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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 the business owner for Church Law & Tax.

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.

It is likely that Americans will file more than 160 million federal income tax returns this year.

As April 15 approaches, and ministers and employees nationwide prepare to send their filings, they may be surprised to learn they owe more taxes than expected. 

The reason? 

Their employing churches haven’t adopted and followed an accountable reimbursement arrangement.   

It sounds like a technicality. 

In some ways, it is. 

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 the business owner for Church Law & Tax.

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.

Dates: July 15-18

Location: Omaha, NE

Registration is now live. *Single day registration is available.

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.

BMWL National Nonprofit Conference

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.

Date: Check conference website for updates.

Location: Virtual

Registration cost: Check conference website for updates.

Church Compliance Conference

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

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.

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).


Start 2025 on a firm footing – become a Church Law & Tax member today!


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.

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.

The issue became murkier for churches after the US Supreme Court’s 2020 decision in Bostock v. Clayton County broadened the definition of “sex” under Title VII of the Civil Rights Act of 1964.

Since then, a handful of states have enacted laws mirroring language from the federal Religious Freedom Restoration Act (RFRA). More than half of the country’s states have now codified these protections.

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.

  1. Employment for foreign clergy. Enhanced vetting from Trump’s first term may return, impacting visa processes for clergy and religious workers.
  2. Church sanctuaries. The US Department of Homeland Security announced that schools and churches will no longer serve as “safe zones” for individuals illegally in the country.
  3. 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 the business owner 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.

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.

CPA Elaine Sommerville, who is also a Church Law & Tax Senior Editorial Advisor, offers her insights for mastering the 2025 tax season:

  • Filing requirements for January 31, 2025 to include payroll tax returns (Form 941), and W-2s.
  • Form 1099: reviewing vendor payments and verifying vendor information
  • 2025 payroll: ensuring everything is properly setup and ready to go for the year, including housing allowances and tax deposit requirements

Meanwhile, Sommerville covers a host of other beginning-of-the-year tasks including:

  • Contribution receipts preparation
  • Worker classification review
  • FICA/Medicare taxes for credentialed ministers
  • Update mileage rate reimbursement accounts to match newly established levels

Sommerville also mentions the importance of taking this time to review existing retirement plans to include:

  • Understanding how new laws are affecting plan documents and amendments
  • Determining whether it’s time to redefine acceptable hardship distributions
  • Addressing catch up provisions for those between the ages 60 to 63

Meanwhile, don’t forget to stop by the Church Law & Tax store and pick up a copy of our “2025 Clergy Tax Prep Guide” along with “Federal Reporting Requirements for Churches.” Both are available in PDF format.

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Church Budget: Balancing Salaries and Expenses Effectively

Discover how to manage salaries and expenses effectively to maintain a healthy church budget and financial flexibility.

Last Reviewed: February 6, 2025

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.

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.

Church Law & Tax Advisor Vonna Laue counts personnel costs among the four key expense ratios church leaders should monitor, and has said personnel costs (salaries plus benefits) should land anywhere between 40 percent and 55 percent of a church’s expenses.

Why These Ratios Matter

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.

Related Articles:

Related Resouces:

The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.

What Is Eligible for FSA Reimbursement? Understanding the Rules

Learn what expenses qualify for reimbursement from an FSA and how churches can ensure compliance with current rules.


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.

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. 


Make sure to pre-order a copy of the 2025 Church & Clergy Tax Guide (available both in PDF and book form) today!


The overtime pay rules

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 a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Matthew Branaugh is an attorney, and the business owner for Church Law & Tax.

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.

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.”


Download your FREE copy of “Can Our Church Get Political?” for pastors and church leaders, alike.


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.

For early access and additional resources, visit stateofthechurch.com.

To become a Church Law & Tax member, visit ChurchLawAndTax.com

Designating a Housing Allowance for 2025

Take advantage of the housing allowance, which is the most important tax benefit available to ministers.

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.

Tip. Use the form in “Sample Housing Allowance Resolution for Pastors.”

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.

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 IRS is offering churches a second chance to voluntarily disclose and correct COVID-era Employee Retention Credit (ERC) errors.

In a pair of releases issued in August (IR-2024-212 and IR-2024-213), the IRS announced the reopening of the Voluntary Disclosure Program (VDP) through November 22, 2024.

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.


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“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.

Can Church Disputes Be Resolved Without Going To Court?

Attorney and Senior Editorial Advisor Lisa Runquist shares what she’s learned in more than four decades of handling church disputes.

How often have you heard about church disputes, and thought, This could have been our church?  

Or you thought, This will never happen to our church?  

Most pastors and church leaders never anticipate such a situation—until it happens. 

After more than 45 years of helping churches find solutions to complicated problems, here are a few things I’ve learned:

They can be financial in nature

They can involve a moral failure of some sort

Church disputes can involve an internal power struggle

Church disputes can be rooted in how church property is used

It is wise to have an internal dispute resolution process

Mediation and arbitration are vastly different processes

Selecting the right mediator or arbitrator is crucial

Arbitration is not always an option

Arbitration is not always a requirement

Before seeking options for resolving church disputes, it may be helpful to first identify some of the common types. 

These include:

Financial disputes

Churches receive tithes and offerings.  These mostly end up in the general fund and are used for church expenses.  As long as the funds advance the religious purposes of the church, the expenditures are likely permissible.      

However, if funds are used in a way that does not clearly advance the religious purposes, a dispute may arise.  

Churches also raise funds for a specific purpose. Restricted gifts (also known as designated gifts) support initiatives like a building fund. They may also finance a special program such as assisting the poor and needy or buying new choir robes.

Unless there is some qualifying language (such as retaining ultimate control over the use of the funds even if contrary to the donor’s stated preferences, or allowing a percentage of the funds to be used for administrative costs), the funds raised for this purpose are to be used only for the same purpose. When they are not, conflicts may again arise.

Similarly, a person occasionally may make a separate donation apart from the regular offerings and include specified restrictions. These restrictions will have to be set forth in writing to be effective. For example, a donation to finance a new building might come with a naming restriction. Again, a church’s decision to use the donation contrary to the donor’s restriction will likely trigger a dispute.

Claims of moral failures 

This type of dispute has become increasingly common, especially in the areas of child abuse or sexual misconduct. 

In addition to a claim against the alleged abuser, the church may find itself sued on the basis that it did not exercise appropriate oversight or, when the matter was brought to its attention, the church failed to act.  

The alleged abuser might be an employee, a volunteer, or someone in a position of authority within the church, whether a senior leader or a lay leader. 

Disputes over who controls the church  

When there is a functioning corporate structure, this question is less likely to be raised. 

However, independent churches founded by individual pastors are susceptible to control-related disputes, even when there is a functioning corporate structure. That is because, quite often, the pastor has exercised full oversight of the church to include making (or approving) all major decisions, and dies without a clear succession plan in place. When this happens, the pastor’s family often takes over and, on occasion, uses the assets for their own benefit. 

But even when the family does not abuse the church’s assets, the question of who controls the church often ends up in court.

Using church property contrary to religious doctrine

Along with the issue of church control is the issue of ensuring the purpose of the church and its religious beliefs remain unchanged with any change of control.  

Similarly, there are also numerous churches that have had to face disputes arising out of changing social mores within their congregation. Even well-established hierarchical churches have found themselves in the middle of disputes involving such matters as the ordination of women, gay rights, and use of gender-specific bathrooms, that have sometimes resulted in church splits. 

Developing a dispute resolution process

There are several reasons to develop a method to resolve disputes before going to court. Lawsuits are both time-consuming and expensive. But even beyond this,  it is important to remember courts are not allowed to make decisions based on a church’s religious beliefs. Instead, courts can only resolve church disputes based on outside objective facts, without interpreting doctrine or polity. 


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For example, what do your articles and bylaws say? Do you have a hierarchy that can override the decision of the local church? If the matter is left up to the directors, then what happens when the dispute is with those directors? And even if you have set out a method of resolving church disputes, how can you assure that the individual involved in the dispute is bound by that method? 

If the conflict impacts the life and vitality of the church, and a church wishes to avoid the civil courts, it is recommended that there be a method of resolving the dispute in a manner that allows religious beliefs and doctrine to be considered. 

Civil courts defer to church-mandated dispute resolution

As civil courts will defer to a church-mandated dispute resolution procedure, every church should consider to whom they are willing to submit a dispute for a decision. 

This varies by church; there is no “one-size-fits-all” language that can be adopted. As part of this, the church will also want to consider how the approved method of resolution will allow both sides to feel that their concerns have been heard, regardless of whether the final resolution is to their liking. 

Many churches start with the position that any dispute will be settled by the church authorities, which may include the pastor, the elders, the directors, or, for hierarchical churches, the higher church authorities. 

But what if the dispute involves those authorities?

 In that case, a court is likely to find there to be too much of a conflict of interest and will allow a court action to proceed in lieu of following the church arbitration provisions.

Mediation v. Arbitration

One should not confuse “mediation” with “arbitration.” 

Although there are similarities, there is one huge difference: mediation is not binding unless both parties arrive at an agreement.  

With mediation, the mediator works to bring both parties together. It is likely that neither party will get everything it wants; however, since both parties must agree to the terms of the settlement, each party is likely to be somewhat satisfied. Unless and until the parties agree, the mediation ends with the dispute still pending.

Arbitration, on the other hand, allows the outside third party to hear both sides of the dispute, and then make a decision

The arbitrator will often try to encourage the parties to settle; however, if no settlement is reached, then the arbitrator’s decision will be binding. Depending on how the arbitration provision is drafted, this can either be a permanent decision, or it can be appealed to the court. Obviously, since the intention of this process is to avoid court if possible, making the decision of the arbitrator binding is often preferable.

How arbitration works

The parties may always agree to mediate a matter, since it is simply a more formal attempt to settle with an independent mediator. It can—but need not be—a first step before arbitration. However, for arbitration, there must be rules as to when a matter is to be submitted to arbitration. There must be rules as to when arbitration must be used, and about who is required to submit to it. There must also be rules about how the arbitrators are to be selected, and how the arbitration shall proceed. 

The church should include in its bylaws the process selected for arbitration.  

There are some professional associations, including the American Arbitration Association and the Judicial Arbitration and Mediation Services, Inc. (JAMS), which offer mediation, arbitration, and alternative dispute resolution (ADR) services. If your church selects one of these organizations, the organizations have their own rules and processes to follow, and it is not necessary to spell out the process so completely in your church’s bylaws. 

If your church decides to set up its own method of arbitration, it can also designate the people or organizations from whom the arbitrator(s) will be selected. 

Choosing the right mediator or arbitrator

In addition to setting out the process, the professional associations have their own mediators and arbitrators from which to choose. 

Many of the JAMS mediators and arbitrators are retired judges. However, the problem with professional mediation/arbitration associations is that their arbitrators only have experience settling non-church matters.

Should you find someone that has worked with churches, they probably lack experience working with your church or your religious beliefs. This may not be an issue with mediation, but an impartial arbitrator might need to be educated on the matter. This is because they may not understand how religious beliefs and doctrine come into play.

There are some professional mediators and arbitrators who have experience in settling church matters. But, they may be harder to locate.

If your church is a hierarchical church, it may already have a dispute resolution process. Even if it does not, you have an existing church community from which you may be able to select arbitrators who are already familiar with your beliefs and doctrines. If you are a congregational church that is part of a recognized convention of churches (e.g. a Baptist church), or if there are other similar churches with which you associate, you may consider requiring that the arbitrators be selected from such related church entities.  

However, as noted above, the arbitrator(s) selected cannot be interested in the dispute without running the risk that a court will later find that the arbitration was unfair.

Who decides?

With mediation, there should be agreement between the parties on the mediator to be used. 

With arbitration, both parties may agree on an arbitrator.  

However, if your church is not going to use a professional association, the most common method of selecting the arbitrator is for each party to select an arbitrator and to have those two arbitrators select a third. 

Then, either all three arbitrators can participate, or the third arbitrator selected can run the arbitration. This depends on your church’s process.  

As noted above, the church can limit the groups from whom the arbitrator(s) are to be selected. This is fine as long as there is no resulting conflict of interest. 

Who must submit to arbitration?

No one can be required to participate in binding arbitration without having agreed to the process in advance. 

For example, an employment agreement may require binding arbitration over a dispute between the church and a nonministerial employee.  

But how does a church bind its congregants?

If the individuals become members, they will normally agree, as members, to follow the doctrines and beliefs of the church. The would also agree to abide by the rules and regulations thereof.

However, for there to be such an agreement, these individuals need to know what these rules are upfront. Therefore, if arbitration is to be required in certain circumstances, they must be spelled out (e.g., any matters concerning finances of the church). The required method of arbitration must also be described.  

The harder situation is when the church has a congregation, but no members who have formally joined the church. In that situation, arbitration can be recommended, and the congregant can agree to be bound by the arbitration process. However, the congregant cannot be forced to do so. If they do not agree, then the court is more likely to entertain a lawsuit.

Lisa A. Runquist has more than 40 years of experience as a transactional lawyer, both with nonprofit organizations and business organizations.

Church Disaster Preparation as an Act of Stewardship

Church disaster preparation is more than just protecting the church from harm, it is about serving the community during recovery.

Every year from June 1 to November 30, church disaster preparation takes place from Brownsville, Texas to the Outer Banks of North Carolina, as leaders brace for the possibility of one or more hurricanes making landfall in their areas.

In 2023, Hurricane Idalia caused a combined $3.6 billion in damages in Florida, Georgia and South Carolina, according to the National Oceanic and Atmospheric Administration’s (NOAA) Office of Coastal Management, and between 1980 and 2023, hurricanes are the most destructive force of nature in the United States, causing more than $1.3 trillion in damage while averaging almost $23 billion per storm, and accounting for almost 7,000 deaths.

Image courtesy NOAA showing weather and climate-disaster icons located throughout a map of the United States.

*Infographic courtesy NOAA.

Therefore, when a hurricane cuts a path of destruction through a community, God’s church is in a unique position to meet both physical and spiritual needs, assuming the church is on a good footing to do so.


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The below three articles, originally prepared and recently reviewed by Jamie Aten, founder and co-director of the Humanitarian Disaster Institute at Wheaton College, will put your ministry in a position to respond well should a hurricane—or other disaster—strike your community.

Can Getting Political Affect Our Church’s Tax Status?

Before you decide to get political, use this checklist to determine how it might affect your church’s tax status.

Some pastors and church leaders want to see their church take a stand on a certain issue or candidate during an election year but aren’t sure how it might affect their church’s tax status.

Others might hesitate, wondering whether taking a stand is the right decision, both from a spiritual and governance standpoint.

Either way, section 501(c)(3) of the tax code has something to say about tax-exempt churches that engage in political activities and speech, along with penalties for churches that run afoul of the rules, including the revocation of the church’s tax status.

While few public examples exist of the actual enforcement of these rules over the years by the Internal Revenue Service (IRS), churches and church leaders still should understand the prohibitions and limitations, including any potential tax consequences triggered by them.

Resources for pastors and church leaders

This free, easy-to-understand quick reference guide is designed to help churches and church leaders make informed decisions on what they can, and cannot, engage in on the political front.

Download it here, and share it with other church leaders.

Meanwhile, dig deeper on religious freedom in the United States with our carefully curated recommended reading section on the topic.

For pastors and church leaders thinking of engaging in political discourse on their social media feeds, give this 10-point checklist a look.

Emotions often can run high whenever political issues arise. These tools are designed to help pastors and church leaders navigate the volatility and make certain any decisions they make—in response to how they believe God has called them to act—are informed ones.

Church Law & Tax Bought By Gloo Family of Brands

Church Law & Tax has been bought by the Gloo family of brands along with sister site, ChurchSalary. The deal closed May 1, 2024.

Church Law & Tax has been bought by the Gloo family of brands.

Gloo purchased Church Law & Tax’s website and its vast array of print and digital resources from Christianity Today International. The acquisition also includes Church Law & Tax’s sister site, ChurchSalary.

The deal closed May 1, 2024. Financial terms were not made public.

“We are incredibly excited to welcome both Church Law & Tax and ChurchSalary into the Gloo family of brands,” said Brad Hill, Chief Solutions Officer at Gloo. “Both organizations have a proven track record of delivering exceptional value to church leaders. By integrating their capabilities into the Gloo portfolio of offerings, we can serve more church leaders in even more comprehensive ways, ultimately helping their organizations thrive.”

The acquisition positions Church Law & Tax to build on almost five decades of serving churches and church leaders.

What the acquisition means for members

Church Law & Tax’s Advantage Members and Basic Members will receive uninterrupted access and benefits to ChurchLawAndTax.com and ChurchLawAndTaxStore.com.

Additionally, efforts are already underway to offer Church Law & Tax members access to Gloo+, a powerful text-messaging platform for churches, and Gloo Marketplace, a church leadership resources platform. Gloo serves about 70,000 church leaders nationwide through its products and services.

“Gloo’s rapidly expanding abilities to unite and inform churches through its powerful technology platforms position Church Law & Tax to serve churches for decades more,” said Matthew Branaugh.

Branaugh joined Church Law & Tax in 2008, and has helped lead day-to-day and strategic operations for most of that time. He will become Church Law & Tax’s business owner at Gloo.

Richard Hammar, Church Law & Tax’s co-founder and senior editor, will continue his writing and research. Along with operating ChurchLawAndTax.com, Church Law & Tax publishes Hammar’s annual Church & Clergy Tax Guide and Pastor, Church & Law, Fifth Edition. The business also features online training, including Safeguarding Your Church’s Finances and Reducing the Risk: A Child Sexual Abuse Awareness Program.

Rick Spruill joined Church Law & Tax as managing editor in 2022. He will become Church Law & Tax’s digital content manager at Gloo.

Aaron Hill will continue leading ChurchSalary as business owner.

Fed Raises Minimum Salary Requirements For Exempt Status

New minimum salary requirement from DOL would make significant changes in 2024 and beyond.

Last Reviewed: November 18, 2024

Editor’s Note: On November 15, 2024, a Texas federal court vacated the US Department of Labor’s 2024 minimum salary requirement changes for exempt employees and overtime pay. The change that took effect on July 1, 2024, is no longer valid, and future scheduled ones will not occur. This means the minimum salary requirement in effect before July 1, 2024—$684 per week, or $35,568 per year—is in effect again. Follow Church Law & Tax for updates.

The US Department of Labor (DOL) raised the minimum salary requirement under the Fair Labor Standards Act (FLSA) from $684 per week to $844 per week as of July 1, 2024, with another change set to take effect on January 1, 2025—and future increases set to happen every three years thereafter.

Brief history of FLSA

FLSA became law in 1938 and was the first federal regulation of employment practices to withstand a Supreme Court challenge. 

It eliminated most child labor practices and established a minimum wage ($.25 per hour) and minimum weekly salary of $100 in order to be exempt from overtime pay.

FLSA required overtime pay for nonexempt workers that put in more than 44 hours in a week. That standard dropped to 40 hours a couple of years later.

Meanwhile, the minimum salary requirement for exempt status has changed many times through the years. It last changed in 2020 from $455 to $684 weekly.

New minimums phase-in 

The new regulations establish the minimum salary at the 35th percentile of full-time salaried workers in the lowest wage Census region, which is $1,128. 

Because the new minimum represents a significant increase over the previous minimum of $684, the DOL opted for a phased-in approach.

  • Phase 1: $844 per week (equivalent to $43,888 per year) on July 1, 2024. 
  • Phase 2: $1,128 per week (equivalent to $58,656 per year) on January 1, 2025. 

After that, the minimum salary will change every three years on July 1, starting in 2027. 

Note: The minimum salary for exempt status applies for part-time employees. In simpler terms, the minimum salary for exempt status applies whether an employee works one hour or 40 hours. 

Increases for highly-compensated individuals

The salary thresholds for highly compensated classification also increased from $107,432 to $132,964 (for 2024) and $151,164 for 2025.

What this means for churches and church leaders

All churches should immediately evaluate all positions and determine which positions are subject to the ministerial exception. That is because ministerial exception positions (clergy, pastors, ministers, and others with spiritual duties) are exempt from all labor laws, including federal and state minimum wage and overtime laws. 

From there, a church must determine what positions may change from exempt to nonexempt under the new minimum salary test. The church must act quickly regarding positions with compensation of less than $844 per week, or $43,888 annually. The church must either re-classify these workers as nonexempt or increase their compensation to $844 per week or $43,888 annually.


If you’re a Church Law & Tax member but haven’t yet spent time in Frank Sommerville’s 6-part series on church employment best practices, now is a good time to go through it.


Many churches err by classifying workers as exempt when they fail the duties test. Churches should also use this opportunity to review all their exempt positions to confirm that they otherwise qualify for their exempt classification.

Remember, the ministerial exception classification is entirely independent of the worker’s classification for income tax purposes. For example, a children’s ministry director may not qualify as a minister for income taxes because he/she does not possess a ministerial credential. However, the children’s ministry director qualifies for the ministerial exception for employment laws. 

Schools (K-12) should note that school teachers and school administrators are not subject to the minimum salary test. 

The church should discuss with an employment law professional to determine whether a preschool or daycare center qualifies as a school for employment laws.

The other standards for exempt status remain unchanged. These standards include that the employee must be compensated by salary that may not vary based on the number of hours worked. The worker must perform specific duties as defined by the Department of Labor. These duties tests include Executive, Administrative, and Professional duties. The defined duties must represent the workers’ primary duties. The Department of Labor will make the determination based on the totality of the circumstances. 


Elaine Sommerville’s “Church Compensation: From Strategic Plan to Compliance” covers FLSA classification in great detail. Advantage Members enjoy 20% off this important reference work for church leaders.


Important Caveat

Many business groups have filed a suit to block previous increases in the minimum salary.

New lawsuits are expected to challenge this latest increase. Some uncertainty will exist until the increase is implemented. Church administrators need to monitor the status of this proposed increase, but should still plan to implement the changes to comply with this new announcement.

Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.

Iowa, Utah, and Nebraska Pass Religious Freedom Restoration Acts

More than half the country’s states possess laws addressing free exercise protections for individuals, churches, and religious institutions.

Last Reviewed: January 27, 2025

Editor’s Note: This article has been updated to include laws passed in Nebraska and Utah.

Iowa, Nebraska, and Utah adopted “Religious Freedom Restoration Acts” in early 2024, meaning more than half of the country’s states now have enacted such laws throughout the past three decades—seven of them since 2021 alone. 

Iowa’s statute is intended “(t)o restore the compelling governmental interest test and to guarantee its application in all cases where the free exercise of religion is substantially burdened by state action.”

Nebraska adopted the “First Freedom Act,” which also prohibits state actions from substantially burdening free exercise rights unless a compelling governmental interest exists and the action is crafted in the “least restrictive” way possible.

Utah’s statute also follows a similar standard, noting the “free exercise of religion as a fundamental right.” 

Individuals, churches, and religious institutions in these states can seek these protections when they believe their free exercise rights under the US Constitution have been substantially burdened by government actions at the local or state levels.

The laws resemble federal Religious Freedom Restoration Act

The wording in each of the states’ laws echoes language used in the 1993 Religious Freedom Restoration Act (RFRA).

The federal act, passed nearly unanimously, came in response to a controversial US Supreme Court decision.

The Court’s 1990 ruling in Employment Division v. Smith established a lower judicial standard for reviewing neutral, generally applicable laws, even when those laws substantially burden religious exercise. The resulting effect was a harder legal path for religious parties to defend their free exercise rights, prompting Congress to respond.


Read more about the state and federal Religious Freedom Restoration Acts as an Advantage Member.


Another Supreme Court decision in 1997 determined that RFRA could only apply to federal government agencies and actors. In response, states began adopting their own versions to address local- and state-level situations. 

Several RFRAs since 2021

In 2021, South Dakota and Montana passed RFRAs, while in 2023, North Dakota and West Virginia did the same. 

South Dakota, North Dakota, and West Virginia’s RFRAs also added language prohibiting state and local governments from restricting religious activities more than secular parties—an issue triggered by restrictions and executive orders during the COVID-19 pandemic that in some instances appeared to unfairly treat churches and ministries.

In response, the Supreme Court ruled restrictions imposed on churches violate the First Amendment unless they are uniformly applied to businesses and secular organizations. 

Nebraska included pandemic-tied language similar to South Dakota, North Dakota, and West Virginia. Neither Iowa nor Utah did.

In 2005, Utah adopted a religious land-use act designed to offer churches RFRA-like protections in property-related matters. Utah state representative Jordan Teuscher, the floor sponsor for the bill ultimately passed, said the law was “an important expression of Utah’s long-established commitment to religious freedom” due to “a world that’s increasingly hostile to religion,”  according to the Deseret News.

Kim Reynolds, Iowa’s governor, said her state’s law became necessary as well.

“Thirty years ago, the Religious Freedom Restoration Act passed almost unanimously at the federal level,” Reynolds said in a statement. “Since then, religious rights have increasingly come under attack. Today, Iowa enacts a law to protect these unalienable rights—just as twenty-six other states have done—upholding the ideals that are the very foundation of our country.” 

In all, 28 states have religious freedom laws on the books. Ten states do not. The remaining states rely upon past court decisions for determining the standards with which to evaluate a religious freedom claim.

Matthew Branaugh is an attorney, and the business owner for Church Law & Tax.

Asked, Answered: The Clergy Allowance and Part-Time Ministers

Do part-time ministers qualify for the clergy housing allowance? Matt Branaugh helps you answer hat critical question.

Church Law & Tax members often ask us whether their part-time pastor or minister qualifies for the clergy housing allowance.

In this brief video, Matt Branaugh walks members through the five-factor test the Internal Revenue Services uses to determine whether a part-time minister qualifies for the clergy housing allowance.

The good news? It’s not as complicated as it seems.

Take a look:

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Of course, there are many facets to the housing allowance, and we’ve spent years unpacking all of them. It’s why you should bookmark our curated Recommended Reading page on the housing allowance for future reference.

The housing allowance is also extensively covered in Elaine Sommerville’s updated Church Compensation – From Strategic Plan to Compliance, available now at ChurchLaw&TaxStore.

Asked, Answered: The Importance of Governing Documents

Matt Branaugh reminds church leaders what they need to be looking for when it comes to church governing documents.

Does your church have governing documents? If you’re a pastor, do you know where those documents are located?

It’s a question every pastor and church leader should ask, and it’s the topic of this Asked, Answered from Church Law & Tax’s Matt Branaugh.

The topic bubbled to the surface recently in the ongoing controversy at Immanuel Baptist Church in Little Rock, Arkansas, where the absence of governing documents such as a corporate charter, constitution, or bylaws has complicated things for the 132-year-old church that is part of the Southern Baptist Convention.

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Church Law & Tax members enjoy plenty of access to resources on this topic, including:

For Basic and Advantage Members: Richard Hammar explains the basics of church bylaws.

Meanwhile, Advantage Members get 20 percent off Hammar’s Church Governance – What Leaders Must Know to Conduct Legally Sound Church Business when purchased through the Church Law & Tax Store.

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