1) Will churches get more leeway to support or oppose political candidates?
We don’t know just yet.
The fate of a proposed statement from the Internal Revenue Service (IRS) regarding churches and their activities involving political candidates likely will get decided in 2026.
The statement, included with a proposed settlement in a lawsuit against the IRS, suggests churches as tax-exempt entities should enjoy more latitude when it comes to supporting or opposing political candidates—a major departure from tax-exempt regulations in place for decades.
The development caused controversy, and the federal judge in the case is mulling whether to approve the settlement.
If he approves it, the IRS has already prioritized work in 2026 to revise its guidance.
2) The “church autonomy doctrine” expands.
The long-standing “church autonomy doctrine” generally bars civil courts from resolving internal church disputes that involve faith and doctrine.
It may further expand as a defense for churches after two recent federal court decisions.
- In October 2025, the US Court of Appeals for the Fifth Circuit said a lower court properly dismissed a lawsuit filed against a missions organization by its former executive director—and cited the doctrine as the reason.
- Separately, through an early January 2026 decision, the US Court of Appeals for the Ninth Circuit specifically recognized the doctrine as a defense in employment claims. The court said a Washington-based Christian ministry can apply the doctrine to justify employment decisions it makes for nonministerial employees when they are based solely upon religious beliefs.
3) Changes to the US Postal Service (USPS) postmarking processes.
A few weeks ago USPS changed the way it postmarks first-class mail—significantly affecting postmark-dependent legal- and tax-related matters.
According to USPS, postmarking now will be handled by regional offices, not local ones, which will delay postmark dates.
This is critically important for church leaders.
Postmarks are used to determine whether legal filings and correspondences are made on time.
Additionally, the Internal Revenue Code contains a “mailbox rule” that relies upon postmarks for determining timely filings and compliance.
Later postmark dates can affect anything ranging from court filings, to IRS reporting requirements, to donor checks sent around the end of the calendar year.
Church leaders should consider using certified mail, requesting manual postmarks at the local USPS office, or possibly securing alternative mail services to ensure timely postmarks.
4) More clarity about the One Big Beautiful Bill Act (OBBBA).
The IRS is prioritizing guidance and updates for OBBBA-related items in 2026.
That includes reporting tips and overtime wages, excess compensation paid by tax-exempt entities, and more.
STAY INFORMED. The 2026 Tax Prep Guide for Churches & Clergy covers all OBBBA-related developments affecting churches, clergy, and employees. The online Church & Clergy Tax Guide has been updated—and will remain updated as changes unfold throughout 2026. Get access to it all today as an Advantage Member, along with our annual early-year, on-demand webinar with CPA Elaine Sommerville.
5) Continued shaping of the “ministerial exception.”
The “ministerial exception,” a subset of the church autonomy doctrine, also continues to evolve since the US Supreme Court’s unanimous 2012 decision recognizing it. This doctrine, based upon the First Amendment, allows houses of worship to hire and fire ministers without interference from civil courts. Key decisions last year continued to shape it—setting the stage for more in 2026.
In 2025, New York’s highest court said the doctrine applied to a religious school teacher fired for a blog post she published, while a lower-level New York court said the ministerial exception did not apply to hostile work environment claims brought by teachers against a Catholic school and its principal.
Elsewhere, a Louisiana federal district court used the doctrine to dismiss a priest’s discrimination and defamation claims.
WATCH: Learn more from Matthew Branaugh, attorney and editor for Church Law & Tax, about the ministerial exception.
6) Worker classifications.
Churches must make sure they properly classify individuals as employees or independent contractors—or else face hefty penalties. Several cases decided last year, including one involving the ride-sharing app Lyft, revealed how expensive misclassifications can run. Lyft paid the state of New Jersey nearly $20 million after misclassifying 100,000 people as independent contractors.
7) Payroll tax compliance.
Churches must verify payroll taxes are correctly paid, whether directly or through a third-party payroll service, or face significant liability (see “Employment Taxes” in our online Legal Library).
A former certified public accountant from Texas was found guilty of payroll tax fraud in 2025 after withholding taxes from employee wages, but never paying them to the IRS, according to Thomson Reuters.
Remember, churches must withhold income, Social Security, and Medicare taxes from employees’ wages, but do not withhold Social Security or Medicare taxes from ministerial wages.
8) Substantiating noncash donations remains crucial.
A recent US Tax Court decision denied a couple’s ability to deduct nearly $200,000 in noncash charitable contributions, largely because they did not provide substantiation regarding how, when, and at what value they acquired the personal property—and the person they used to appraise the property’s value when they donated it did not meet statutory and regulatory requirements for an appraiser.
LEARN MORE: Advantage Members have access to the onlineChurch & Clergy Tax Guide, which goes deeper into noncash charitable contributions, including substantiation requirements and the required IRS form to complete.
9) Religious freedom issues persist.
Religious freedom issues continue to spring up locally and nationally. These recent headlines illustrate how:
- President Trump created the Religious Liberty Commission.
- The Wisconsin Supreme Court rebuffed an effort by the state’s department of justice to strip tax exemption for all religious entities (on the heels of the US Supreme Court’s unanimous decision against the state’s attempt to deny an unemployment tax exemption to a Catholic charity).
- Street preachers in Florida unsuccessfully challenged a city noise ordinance.
- The Kentucky Supreme Court said the denial of a permit to construct a religious shrine did not violate the Religious Land Use and Institutionalized Persons Act (RLUIPA).
- The state of Indiana filed a motion and a supporting brief in federal district court seeking to have a monument including the Ten Commandments relocated back on statehouse grounds. The state argues the US Supreme Court’s 2022 decision to evaluate Establishment Clause cases based upon “historical practices and understandings … consistent with the understanding of the Founding Fathers” supports its case.
Church Law & Tax will track these issues—and many more—throughout 2026. Be sure to sign up for the free weekly e-newsletter to keep up.
Or, become a member today and enjoy our slate of webinars, including our annual early-bird webinar featuring expert advice and insights on 2026 tax readiness with CPA Elaine Sommerville.
Presentation slides: