway: Given the volatility of this issue, churches and ministries should continue to monitor for new developments. Until then, the minimum salary threshold of $684 per week, or $35,568, remains the rule to follow.
Frank Sommerville is both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: gloo/Barna
State of the Church Research Reveals Key Leadership Challenges for Thriving Churches
Barna and Gloo’s State of the Church research reveals key trends in pastoring, politics, and leadership development.
Generated by AI, Edited by Humans
New research from Gloo and Barna Group’s State of the Church initiative will help churches navigate today’s toughest challenges.
Designed to help pastors lead effectively, the research identifies obstacles and opportunities for fostering thriving churches in a polarized world.
Key Insights from State of the Church
Politics and Pastoring: Only 20% of pastors feel equipped to lead discussions on politics and civic engagement. Nearly half (45%) identified this as their greatest area of inadequacy. While partisan political activities can cause tax-related troubles for tax-exempt churches and congregational tension, pastors and leaders needn’t feel helpless. Enter “Can Our Church Get Political?“—a free download from Church Law & Tax. This resource offers ideas and ways churches can engage in the political arena and reinforce their congregants’ civic duties.
Measuring Success: 92% of pastors prioritize depth of engagement over church size. Yet only 8% see attendance numbers as an effective measure of success.
Burnout Among Younger Pastors: Leaders aged 44 and younger report higher levels of mental exhaustion and pressure compared to older peers.
Leadership Development: Half of pastors (49%) believe their churches under-prioritize developing the next generation of leaders.
Trust in Leadership: 54% of churched adults rated their trust in church leadership as a 9 or 10 out of 10.
What is State of the Church?
The State of the Church initiative is the largest church-wide research effort slated for 2025. It equips faith leaders with monthly updates on trends, free assessments, and community sentiment dashboards. The latest findings address pressing themes like political engagement, pastoral burnout, and succession planning.
David Kinnaman, CEO of Barna Group, highlighted the stakes for leaders. “Today’s polarized cultural climate and the ongoing strain of political division place unprecedented pressure on pastors striving to lead effectively in a changing world,” Kinnaman said. “These cultural headwinds drive burnout, underscoring the urgent need for tools like State of the Church to help pastors—especially young leaders—navigate complex issues and foster unity.”
Brad Hill, chief solutions officer at Gloo, emphasized the importance of equipping leaders to support their congregations. “This latest research highlights that pastors can foster whole-life flourishing without feeling compelled to address every cultural issue. Supporting leaders is crucial for the long-term health of the Church,” he said.
What’s next from State of the Church?
In December, Gloo and Barna will release further research on how Christians approach relationships and discipleship within their communities. This exclusive data will be available on Barna Access Plus, a subscription-based library offering insights tailored to church leaders.
The housing allowance is the most important tax benefit available to ministers.
But many ministers do not take full advantage of it because they (or their tax adviser or church board) are not familiar with the rules.
What can church leaders do to help? Consider the following guidance.
Designating a housing allowance for ministers in church-owned parsonages
Ministers who live in a church-provided parsonage or manse can exclude from their income for federal income tax reporting purposes (1) the fair rental value of the parsonage, and (2) the portion of their compensation designated in advance by the church as a “parsonage allowance”—to the extent that it is used to pay for parsonage-related expenses such as utilities, repairs, and furnishings and does not exceed the fair rental value of the home (furnished, plus utilities).
Recommendation. If your pastor lives in a church-provided parsonage or manse, and incurs any out-of-pocket expenses living there (for example, for utilities or furnishings), then have the church designate a portion of the pastor’s 2025 compensation as a “parsonage allowance.” This should be done in December 2024 so that it will be effective for all of 2025. Parsonage allowances cannot be designated retroactively.
Example. Your youth pastor lives in a church-provided parsonage. He is expected to pay his utilities and provide his furniture. His compensation for 2025 will be $35,000. In its December 2024 meeting, the church board designates $3,000 of this amount as a “parsonage allowance.” The youth pastor has parsonage expenses of at least $3,000 in 2025 (for utilities and furnishings). At the end of the year, the church treasurer issues the youth pastor a W-2 reporting only $32,000 as church compensation. The parsonage allowance is not taxable (assuming that it was used for parsonage expenses) for income tax reporting purposes.
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Designating a housing allowance for ministers who own their home
Many ministers own their homes. The portion of their compensation that is designated in advance by the church as a “housing allowance” is not subject to income tax to the extent it is used for housing expenses and does not exceed the home’s annual fair rental value (furnished, plus utilities).
Recommendation. If your pastor owns a home, have the church designate a portion of the pastor’s 2025 compensation as a housing allowance. This action should be taken in December 2024 so that it will be effective for all of 2025. Housing allowances cannot be designated retroactively.
Key question. Who should designate the housing allowance? In most churches, it will be the governing board. But this is not always the case. Some church boards delegate this authority (and other compensation decisions) to a personnel or compensation committee. In other churches, the membership approves all compensation decisions at the annual business meeting. Whichever method your church uses, be sure that the allowance is designated in advance, and that the action is in writing.
Designation a housing allowance for ministers who rent a home
Many ministers rent their homes. The Apostle Paul did for a brief time during his ministry. Acts 28:30 states that “for two whole years, Paul stayed there in his own rented house.” Perhaps your minister is renting a home or apartment. If so, you should understand that the portion of your minister’s compensation that is designated in advance by the church as a housing or rental allowance is not subject to income tax to the extent that it is used for rental expenses and does not exceed the fair rental value of the home (furnished, plus utilities). See the above recommendations and tips for ministers who own their homes.
Determining the amount of the allowance
How does your church determine the appropriate amount for a parsonage, housing, or rental allowance? A common practice is for churches to provide their pastor with an “estimated expense form” prior to the end of the year. The pastor estimates likely expenses for the following year on this form, and returns it to the board or other body that designates housing allowances. The allowance is based on the pastor’s estimated expenses.
Tip. Sample expense forms are reproduced at the end of chapter 6 in the annual Church & Clergy Tax Guide. There are separate forms for computing parsonage allowances, housing allowances, and rental allowances. This is a simple and convenient way for your church to designate an appropriate allowance.
Tip. Your church should not be too conservative in designating a housing allowance. The pastor cannot exclude from taxable income an amount more than the church-designated allowance. So, your church may want to designate an allowance in excess of a pastor’s estimated housing expenses for the new year.
Tax reporting
Most churches reduce the pastor’s W-2 by the amount the church designated as a housing allowance. But remember that the allowance is not necessarily nontaxable for income tax reporting purposes. For ministers who own or rent their home, the allowance is nontaxable only to the extent that it does not exceed actual housing expenses or the annual rental value of the home (furnished, plus utilities). It is the minister’s responsibility to report any excess housing allowance as taxable income on his or her tax return.
IRS Publication 517 states:
You must include in gross income the amount of any [housing, rental, or parsonage] allowance that is more than the smallest of
Your reasonable salary,
The fair rental value of the home plus utilities, or
The amount actually used to provide a home.
Include this amount in the total on Form 1040, line 1. On the dotted line next to line 1, enter “Excess allowance” and the amount.
Example. At the end of 2024, a church board determined that Pastor T’s compensation for 2025 would be $50,000. It designated $20,000 of this amount as a housing allowance. At the end of the year the church treasurer issues Pastor T a W-2 that reports taxable income of $30,000 (salary less housing allowance). However, Pastor T only has $17,000 of housing expenses in 2025. As a result, taxable income is understated on his W-2 by $3,000. It is Pastor T’s responsibility to report this $3,000 as additional income on line 7a of Form 1040.
Church treasurers should be sure that their pastor is aware of this reporting responsibility. Many pastors erroneously assume that they can reduce their taxable income by the full amount of the church-designated housing allowance. This will be true only if the allowance is less than the pastor’s actual housing expenses and the annual rental value of the home (including utilities).
Amending the housing allowance
What if the housing allowance designated for your pastor turns out to be too low? For example, the pastor has to pay for unanticipated home repairs, or begins to prepay part of the home mortgage loan. Can the church amend the pastor’s housing allowance? Yes it can, but note that the amendment only operates prospectively—from the date of the amendment forward. For detailed information on the parsonages and housing allowances, see chapter 6 in the annual Church & Clergy Tax Guide.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Adobe Stock/Svetlana
IRS Offers Churches Another Chance to Correct ERC Errors
A second Voluntary Disclosure Program means churches have until Nov. 22 to review and correct ERC errors at a discounted rate.
The agency is urging any businesses—including churches—that claimed the ERC to review and self-correct claims at a 15-percent discount. Doing so will avoid future audits, penalties, and interest.
The reopening follows an initial VDP for pending claims that expired in March. VDP offers organizations a chance to self-correct and repay any credits received as a result of erroneous claims. In many cases, erroneous claims are rooted in aggressive marketing schemes hatched by unscrupulous third parties.
IRS going after incorrect claims
The IRS is in the middle of trying to reverse or recapture more than $1 billion in improper ERC claims.
More than 30,000 compliance letters have gone out, with thousands more going out later in the year.
“The limited reopening of the Voluntary Disclosure Program provides an opportunity for those with improper claims to come in ahead of IRS compliance work and get a discount on repayments,” said IRS Commissioner Danny Werfel. “This is especially important given increasing IRS compliance actions involving bad claims, many of them are the result of aggressive marketing tactics to lure unsuspecting businesses into claiming the complex credit. This provides a final window of opportunity for those misled businesses to make adjustments and avoid future compliance action by the IRS.”
The IRS is offering reduced and interest-free repayments under certain conditions, among other perks.
Who can apply
Businesses, tax-exempt organizations, and even government entities are eligible for the program. The program covers each tax period in 2021 that meets each one of the following requirements:
Your ERC claimed on a 2021 employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.
You now think that you were entitled to $0 in ERC.
You’re not under employment tax examination (audit) by the IRS.
You’re not under criminal investigation by the IRS.
The IRS has not reversed or notified you of intent to reverse all or part of your ERC. For example, you received a letter or notice from the IRS disallowing your ERC.
Other conditions apply. Click here to learn more. Meanwhile, an IRS FAQ page offers answers to common questions, such as how to enter the second VDP.
