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Why That “Gift” to Your Pastor Requires Caution

Church congregations naturally see giving gifts to pastors as a blessing. But there are some critical tax considerations.

Matthew Branaugh, Attorney and Editor
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Q: We are giving our pastor and wife of 40 years a cruise. Is this gift taxable to them?

It’s great your church wants to do this. But caution is needed—at least two significant issues are triggered when churches give gifts to ministers.

A gift poses potential income tax consequences for the pastor. It also raises concerns about reasonable compensation.

Chapter 12 of Church Law & Tax Senior Editorial Advisor and CPA Elaine Sommerville’s Church Compensation, Second Edition, does an excellent job of explaining the tax and reasonable compensation issues surrounding gifts:

Where the church pays directly to a minister or an employee, the amounts are not gifts, according to the Internal Revenue Code. This classification includes any payment of cash or transfer of a noncash item unless it is a qualified employee achievement award or a small de minimis item. (emphasis added)

In chapter 2 of her book, Sommerville also notes concerns related to excess benefit transactions, in which a person with presumed influence receives a benefit valued above a reasonable range of compensation for his or her position. An excess benefit transaction occurs “when a church pays a worker more than is reasonable for the services rendered, or when the church fails to report a taxable fringe benefit.”

The penalties for an excess benefit transaction are severe, both for the recipient (the pastor) and the church.

Retirement gifts

Church leaders also often ask whether the analysis changes for a gift when it involves a pastor who is retiring. Unfortunately, the answer is usually no.

Sommerville notes: Confusion arises when working with retirement gifts. An old IRS revenue ruling states it is possible that a gift to a retiring minister may not be taxable (Rev. Rul. 55-422, 1955-1 CB 14). (The revenue ruling has never formally been made obsolete by the IRS.) The ruling is often cited to support a tax-free retirement gift, but its application has changed with the 1986 change to the definition of a gift in the Internal Revenue Code. Since employers may not give a tax-free gift to an employee, a retirement gift may not be a tax-free payment. (emphasis added)

Also note that how a church collects, handles, and distributes funds matters a great deal in how any special-occasion gifts are analyzed. This article dives deeper into why.

Final point

Lastly, in very limited instances, there may be times when a gift associated to a retired pastor may not cause taxable income. A 2018 Tax Court ruling about a pastor who received monetary gifts from church members included an analysis discussing prior federal court decisions involving former ministers who received gifts from their former congregations that did not trigger income tax liability for the ministers.

Attorney and senior editor Richard Hammar, in reviewing the 2018 Tax Court decision, noted that gifts to a retired pastor may not be taxable when specific facts and circumstances are involved. Regarding one of the federal cases cited by the Tax Court (Schall v. Commissioner, 174 F.2d 893 (5th Cir. 1949), Hammar made this observation about the Fifth Circuit court’s analysis and its reason for concluding the gifts were not taxable: “[The pastor] made no request of the congregation that any amount be paid to him after his resignation, and he had no knowledge that the church would agree to do so. He did not agree to render any services in exchange for the gift and in fact did not do so.” 

While the 2018 decision is insightful, churches still should evaluate their situations carefully, preferably in consultation with qualified local tax counsel, before reaching a similar conclusion.

Similarly, as noted above, for gifts involving employed pastors, it’s strongly recommended churches retain qualified local counsel to assist them with the income tax treatment of those gifts.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
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Get Answers to Your Church’s Most Pressing Employment Law Questions

On-Demand Webinar: Attorney and CPA Frank Sommerville addresses key questions—including yours—about churches as employers.

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Every day, churches face a variety of employment issues. Many questions arise regarding employee classifications, overtime regulations, workplace accommodations, hiring and firing protocols, etc. It seems as if the list is endless.

Though the list is long, church leaders can also avoid many of the most pressing and common employment issues that face their congregations. In this exclusive webinar for Advantage Members, you’ll learn helpful information that will assist you in preparing answers to these frequently asked questions.

Senior editorial advisor for Church Law & Tax, attorney Frank Sommerville, provides insight into Title VII and FLSA in light of their impact on churches, as well as answer employment-related questions submitted by Advantage Members.

Watch now and learn how to address employment matters your church faces.

Speaker:

Frank Sommerville | Attorney

Reading & Resources: 

Download the resources and templates mentioned in this webinar below. Or read one of the articles to get a handle on the basics of developing fair compensation in your ministry.
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Meetings Matter: A Crash Course for Church Leaders

On-Demand Webinar: Quick tips and insights for effectively running anything from a board meeting to a congregational meeting.

Sarah E. Merkle, Attorney
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Editor’s note. This video is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

Church meetings play a crucial role in the life of the church. Yet leaders rarely receive training to help them organize and run meetings crucial to their ministries’ directions. The lack of preparation can unintentionally cause problems—or worse, conflict.

Attorney Sarah Merkle helps churches, ministries, and nonprofits get organized and ready for meetings. In this webinar recording for Church Law & tax advantage members, Merkle provides a crash course on meeting leadership that will help leaders improve their skills fast.

Through case studies and examples, Merkle demonstrates how your church can make its next board meeting productive and fruitful. Learn how to create effective agendas, set meeting orders, make and discuss motions, take minutes, and more by watching this recording now.

Download the presentation slides:
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Reading & Resources: 

Download other resources and templates mentioned in this webinar below. Or read to learn more about this important topic:

Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
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Mastering Meeting Basics

A five-part series providing simple and straightforward guidance to church leaders.

Sarah E. Merkle, Attorney
Bio

Church business meetings take place any time church members, boards, or committees get together to conduct official church business—from annual member meetings to weekly or periodic board or committee meetings where votes are taken and decisions are made.

This five-part article series is designed to provide simple and straightforward guidance to church leaders on parliamentary procedure and best practices for business meetings.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
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Advantage Member Exclusive

Retirement Planning for Pastors and Staff

On-Demand Webinar: Setting successful strategies as your church’s workforce ages.

Elaine L. Sommerville, CPA
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Editor’s note. This video is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

In America, the retirement boom has begun. Yet statistics from annuity.org and elsewhere indicate that most Americans are not financially ready for it.

Unfortunately, this trend rings true in churches as well. But this doesn’t have to be the case. With a little forward thinking, churches can set their pastors and staff up for success during the retirement years.

In this webinar featuring CPA Elaine Sommerville, you will learn what to do–or not do–as your workforces age. Watch now to gain an overview of plans that can assist pastors and staff members with setting aside retirement funds, as well as critical considerations they must make regarding housing, spouses, health insurance and Medicare, and life insurance.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
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Can Churches Assist with Medicare Premiums for Eligible Employees?

Churches must understand several rules and factors when it comes to medicare premiums for eligible employees.

Elaine L. Sommerville, CPA
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Can churches assist with medicare premiums for eliglible employees?

It’s an important question as aging workers stay in the marketplace longer than in past years.

As a result, churches are facing—or will face—the question of how to handle health insurance coverage for employees reaching Medicare eligibility. Upon reaching Medicare eligibility, a person’s health coverage becomes a maze of options for both the employer and the employee.

Churches often desire to encourage an employee to leave a group health-care plan and enroll in Medicare to take advantage of cost savings. Many times, the employee also desires this path because it is less expensive than his or her portion of the cost of the church’s group health-care plan. When discussing Medicare as a health-care option, the topic of the church’s ability to assist with Medicare-related premiums invariably comes up.

While employers may not pay Medicare premiums directly for active employees, they may in some circumstances establish reimbursement plans for the related costs. However, employer assistance with these costs requires great caution and an understanding of multiple, little-known laws.

Navigation of this complex subject is dependent on several factors requiring skilled analysis and well-thought-out planning. The analysis is intricate and easy to misstep. The purpose of this article is to raise awareness of the rules involved and assist a church in knowing when to seek guidance from a benefits professional.

Rules to consider in the analysis

There are two primary sets of rules to consider when deciding whether to assist an employee with Medicare-related premiums and supplemental coverage.

The first is the Affordable Care Act (ACA). Created in 2010, most churches are now accustomed to navigating the ACA’s intricate rules relating to health-care coverage.

The second set of rules, which is not as familiar to church employers, is the Medicare Secondary Payer (MSP) rules.

The ACA and Medicare

Medicare is not a group health-care plan under the ACA, so Medicare reimbursements or payments are considered reimbursements of an individual health insurance plan. Therefore, if a church agrees to pay an employee for Medicare premiums, it is reimbursing an individual health insurance plan. If a church has more than one employee, then the provisions of the ACA kick in, and those provisions generally prohibit the reimbursement of individual health insurance premiums.

Understanding QSEHRA and ICHRA

Learn more about these two HRAs in “Churches Can Once Again Reimburse Employee Health Care Costs” by attorney and senior editor Richard R. Hammar.

In the past few years, two avenues have been approved that allow employers to provide for individual health insurance coverage. These avenues are specific versions of health reimbursement arrangements (HRAs): the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or the Individual Coverage Health Reimbursement Arrangement (ICHRA).

Both HRAs have specific qualifications and operating rules. Reimbursing individual health insurance premiums outside of a qualifying HRA creates an employer-paid health plan subject to the ACA’s penalty of $100 per day ($36,500 per year) per employee.

Additional ACA rules apply to employers with 50 or more full-time equivalent employees because they must offer group health insurance to all full-time employees.

Medicare Secondary Payer rules

Outside of the ACA rules, any arrangement involving Medicare and employees must also comply with the MSP rules. No one should be surprised to learn that the government does not approve of employers transferring their insurance responsibilities to the government. MSP rules define when Medicare can be the primary payer versus when the federal government insists that Medicare operate as a secondary payer behind other employer-provided insurance plans covering active employees.

For an employer with 20 or fewer full- or part-time workers that offers group health insurance plans, MSP rules allow greater latitude in working with employees eligible for Medicare. Medicare rules require an employee to enroll in Medicare when eligible and Medicare serves as the primary payer of medical needs.

But the provisions clearly state that employers of 20 or more employees may not actively encourage or compensate employees for exiting their group health plan in favor of Medicare. The employer must offer the same health-care benefits to those 65-and-older employees that they do to employees under 65. A church’s group health plan must be the primary payer and Medicare the secondary payer. While an employee may choose to exit the group health-care plan in favor of a Medicare option, the employer may not compensate or reward the employee for this decision.

Note. An employer meets the 20-or-more-employee requirement when an employer has 20 or more full-time and/or part-time employees for each working day in each of 20 or more calendar weeks in the current or preceding year.

Potential solutions

So, what are a church’s options for employees who desire to enroll in Medicare?

Churches with fewer than 20 employees that offer group health insurance

A church with fewer than 20 full- or part-time employees (as defined above)—and that offers group health insurance not consisting solely of benefits excepted from the ACA rules—may take the following steps:
  • establish a group health insurance plan for employees not eligible for Medicare; and
  • create an integrated health reimbursement arrangement for those employees enrolled in Medicare Part A and Part B or D that reimburses the premiums the employee pays for Medicare Parts B and/or D only. (This is a specifically authorized method of integrating this type of HRA into an employer’s group health plan.)

Churches with fewer than 50 employees not offering group insurance

A church with no more than 49 full-time equivalent employees and not offering group health insurance may consider establishing an ICHRA or a QSEHRA (see above sidebar). Both types of HRAs may reimburse individual health insurance premiums and the employee’s benefits may be used to pay for Medicare Parts B, C and/or D. However, these plans may not be limited to simply covering Medicare premiums and must comply with nondiscrimination rules.

Churches with 20 or more employees offering group insurance

For employers that offer group coverage and meet the 20-employee rule above, compliance with MSP rules is more challenging. To comply, the health-care options offered to qualifying employees and their spouses (if applicable) may not differ based on whether or not employees are eligible for Medicare. Any HRA must comply with ACA rules. The interplay of these rules makes it difficult—if not impossible—to create a plan providing for the reimbursement of Medicare-related premiums for active employees.

Employer size is the determining factor

In summary, an employee may enroll in Medicare when he or she becomes eligible and may still participate in his or her employer’s group health plan—or choose to leave the employer’s plan.

However, the size of the employer determines which plan provides primary coverage for health expenses and which one provides secondary coverage, and it determines the options available (or not) for the employer to reimburse costs.

Assisting employees with Medicare-related premiums should only be undertaken when a church has actively sought the assistance of a benefits professional skilled in working with these specific rules. Churches and employees may also find assistance through a State Health Insurance Assistance Program (SHIP) that provides free health insurance counseling services. Locate a local SHIP by visiting shiphelp.org or by calling (toll-free) 1-800-633-4227.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
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Downloadable Checklist: How Various Political Activities Might Affect Your Church’s Tax-Exempt Status

Which political activities may affect your church’s tax-exempt status, based on IRS guidance.

From the editors of Church Law & Tax

Last Reviewed: April 25, 2024

Election years frequently prompt a common question among church leaders and pastors: What types of political activities and speech are allowed under section 501(c)(3) of the tax code?

While political activities and speech by churches and pastors are protected by the US Constitution’s First Amendment, the Internal Revenue Code contains specific language that either prohibits or limits certain activities conducted by tax-exempt entities. Violations can lead to excise taxes, the revocation of federal tax exemption, or both. While few public examples exist of the 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 any violations may trigger.

This chart provides a variety of examples of political activities churches might wish to do and briefly details the related IRS guidance, including the potential effects of those activities on a church’s tax-exempt status. The goal is to provide a quick reference for church leaders that helps them make informed decisions.

To go deeper on these issues, don’t miss “The Tax Implications of Churches and Political Involvement,” by attorney, CPA, and senior editor Richard R. Hammar, and “Churches, Politics, and Constitutional Protections,” by attorney Erik Stanley on ChurchLawAndTax.com’s Recommended Reading page.

ACTIVITY

IMPACT ON TAX- EXEMPT STATUS

BASIS

A church makes contributions to a candidate’s campaign fund

Prohibited

IRS Publication 1828

A church makes public statements of position (verbal and written) in favor of or in opposition to candidates for office through official church publications, at official church functions, or both

Prohibited

IRS Publication 1828

A church’s pastor delivers a sermon series addressing what the Bible says about abortion, criminal justice reform, sexual orientation and gender identity, and other topics with social and spiritual implications

Permitted

First Amendment of the US Constitution

A church provides a nonpartisan forum for all candidates to address the church

Permitted

IRS Publication 1828

A church invites all candidates for a political office to address the congregation and informs the congregation before each candidate’s speech that the views expressed are those of the candidate and not the church, and that the church does not endorse any candidate

Permitted

Revenue Ruling 74-574; IRS Publication 1828

A church invites only one candidate in a political campaign to address the congregation

Prohibited

Revenue Ruling 2007-41; IRS Publication 1828

A church provides an opportunity for a candidate to speak in a noncandidate capacity (for example, as a member of the church, public figure, or expert in a nonpolitical field) without providing equal access to all political candidates for the same office. The church ensures that the candidate speaks in a noncandidate capacity; no reference is made to the person’s candidacy; the church mentions the capacity in which the candidate is appearing (without mentioning the person’s political candidacy); and no campaign activity occurs.

Permitted

IRS Publication 1828

A church distributes a compilation of voting records of all members of US Congress on major legislative issues involving a wide range of subjects; the publication contains no editorial opinion, and its text, design elements, and structure do not imply approval or disapproval of any members or their voting records

Permitted

Revenue Ruling 78-248; IRS Publication 1828

A church distributes a voter guide containing questions answered by all candidates. The questions cover a wide range of topics, but the wording of the questions demonstrates bias on certain issues.

Prohibited

Revenue Ruling 78-248; IRS Publication 1828

A church endorses a candidate (by any variety of ways, including verbal or written statements, references to the candidate’s political party, references to the candidate’s distinctive platform or biography, and/or showing the candidate’s picture)

Prohibited

Int. Rev. News Release IR-96-23; IRS Publication 1828

Church employees carry on campaign activities for a candidate within the context of their church employment

Prohibited

FSA 1993-0921-1; IRS Publication 1828

A church fails to “disavow” the campaign activities of persons under “apparent authorization” from the church by repudiating those acts “in a timely manner equal to the original actions” and taking steps “to ensure that such unauthorized actions do not recur”

Prohibited

FSA 1993-0921-1

A church engages in fundraising on behalf of a candidate

Prohibited

Int. Rev. News Release IR-96-23; IRS Publication 1828

A church conducts a neutral voter registration drive

Permitted

11 C.F.R. § 111.4(c)(4); IRS Publication 1828

A church buys and places newspaper ads urging voters to vote for or against a candidate

Prohibited

Branch Ministries, Inc. v. Commissioner, 99-1 USTC ¶50,410 (D.D.C. 1999), aff’d, Branch Ministries v. Rossotti, 2000 USTC ¶50,459 (D.C. Cir. 2000)

A church website contains information either supporting or opposing candidates for public office

Prohibited

IRS Publication 1828

A church website contains links to candidate-related materials, and does not include any text, design elements, or structure indicating support of or opposition to any of the candidates

Permitted

Revenue Ruling 2007-41; IRS Publication 1828

A church website links to third-party websites containing materials supporting or opposing candidates

Prohibited

IRS Publication 1828

A minister who is known well in the community attends a press conference at a political candidate’s campaign headquarters and states that the candidate should be reelected. The minister does not say he is speaking on behalf of his church. His endorsement is reported on the front page of the local newspaper, and he is identified in the article as the minister of his church.

Permitted

Revenue Ruling 2007-41; IRS Publication 1828

A church maintains a website that includes biographies of its ministers, times of services, details of community outreach programs, and activities of members of its congregation. A member of the congregation is running for a seat on the town council. Shortly before the election, the church posts the following message on its website: “Lend your support to your fellow parishioner in Tuesday’s election for town council.”

Prohibited

Revenue Ruling 2007-41; IRS Publication 1828

A church urges its members to contact members of the state legislature and urge them to reject a proposed bill legalizing marijuana

Prohibited

IRS Publication 1828

A church provides its members with educational materials about the legalization of marijuana and hosts an educational meeting on the topic

Permitted

IRS Publication 1828

A church gives a pro-life advocacy group permission to place pamphlets on vehicles in the church’s parking lot during Sunday worship services. The pamphlets urge congregants to support a “pro-life” slate in the upcoming election.

Unclear based on IRS regulations and current law—but likely prohibited

A church owns space suitable for events and makes it available for rent to the public on a first come, first served basis. A candidate pays the standard fee to host a campaign dinner.

Permitted

IRS Publication 1828

A church sets up a booth at the state fair where citizens can register to vote. The booth only contains the church’s name, the date of the next statewide election, and notice of the opportunity to register. No reference to any candidate or political party is made in any materials or in any statements given by volunteers.

Permitted

IRS Publication 1828

A church maintains a list containing contact information for its members and has never rented it to a third party. The church allows one candidate to rent the list to send campaign information, but declines similar requests from other candidates.

Prohibited

IRS Publication 1828

A church sets up a telephone bank to conduct a “get-out-the-vote” effort and contacts registered voters in its district. Church volunteers are instructed to ask the registered voters about their positions on certain moral issues, and if the voter’s positions align with a specific candidate running for office in the district, to then remind them about the upcoming election, the importance of voting, and the availability of church-sponsored transportation to the polls.

Prohibited

IRS Publication 1828

For a more detailed discussion about political activities and the church, visit ChurchLawAndTax.com’s Recommended Reading page, “Churches and Political Activities,” as well as chapter 12 of Richard R. Hammar’s annual Church & Clergy Tax Guide.

The Tax Implications of Churches and Political Involvement

The tax implications for churches that engage in political campaigns and legislative lobbying.

Richard R. Hammar, Attorney, CPA
Bio

To maintain federal tax-exempt status under section 501(c)(3) of the Internal Revenue Code, churches must follow specific rules. Two key restrictions apply:
  • No political campaign activity—churches may not support or oppose any candidate for public office.
  • Limited lobbying—churches may not devote a substantial part of their activity to influencing legislation.

While enforcement has historically been limited, violations can carry significant tax consequences. Church leaders should understand these restrictions and evaluate how their activities may be affected.

Historical Context: A Tradition of Political Engagement

Political involvement by churches and clergy is nothing new. Common examples include:
  • Inviting candidates to speak at services
  • Distributing voter guides or candidate literature
  • Organizing voter registration drives
  • Recruiting volunteers for campaigns
  • Making statements for or against political candidates during worship

However, even well-intentioned actions can risk a church’s tax-exempt status.

What Section 501(c)(3) Requires

According to the law, a church is tax-exempt only if:

“No substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which does not participate in, or intervene in … any political campaign on behalf of any candidate for public office.”

This means:
  • No substantial lobbying (even if not related to elections)
  • No political campaign activity whatsoever, even if minimal

These activities aren’t illegal—but they can result in loss of tax-exempt status.

IRS Enforcement: Rare but Real

Although violations have occurred with little IRS response, there have been some notable actions:
  • 1990s: The IRS revoked a church’s exemption for engaging in a presidential campaign.
  • Jimmy Swaggart Ministries (1992): Agreed to cease political activity after IRS findings.
  • 2004 Ruling: A pastor’s comments opposing candidates were imputed to the church. The IRS imposed a tax but did not revoke status.

Other Instances of IRS Action

Though relatively rare, there have been other instances of IRS action against churches and ministries releated to political campaign activities.

In a 1989 memorandum issued by IRS General Counsel, the IRS revoked the tax-exempt status of a religious organization (not a church) for intervening in a political campaign. The organization, among other things, encouraged members to run for office and used its publications to advocate “the nomination and election of candidates for precinct committee positions.” IRS General Counsel Memorandum 39811.

In January of 1992, the IRS nearly revoked the tax-exempt status of Jimmy Swaggart Ministries (JSM). The IRS found JSM violated the tax code’s political campaign prohibitions when Jimmy Swaggart, from the pulpit of his church, endorsed Pat Robertson in 1988 for president, and again through a ministry publication distributed by JSM. JSM agreed with the IRS’s conclusion. To keep its exempt status, JSM agreed to refrain from certain political activities in the future.

Lastly, in an IRS ruling issued in 2004, the agency concluded a pastor’s vocal opposition to certain political candidates could be imputed against his church. The IRS determined the revocation of the church’s exempt status was not warranted. Instead, it imposed an excise tax permitted by the tax code (discussed further below in the section titled “Potential Consequences for Political Campaign Violations). IRS Letter Ruling 200437040.

Limited enforcement is partly due to the Church Audit Procedures Act, which restricts when and how the IRS can investigate churches. A 2009 federal court ruling further limited IRS authority—though a later settlement in 2014 affirmed the IRS still had enforcement procedures in place.

Understanding Political Campaign Activity

What the Law Prohibits

Churches cannot:
  • Make statements (oral or written) supporting or opposing candidates
  • Distribute biased voter guides
  • Allow use of church property or events to promote candidates

This includes all levels of government: local, state, and national.

What the IRS Says (Publication 1828)

The IRS allows personal political activity by church leaders, but not during:
  • Official church functions
  • Church publications
  • Any event where the leader represents the church

To protect the church, leaders should clarify when they’re speaking personally—not on behalf of the church.

Candidates Speaking at Church

Speaking as a Candidate

Churches may invite candidates to speak—but must ensure:
  • Equal opportunity is given to all candidates
  • The church does not endorse or oppose the candidate
  • No fundraising occurs
  • The nonpartisan purpose of the visit is clear
  • The church maintains a neutral tone in all announcements

Speaking as a Noncandidate

Candidates may also speak in a noncandidate capacity (e.g., as a public figure or expert). In these cases:
  • The event must remain nonpartisan
  • No mention of candidacy or elections is permitted
  • The individual must be invited for reasons unrelated to the campaign

Hosting Forums or Debates

Public candidate forums are allowed—but only if they are neutral. The IRS evaluates:
  • Who prepares and asks the questions
  • Whether issues reflect public interest
  • Whether all candidates get equal opportunity
  • Whether the event avoids endorsements or disapproval
  • Moderator neutrality

Voter Education and Registration

Churches may conduct:
  • Voter registration drives
  • Distribute nonpartisan voter guides
  • Host educational events

But they must avoid:
  • Comparing candidate views to the church’s positions
  • Distributing guides with biased design, content, or placement
  • Omitting candidates or editorializing their views

Even third-party guides may count as political activity if biased and distributed by the church.

Campaign Literature on Church Property

If individuals distribute campaign materials on church premises—especially with leadership’s permission—the church risks appearing to endorse a candidate.

Key point: If church leaders allow this, the IRS may view it as indirect campaign participation.

Unsolicited pamphleteering (e.g., flyers on windshields without church knowledge) is not a violation—unless church leaders gave permission.

Business Activities and Campaigns

Churches must be cautious with:
  • Renting out space
  • Selling mailing lists
  • Accepting political advertising

IRS will consider:
  • Equal access for all candidates
  • Whether services are offered to the general public
  • Standard pricing practices
  • Whether the church routinely conducts the activity

Church Websites and Digital Content

The IRS treats websites like printed materials. Churches are responsible for:
  • Content favoring or opposing candidates
  • Links to outside political websites
  • Context in which links or statements are shared

Churches should regularly review links and online materials during election seasons.

Lobbying Restrictions

Churches may lose tax-exempt status if a substantial part of their activity is lobbying. This includes:
  • Urging the public to contact legislators
  • Supporting or opposing legislation
  • Advocating for ballot measures

What Isn’t Lobbying?
  • Educating the public on policy issues
  • Hosting educational meetings
  • Distributing materials in an educational, nonpartisan way

How Much Is Too Much?

There is no clear IRS rule defining “substantial.” Courts have offered guidance:
  • Less than 5% of a church’s time/resources may be considered insubstantial (Seasongood v. Commissioner, 1955)
  • 16% to 20% was deemed substantial in another case (Haswell v. U.S., 1974)

The IRS considers all facts, including:
  • Time spent by staff and volunteers
  • Resources and money used for lobbying

Consequences for Violations

Political Campaign Violations

Possible penalties include:
  • Loss of tax-exempt status
  • Loss of tax-deductible contributions
  • Excise taxes, such as:
    • 10% on the church’s political spending
    • 2.5% on responsible managers (up to $5,000)
    • Additional taxes (up to 100%) if not corrected
    • 50% on managers who refuse to correct (up to $10,000)

Correction involves recovering the funds and creating safeguards to prevent future violations.

Lobbying Violations

Excessive lobbying may lead to:
  • Loss of tax-exempt status
  • Federal and state taxes on all income
  • Potential excise taxes on political expenditures (though churches are often excluded)

What Losing Tax-Exempt Status Means

If a church loses its status:
  • Income becomes taxable
  • Donors lose their charitable deduction
  • The church may lose:
    • Property tax and sales tax exemptions
    • Exemption from unemployment tax
    • Eligibility for 403(b) retirement plans
    • Preferential mailing rates
    • Protection under the Church Audit Procedures Act
    • Exemption from religious discrimination claims in certain cases

These consequences are serious—and should be carefully considered when evaluating political involvement.
Matthew Branaugh, attorney and content editor for ChurchLawAndTax.com, contributed to this article.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Politics, Churches, and Constitutional Protections

The Johnson Amendment and other tax laws try to limit activities by churches that intersect with politics—but certain constitutional protections allow more engagement than some realize.

Erik Stanley

Every election year churches question what they can do or say about the upcoming election. And quite often the central question is how far is too far?

Many churches earnestly attempt to navigate this dilemma while others are simply silent.

As a pastor or church leader, do you know what your church may legally do during an election year? Or would you wonder if you really understood what the law says and how it applies to your church?

Unfortunately, articles and guides about the Internal Revenue Service (IRS) regulations on election-year activities by churches often overlook the US Constitution and its safeguards of the free exercise of religion, freedom of speech, and protection from government intrusion into the church.

Your church’s ability and freedom to address an election are broad, even under current tax law. This is especially true considering the constitutional guarantees churches enjoy.

Through exploring and explaining the Johnson Amendment (the law behind much of the confusion) leaders will learn more from this article about their constitutional protections.

This article will also point out key cautions wwith regard to candidates running for office.

Leaders also will learn more about how other tax laws allow churches to engage in some lobbying and advocacy efforts tied to legislative matters and ballot measures.

What is the Johnson Amendment?

The Johnson Amendment is a federal tax law restricting a tax-exempt organization’s interactions with candidates and elections. The Amendment gets its name from Senator Lyndon Johnson. He was the motivating factor in adding the provision to the tax code in 1954.

The history of the Amendment suggests that Johnson wanted to silence two powerful, secular nonprofit organizations. The organizations were opposing his reelection to the US Senate because they believed he was soft on communism.

The Amendment was part of a massive tax overhaul bill and was inserted into the bill by a voice vote.

There were no debates or committee hearings. There was no meaningful consideration of how the Amendment would impact the constitutional rights of churches.

President Eisenhower signed the tax bill, which included the Johnson Amendment, into law without comment in August 1954. Since that time, the Johnson Amendment has been part of federal tax law.

The Johnson Amendment is the last sentence of section 501(c)(3) of the Internal Revenue Code. It states that nonprofit organizations may not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Section 501(c)(3), of course, applies to churches.

How is the Johnson Amendment enforced?

The IRS enforces the Johnson Amendment along with the rest of the tax code. Its record of enforcement since 1954 has been spotty and uneven. For example, on its website, the IRS states that nonprofit organizations are “absolutely prohibited from directly or indirectly” violating the Johnson Amendment. Yet there is no explanation of what an “indirect” violation of the Johnson Amendment is or could be.

The Johnson Amendment itself prohibits a church from “participating in” a candidate’s campaign. However, the law contains no clear definition of what “participation” consists of.

Despite this vagueness, the IRS warns that a violation of the Johnson Amendment “may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.”

The predictable result of the inherent vagueness and murkey enforcement rules is to chill the speech of America’s churches and pastors.

Pastors often admit they don’t know what is considered prohibited speech when it comes to candidates and elections.

So, most just say nothing. Only an intrepid few may decide to shoot in the dark and hope for the best.

This only magnifies the problem. Pastors are frequently intimidated because they do not know what the IRS thinks they can or cannot say.

This chill on speech is further exacerbated by the fact that churches cannot just sue the IRS to have the Johnson Amendment declared unconstitutional. The rules of federal court jurisdiction (when a lawsuit may be brought to court) prohibit lawsuits against the IRS until a provision of the tax code has been enforced against a taxpayer and a penalty has been levied and upheld during an internal IRS appeal process.

The IRS decides when to go to court

The result is that the IRS decides how, when, and with whom it will get into a lawsuit with. And the IRS has studiously avoided a lawsuit over the constitutionality of the Johnson Amendment.

The IRS prefers a status quo in which the law is never clarified. As a result, most churches simply self-censor.

No court has confronted the constitutionality of government regulation of a church’s political speech during a church service or event. Yet this is precisely what the Johnson Amendment claims authority to do.

Moreover, some organizations that advocate for radical enforcement of the “separation of church and state” take advantage the amendment’s vagueness.

One organization even conducted a nationwide advocacy campaign where it asked its supporters to turn in churches to the IRS.

Never mind that its view of the Johnson Amendment was so extreme the IRS wouldn’t act on the complaints.

Just the threat of a complaint or an actual complaint followed by a press release further chilled free speech.

Is the Johnson Amendment constitutional?

Numerous legal scholars have written law review articles arguing that the Johnson Amendment is unconstitutional. These arguments focus on the Establishment, the Free Exercise, and the Free Speech Clauses of the First Amendment to the US Constitution.

What follows is a summary of some of the legal arguments for how the Johnson Amendment appears to violate each clause.

The Establishment Clause

The Establishment Clause prohibits excessive entanglement of the government with religion. The IRS cannot enforce the Johnson Amendment without an IRS agent parsing the speech of a church or a pastor’s sermon or other speech to determine if it crossed the line into a Johnson Amendment violation.

The US Supreme Court has held—in more than one case—that a law that requires pervasive government surveillance and monitoring of religion results in excessive entanglement of the government with religion.

Put simply, the government cannot enforce the Johnson Amendment without intruding into the internal activities and speech of a church. Such enforcement of the Johnson Amendment would unconstitutionally entangle the government with religion.

The Free Speech Clause

The Free Speech Clause prohibits “content-based” restrictions on speech. This kind of restriction is one where the government must review the content of speech to determine if it violates the law.

In cases like this, courts hold the government to the highest constitutional standard in order to justify why it needs to review the content of speech.

The Johnson Amendment certainly requires the IRS to review the content of a church’s speech. In fact, there is no way to enforce the Johnson Amendment without reviewing the content of a church’s speech. This content review, coupled with the vagueness of the Johnson Amendment’s text, gives the government broad censorship power to prohibit speech.

Content-based restrictions on speech are highly disfavored. In fact, they are usually unconstitutional because these kinds of restrictions give the government far too much censorship power.

The Free Speech Clause also prohibits a speech restriction that creates an unconstitutional condition. Stated simply, the Johnson Amendment forces churches to give up their speech rights in order to retain their tax-exempt statuses. This is despite the fact that the Constitution (by virtue of the First Amendment’s Establishment Clause) requires the government to exempt a church from taxation.

Another way of looking at it

Would it be okay for the government to tell churches that they can retain their tax-exempt statuses only if they provide free housing for military troops (barred by the Third Amendment)? What about if they allow the police to search their buildings without warrants (barred by the Fourth Amendment)? Those kinds of restrictions would be instantly condemned—and rightly so—as unconstitutional. Yet the Johnson Amendment says churches can retain their tax-exempt statuses only if churches forfeit their First Amendment rights of speech. This is an unconstitutional trade-off.

The Free Speech Clause also prohibits vague restrictions on speech. The reason is that vague restrictions may result in self-censorship and a chill on speech. As we have already discussed, the Johnson Amendment is full of the type of vagueness to create such a chill.

The Free Exercise Clause

The Johnson Amendment also violates the Free Exercise Clause.

This is because it expressly discriminates against religious speech and penalizes such speech with civil or criminal penalties.

Why hasn’t the Johnson Amendment been declared unconstitutional?

Given the serious constitutional violations inherent in the Johnson Amendment, why has it not been declared unconstitutional? The answer lies in the IRS’s refusal to allow a direct constitutional challenge to the Johnson Amendment.

Again, most churches self-censor, thereby doing the IRS’s enforcement job for it. The few churches investigated for Johnson Amendment violations have generally settled with the IRS. They did so to avoid draconian tax penalties and consequences.

But outside of those few examples, the IRS has essentially avoided direct enforcement action against churches. Earlier in my career, I represented churches that wanted to create a civil rights “test case” challenge to the Johnson Amendment. Over the course of several years, I represented over 4,000 pastors who preached sermons seemingly violating the Johnson Amendment and sent them to the IRS.

This effort was intended to foster a serious constitutional challenge to the Johnson Amendment, something the Constitution gives citizens the right to do.

These churches were willing to endure the consequences for the right to challenge the constitutionality of the Johnson Amendment. Yet the IRS did not investigate or punish any of the churches. The IRS did not allow one court case. Even so, the law persists to this day despite the attempt to create a constitutional test case.

The IRS prefers the status quo of self-censorship by churches and a chill on speech. It can enforce the Johnson Amendment easily by making threatening statements that result in churches enforcing the law against themselves.

What should happen with the Johnson Amendment?

The status quo is a burden on the constitutional rights of America’s churches and pastors. In the absence of a court challenge to the Johnson Amendment, what should happen with the law?

Some have argued that getting rid of the Johnson Amendment would turn churches into pawns of the political parties. Yet the church does not need the government to protect it against itself. We should not allow an unconstitutional law to remain out of a misguided motivation to protect the theological purity of the church. That is not the government’s job anyway.

Others have argued that getting rid of the Johnson Amendment would allow churches to funnel “dark money” to political candidates, campaigns, and parties. Yet the Johnson Amendment applies to far more than just money.

Allowing an unconstitutional speech restriction that entangles the government with religion as a means of preventing political contributions by churches is overbroad. The simple answer is to prohibit political contributions by churches. Congress attempted to do just that when it introduced the Free Speech Fairness Act. The Act would have amended the Johnson Amendment to prohibit political contributions but remove the unconstitutional speech restrictions. The effort stalled, though, and has not moved forward to date.

The answer is not to jettison the Johnson Amendment entirely. Let’s instead remove provisions that prohibit the free speech and free exercise rights of America’s churches and pastors. Perhaps such an amendment will become politically viable in the future.

What about ballot initiatives and legislation?

In addition to the Johnson Amendment, section 501(c)(3) of the Tax Code also includes a limitation on legislative activities by tax-exempt organizations. This section was added to the tax code in 1934. It states that “no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation.” This restriction applies to activities that support or oppose pieces of legislation, such as bills and ballot initiatives.

The lobbying restriction was sponsored by Sen. David Reed. Reed is a Republican from Pennsylvania who wanted to silence a nonprofit organization, the National Economy League. The League was in direct with Sen. Reed over the issue of benefits to veterans. The National Economy League was lobbying against a bill introduced by Sen. Reed who had made the issue, and his bill, the centerpiece of his reelection campaign to the US Senate.

Tax Considerations

For additional discussion on what constitutes “substantial,” see attorney Richard R. Hammar’s article “The Tax Implications of Churches and Political Involvement.”

Unlike the Johnson Amendment, the restriction on legislation is not an absolute prohibition, but just a limitation. The IRS does not define what an insubstantial amount of legislative activity is, but some guidance suggests that more than 5 percent to 15 percent of a church’s overall activities might be considered substantial.

Churches are allowed to directly support or oppose legislation, encourage congregations to vote for or against proposed laws, and speak into broader matters of public policy. None of these activities come close to the legislative limit included in section 501(c)(3).

What should churches do when it comes to an election?

Unless or until Congress amends the Johnson Amendment or a court declares it to be unconstitutional, it is still law. And the law regarding lobbying about legislation remains in place. When it comes to interacting with elections and candidates, churches should consider the following.

Recognize the significant and underappreciated constitutional protections churches have

Church leaders may be surprised by how much their churches may do in an election year. There are valuable resources that will help to cut through some of the vagueness and provide a roadmap as to what is permissible under current law. That’s true with respect to candidates for political office, as discussed above. That’s also true with respect to lobbying efforts related to legislative matters and ballot measures, as also discussed above.

Additionally, there are numerous activities that fall well within the bounds of current IRS guidance and tax law that churches also should contemplate. Such activities range from public forums inviting all candidates to speak, to compilations of voting records (absent editorial comment or approvals/disapprovals of those records), to neutral voter registration drives.

More on Churches and Politics

Find additional guidance on Church Law & Tax’s Recommended Reading page, including a chart detailing the tax code and various political activities.

Even though the Johnson Amendment is unconstitutional, churches should appreciate the vast constitutional protections they currently enjoy without threat of losing their tax-exempt statuses. Doing so can help you avoid self-censorship and feel confident that there is a great deal your church may do should its leaders feel called to do so. Moreover, there are legal groups waiting and ready to provide pro-bono representation in the event a legal challenge ever arises.

Each church must decide for itself how to address politics and elections

For far too long, the Johnson Amendment and IRS guidance has made this kind of decision a legal decision, instead of a theological decision. The fact that this is true should be concerning.

Not every church will be called by its theology to speak about an election or candidates, but some will. Pastors and churches know their congregations best. Every church should have the choice to decide what to do for itself, not out of fear of violating the law, but out of its convictions informed by its theology.

Erik Stanley is an attorney at Provident Law, specializing in religious liberties, churches and nonprofits, commercial litigation, and business law, and the former senior counsel for Alliance Defending Freedom. He is an advisor at large for Church Law & Tax.
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Lessons From Mars Hill: Who Pilots Your Church?

On-Demand Webinar: Why quiet governance changes run the risk of eroding congregational trust.

Erika E. Cole, Attorney
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Editor’s Note. This video is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

In recent years, a growing number of churches have contemplated changing the governance structures contained in their bylaws. For practical reasons, these changes have often moved those structures from ones where voting rights for key decisions reside with members of the congregation to ones where that authority exclusively rests in the hands of a group of elders or the church’s board. To some church leaders, the changes make sense because they can reduce burdens and create efficiencies. But as Christianity Today’s podcast The Rise and Fall of Mars Hill powerfully demonstrates, significant problems can arise in a church when a move to consolidate decision-making power occurs with little or no warning to the church’s members.

In this exclusive webinar for Advantage Members, attorney Erika Cole dives deeply into this trend, examining the roles and purposes of governance, the reasons some churches consider changes, and why leadership must exercise great caution and transparency before ever proceeding with one.

You can download the presentation slides here.

More on this topic:

Find out more on this topic in Erika Coles article, The Dangers of a Quiet Governance Change.
Erika E. Cole, Esq., known as The Church Attorney®, is one of only a handful of attorneys in the nation who practices exclusively in the area of church law. She currently serves as a senior editorial advisor for Christianity Today’s ChurchLawAndTax.com.
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Image: Makhbubakhon Ismatova | Getty

The Dangers of a Quiet Governance Change

Subtly shifting who has authority to make key decisions in your church may make sense—but may also erode congregational trust.

Erika E. Cole, Attorney
Bio

In recent years, and without much fanfare, many churches have quietly shifted their governance structures, moving from structures where voting rights for key decisions reside with members of the congregation to structures where that authority exclusively rests in the hands of a group of elders or the church’s board.

To church leadership, the shift may make sense on paper, reducing burdens and creating efficiencies. But making such a shift also threatens to erode the trust of a congregation if it is done for the wrong reasons, or if it is done for good reasons, but mishandled. When such a significant change goes awry—as has been witnessed at a handful of high-profile churches—the consequences can be devastating.

Christianity Today’s podcast The Rise and Fall of Mars Hill powerfully demonstrates the trouble that can arise in a church when decision-making power gets consolidated.

Situations like this one offer an important caution: Church leaders are wise to review and understand their church’s governance model, and why it exists, before making plans to change it. And if they choose to pursue a change, leaders must carefully contemplate how to communicate with their congregations to demonstrate transparency and integrity throughout that process.

What is church governance?

The word “governance” comes from a Greek word meaning “to pilot” or “to steer.” In the context of church operations, governance connotes who has decision-making authority in significant matters such as buying or selling church property, adopting the annual budget, the approval of a merger or acquisition, and the hiring or firing of key leaders.

More on Church Governance

Go deeper with Church Law & Tax’s Church Governance by attorney Richard R. Hammar and other legal and church leadership professionals.

A church’s governance structure most commonly gets set at the time the church is founded. How it gets set depends on several factors, including denominational affiliations.

The role of bylaws

Many churches incorporate at their founding. Whether incorporated or not, nearly all adopt governing documents known as bylaws. These documents define the systems and processes for decision-making and leadership within the church.

Common Church Governance Models

Church bylaws typically reflect one of these models:
  • Board-led church: A governing board (e.g., elders, trustees, directors) acts on behalf of the congregation. The board makes operational decisions without congregational involvement, unless required by state law.
  • Congregation-led church: Members vote on major decisions, as outlined in the bylaws. This model encourages broad participation and transparency.
  • Denomination-led church: A hierarchical structure, governed by a Book of Discipline or similar document. Local churches operate under the oversight and guidelines of the denomination.

A Healthy Governance Ecosystem

A strong governance model often includes:
  1. Pastoral leadership
  2. A governing board (elders, trustees, directors)
  3. The congregation

All three components can coexist across different governance models.

Shifting Governance Trends

After more than 20 years representing churches, I’ve reviewed hundreds of bylaws. While the congregation-led model remains common, many churches are now shifting toward board- or elder-led models that consolidate decision-making.

This shift often occurs through bylaw revisions, reducing or eliminating the congregation’s decision-making role. When one part of the governance ecosystem is removed, problems frequently arise.

The Role of Church Members

Church members are often the lifeblood of a congregation. Removing their voice from decisions can cause confusion and distrust.

A Personal Example

I grew up in a rural church with fewer than 200 members. These members:
  • Maintained the building
  • Provided music and administration—unpaid
  • Shared meals and supported one another

Quarterly business meetings allowed members to vote on everything from budgets to special events. Membership came through baptism and fellowship. Members were deeply invested in church operations.

When a congregation-led church changes its structure suddenly, members can feel blindsided.

Why Churches Shift Away from Congregation-Led Models

Church leaders may choose to move away from congregation-led structures for reasons like:
  • Avoiding conflict: To reduce tension during contentious meetings.
  • Increasing efficiency: To streamline decisions without red tape.

However, fast decisions are not always wise. Requiring a majority or supermajority ensures careful deliberation and protects against impulsive decisions.

When Governance Changes Cause Conflict

I’ve observed a rise in litigation tied to governance changes, especially when:
  • Membership definitions are altered
  • Bylaws are revised without transparency

Courts are increasingly weighing in—especially when the dispute involves corporate governance rather than doctrine.

Key Legal Insight

Judges often side with long-term attendees and donors who are excluded from decision-making, especially if they were not informed of bylaw changes. Courts can rule on corporate matters that don’t require interpreting religious doctrine.

A Notable Cautionary Tale: Mars Hill Church

Mars Hill never used a congregation-led model, but its downfall underscores the risks of governance consolidation.

Founded in 1996, Mars Hill grew to 12,000 weekly attendees across 15 campuses. In 2014, internal conflicts and leadership issues led to its collapse.

One key decision: Founder Mark Driscoll revised the bylaws to concentrate power among a small group of elders—including himself. This governance shift limited accountability and fueled the church’s downfall. (See The Rise and Fall of Mars Hill, Episode 7.)

Six Key Considerations Before Changing Governance

Churches considering a move from congregation-led to board-led structures should address these:
  1. Assess current governance: Review bylaws, incorporation documents, and denominational rules.
  2. Check state laws: Some states require congregational votes regardless of internal governance.
  3. Evaluate current model: Consider the reasons your church chose a congregation-led model.
  4. Explore alternatives: Could your goals be met within the existing model?
  5. Plan the process: How will you involve the congregation, communicate changes, and handle dissent?
  6. Handle legal updates: Revise incorporation documents and bylaws to align with new governance.

Proceed with Transparency and Caution

A governance change made in secrecy can devastate a church. The Mars Hill story offers a strong caution: concentrated power with no accountability can create lasting damage.

Additional Resources
  • Podcast: Erika Cole interviews Rise and Fall of Mars Hill creator Mike Cosper on church governance
  • Bottom line: Don’t shrink decision-making to a few voices without careful review and counsel. Always consult experienced legal advisors before making major governance changes.
Erika E. Cole, Esq., known as The Church Attorney®, is one of only a handful of attorneys in the nation who practices exclusively in the area of church law. She currently serves as a senior editorial advisor for Christianity Today’s ChurchLawAndTax.com.
A puppy labrador wearing a service dog vest strains against the leash.
Image: getty/Heather Paul

Can Churches Bar Service Animals?

Before your church considers barring service animals, it is good to understand the legal and ministerial dimensions.

Richard R. Hammar, Attorney, CPA
Bio

Responding to a churchgoer who wants to bring a service or support animal to church may not be a new challenge.

A fresco in the ancient Roman city of Herculaneum is one of the world’s earliest references to service animals. The fresco shows a guide dog helping a blind man cross a busy street. Since this fresco dates back to the late first century A.D. in a city not far from Rome and its fledgling Christian church, it is not unreasonable to assume that the church encountered the occasional presence of a service animal.

Lead Your Church With Confidence—Become a Church Law & Tax Member Today.

The New Testament does not mention service animals. But there are several points that may be helpful to modern church leaders when considering whether to bar service animals.

Background: You cannot discriminate in places of public accommodation

Title III of the federal Americans with Disabilities Act (ADA) prohibits discrimination based on disability by places of public accommodation.

ADA Title III Technical Assistance Manual categorizes the 12 different types of public accommodations organizations.

Churches—and religious schools controlled by religious organizations—are not among them.

Actually, the ADA explicitly affirms this exemption by specifying that the public accommodations provisions “shall not apply to … religious organizations or entities controlled by religious organizations, including places of worship.”

As a result, most religious organizations are excluded from the prohibition of discrimination in places of public accommodation. The House Report detailing congressional committee discussions prior to the law’s passage notes that “places of worship and schools controlled by religious organizations are among those organizations and entities which fall within this exemption.”

The House Report also says “activities conducted by a religious organization or an entity controlled by a religious organization on its own property, which are open to nonmembers of that organization or entity are included in this exemption.”

More from the ADA Title III Technical Assistance Manual:

III-1.5000 Religious entities. Religious entities are exempt from the requirements of Title III of the ADA. A religious entity, however, would be subject to the employment obligations of Title I if it has enough employees to meet the requirements for coverage.

III-1.5100 Definition. A religious entity is a religious organization or an entity controlled by a religious organization, including a place of worship.

If an organization has a lay board, is it automatically ineligible for the religious exemption? No. The exemption is intended to have broad application. For example, a parochial school that teaches religious doctrine and is sponsored by a religious order could be exempt, even if it has a lay board.

III-1.5200 Scope of exemption. The exemption covers all of the activities of a religious entity, whether religious or secular.

ILLUSTRATION: A religious congregation operates a daycare center and a private elementary school for [the congregation’s] members and nonmembers alike. Even though the congregation is operating facilities that would otherwise be places of public accommodation, its operations are exempt from Title III requirements.

What if the congregation rents to a private day care center or elementary school? Is the tenant organization also exempt?

No. The private entity that rents the congregation’s facilities to operate a place of public accommodation is not exempt, unless it is also a religious entity. If it is not a religious entity, then its activities would be covered by Title III. The congregation, however, would remain exempt, even if its tenant is covered. That is, the obligations of a landlord for a place of public accommodation do not apply if the landlord is a religious entity.

If a nonreligious entity operates a community theater or other place of public accommodation in donated space on the congregation’s premises, is the nonreligious entity covered by Title III?

No. A nonreligious entity running a place of public accommodation in space donated by a religious entity is exempt from Title III’s requirements. The nonreligious tenant entity is subject to Title III only if a lease exists under which rent or other consideration is paid.

Note that while schools and daycare centers are both on the list of 12 categories subject to the ADA, they are exempt if “controlled by a religious organization.”

Example. A church operates a school and preschool as ministries of the church. Both the school and preschool are subject to the church’s control. The church’s governing board serves as the board for the school and preschool, and it exercises plenary control over all their activities, including personnel, finances, and curriculum. The school and preschool operate under the church’s corporate and tax-exempt status.

The school and preschool are “controlled by a religious organization,” and therefore are exempt from the ban on discrimination by places of public accommodation. Among other things, this means that the school and preschool are not required to allow service dogs.

Example. For many years, a church has operated a private school. Recently, church leaders decided to separately incorporate the school to insulate the church from the school’s liabilities. The school selects its own board and operates independently of church control. The school no longer is “controlled by a religious organization” and therefore is subject to the ADA’s public accommodations provisions.

Note. While religious organizations are not subject to the ADA’s public accommodation provisions, they may be subject to similar provisions under state or local law.

Applying the ADA requirements to service animals

The ADA requires covered entities that provide goods or services to the public to make “reasonable modifications” in their policies, practices, or procedures when necessary to accommodate people with disabilities. This requirement applies to service animals. As noted above, religious organizations are exempt from Title III of the ADA, and so they are not subject to any requirement under Title III of the ADA pertaining to service animals.

Key Point. Whether or not a church is required to allow service animals in church services or at church-sponsored activities, leaders should still have a basic understanding so they can make both informed and compassionate decisions.

What is a service animal?

The ADA defines a service animal as a dog trained to do work or tasks for a disabled person. The disabled person can train the dog. The task(s) performed by the dog must be directly related to the person’s disability.

The dog must be able to assist the person with a disability.

For example, a person with diabetes may have a dog trained to alert him when his blood sugar reaches high or low levels.

A depressed person may have a dog trained to remind them to take their medication.

Or, someone prone to seizures may have a dog trained to detect an oncoming seizure.

What about animals providing “emotional support?”

A fairly common misunderstanding is that a comfort pet is a service animal.

However, service animals are working animals, not pets.

Animals whose sole function is to provide comfort or emotional support do not qualify as service animals under the ADA.

The ADA does not view emotional support, therapy, comfort, or companion animals as service animals. However, some state and local governments do allow such animals in public places. Review local and state laws to find out.

How to determine if a dog is a service animal

In situations where it is not obvious that the dog is a service animal, church staff may ask only two specific questions:
  1. Is the dog serving someone with a disability?
  2. is the dog doing work or performing a task?

Caution. Churches are not allowed to request any documentation for the dog, require that the dog demonstrate its task, or inquire about the nature of the person’s disability.

The ADA does not require service animals to wear a vest, ID tag, or specific harness.

When can a church exclude service animals?

Someone asked the DOJ: “Are churches, temples, synagogues, mosques, and other places of worship required to allow individuals to bring their service animals into the facility?” Its response: “No. Religious institutions and organizations are specifically exempt from the ADA. However, there may be state laws that apply to religious organizations.”

Applying the Americans with Disabilities Act to a congregational setting

Animal’s Owner: Unpaid volunteer workers (i.e., some teachers, musicians, ushers), and/or church members.

Application: ADA Title I does not apply since there is no employment relationship.

ADA Title III states that the public accommodations provisions “shall not apply to . . . religious organizations or entities controlled by religious organizations, including places of worship.”

Be sure to check state and local disability laws.

Remember this: If admitting service animals would fundamentally alter the nature of a service or program, service animals may be prohibited under the federal ADA.

Further, if a service animal is out of control and the handler does not take effective action to control it, or if it is not housebroken, the church may request that the animal be removed from the premises.

The ADA requires that service animals be always under the control of the handler. In most instances, the handler will be the individual with a disability or a third party who accompanies the individual with a disability.

The service animal must be harnessed, leashed, or tethered while in public places unless these devices interfere with the service animal’s work or the person’s disability prevents use of these devices. In that case, the person must use voice, signal, or other effective means to maintain control of the animal.

For example, a person who uses a wheelchair may use a long, retractable leash to allow her service animal to pick up or retrieve items. She may not allow the dog to wander away from her and must maintain control of the dog, even if it is retrieving an item at a distance from her.

Under control also means that a service animal should not be allowed to bark repeatedly in a lecture hall, theater, library, or any other quiet place. However, if a dog barks just once, or barks because someone has provoked it, this would not mean that the dog is out of control.

To help guide your church’s decision-making regarding a service animal’s presence, consider the following examples.

Example. A church’s volunteer worship leader recently began bringing his pet dog to church as a support or comfort animal. Several members who find the presence of the dog a distraction complain to the pastor. Can the pastor ask the volunteer to discontinue bringing his dog?

Yes, for two reasons.

First, Title III of the ADA specifies that the public accommodations provisions “shall not apply to . . . religious organizations or entities controlled by religious organizations, including places of worship.”

Second, the volunteer’s dog is not a “service animal” protected by the ADA unless it has been trained to do work or perform tasks for an individual with a disability. The tasks performed by the dog must be directly related to the person’s disability.

Example. A church member begins bringing her large dog to church services. The dog sits up on the pew next to the owner. Several members find the presence of the dog a distraction and complain to the pastor. Can the pastor ask the member to discontinue bringing her dog?

Yes. See the analysis in the previous example.

Example. A church member begins bringing his miniature horse to church with him in order to provide comfort. The horse sits up on the pew next to the owner. Can the church ask the member to discontinue bringing his horse?

Yes. See the analysis in the previous example.

Also, see the “Miniature Horses” section in the ADA revised requirements for service animals.

Example. A church places a “no pets” sign at all of its entrances. Since religious organizations are not subject to the ADA’s public accommodation provisions, the sign is permissible. Note, however, that the church may be subject to similar provisions under state or local law.

Example. A church with 10 employees has an employee who suffers from anxiety. This employee has asked for permission to bring a service animal to work with her. This question implicates the ban on employment discrimination based on disability under Title I of the ADA. Employment discrimination under the ADA is addressed below.

Caution. It is important to remember that while religious organizations are not subject to the ADA’s public accommodation provisions, they may be subject to similar provisions under state or local law. More details below.

Churches may need to comply with state and local laws

While religious organizations are not subject to the ADA’s provisions regarding public accommodations, including service animals, they must still carefully evaluate whether they are subject to similar provisions mandated under state or local laws—and, if such laws exist, whether they provide any religious exemptions under them.

It is highly recommended church leaders consult with a local ADA attorney who understands local and state public state public accommodations laws, and religious organizations.

Can church employees bring service animals to work?

The ADA specifically permits religious organizations (including religious educational institutions) to “give preference in employment to individuals of a particular religion to perform work connected with the carrying on by organization of its activities.”

The ADA further provides that “a religious organization may require that all applicants and employees conform to the religious tenets of such organization.” 29 CFR 1630.16(a).

Note that Title I’s religious exemption is narrower than Title III’s blanket exemption of “religious organizations or entities controlled by religious organizations, including places of worship.”

Title I of the ADA prohibits private employers (among other entities) from discriminating against qualified individuals with disabilities in job application procedures, hiring, firing, advancement, compensation, job training, and other terms, conditions, and privileges of employment. The ADA covers employers with 15 or more employees.

An individual with a disability is a person who:
  • Has a physical or mental impairment that substantially limits one or more major life activities;
  • Has a record of such an impairment; or
  • Is regarded as having such an impairment.

A qualified employee or applicant with a disability is an individual who, with or without reasonable accommodation, can perform the essential functions of the job in question. Reasonable accommodation may include, but is not limited to:
  • Making existing facilities used by employees readily accessible to and usable by persons with disabilities
  • Job restructuring, modifying work schedules, reassigning to a vacant position
  • Acquiring or modifying equipment or devices, adjusting or modifying examinations, training materials, or policies, and providing qualified readers or interpreters

If a reasonable accommodation of a known disability of a qualified applicant or employee does not impose an “undo hardship” on the employer’s business operation, the employer must do it.

Reasonable accommodations are adjustments or modifications provided by an employer to enable people with disabilities to enjoy equal employment opportunities.

Accommodations vary depending upon the needs of the individual applicant or employee. Not all people with disabilities (or even all people with the same disability) will require the same accommodation.

Service animals may be considered “reasonable accommodation”

The DOJ has stated that service animals may be a reasonable accommodation of some employee disabilities. (See this FAQ.)

Employers that agree to allow service animals can put limits in place to protect other employees and company property.

Applying Americans with Disabilities Act to paid church employees

Animal’s Owner: Paid employees

Application: The ADA’s employment discrimination provisions (Title I) only apply to employers that have 15 or more employees.

Covered employers must provide reasonable accommodations. Sometimes, these may include service animals that help an employee or job applicant do the essential functions of the job.

However, note: (1) The ADA permits religious organizations (including religious educational institutions) to “give preference in employment to individuals of a particular religion to perform work connected with the carrying on by organization of its activities,” and (2) the ADA provides that “a religious organization may require that all applicants and employees conform to the religious tenets of such organization.”

Be sure to check state and local disability laws.

Employers do not have to sacrifice quality or production standards to make an accommodation.

Employers do not have to provide personal use items, such as glasses or hearing aids.

An employer does not have to provide a reasonable accommodation unless an individual with a disability has asked for one. Sometimes, a medical condition may cause a performance or conduct problem. If that is the case, the employer may ask whether the the employee needs a reasonable accommodation.

Unlike Title III, there is no requirement in Title I (see below) that an employer grant the request of an employee for a service animal. Instead, such a request triggers an “interactive process.” This process involves discussing the employee’s needs and possible accommodations that will not impose an undue hardship on the employer.

Note. Where more than one accommodation would work, the employer may choose the one that is less costly or that is easier to provide.

Note. Employers must recognize that they now have an affirmative duty to make reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is a job applicant or employee, unless they can demonstrate that the accommodation would impose an undue hardship on the operation of their business.

Determining if Title I of the ADA applies

When does—and doesn’t—Title I of the ADA apply to a church and its employees? Consider these examples.

Example. A church with 10 employees has an employee with a disability. This employee has asked for permission to bring a service animal to work.

This question implicates the ban on employment discrimination based on disability under Title I of the ADA. However, Title I only applies to employers having 15 or more employees, and so it does not apply to the church in this example.

Most states, however, have enacted legislation banning discrimination in employment based on disability, and many of these laws apply to employers with fewer than 15 employees.

Example. A church with 20 employees has an employee with a disability. This employee has asked for permission to bring a service animal to work with her to manage her symptoms. This question implicates the ban on employment discrimination based on disability under Title I of the ADA.

Title I applies to employers having 15 or more employees, and so it applies to the church in this example. The employee’s request for accommodation triggers an “interactive process” in which the employee and church informally discuss what accommodations the church could adopt (including allowing the employee to bring a service animal to work) that would render her capable of performing the essential functions of her job without undue hardship to her employer.

Example. A church with 20 employees terminates its pastor, who became disabled in recent years.

The pastor sues, claiming that his termination constituted discrimination based on disability since the church refused to provide reasonable accommodations to enable him to perform the essential functions of his job. One of the specific accommodations the pastor requested was a Seeing Eye dog. The court declined to offer this accommodation based on the “ministerial exception.”

In Hosanna-Tabor Evangelical Lutheran Church and School v. E.E.O.C., 132 S.Ct. 694 (2012), the United States Supreme Court unanimously recognized the so-called “ministerial exception” barring civil court review of employment disputes between churches and ministers. The case involved a claim by a “called” teacher at a church-related school in Michigan that the school committed unlawful disability discrimination in terminating her employment. This case effectively bars claims of disability discrimination by ministers against their employing church.

Church leaders should seek legal counsel when responding to requests by employees, job applicants, church members, and visitors.

Sample Service Animal Policy tailored for Churches

Service & Support Animals Policy

{CHURCH NAME} is committed to providing a safe and secure environment for people participating in ministry
activities, including those using service animals. Please review our guidelines regarding both service and
emotional support animals. Although churches are not required to admit service animals to their worship
services, this voluntary policy generally follows federal and state guidelines.

Service Animals


The ADA defines a service animal as a dog that has been individually trained to do work or perform tasks for an
individual with a disability. The task(s) performed by the service animal must be directly related to the person’s
disability. We welcome people with service animals on ministry premises. Ministry leaders may ask individuals
with service animals a few questions, including:

Is the animal required because of a disability? If the answer is NO, see Emotional Support Animals below.

Emotional Support Animals


An emotional support animal (also known as a comfort animal) provides reassurance for someone. Dogs, cats, birds, hamsters, and many other species can serve as emotional support animals. However, they do not qualify as “service animals” under the ADA. Therefore, our organization has chosen NOT to allow emotional support animals on its premises. We apologize for any inconvenience this may cause to you or your family.

Animal Handler’s Responsibilities


Individuals who bring a service animal onto our premises are expected to:
  • Keep the animal harnessed, leashed, or tethered unless these devices interfere with an animal’s work or an
    owner’s disability prevents them from using them.
  • Control the animal through voice, signal, or other effective controls if the animal cannot be harnessed, leashed, or tethered.

Our Organization’s Rights


Our organization does not have to provide care, food, or a special location for the service animal to relieve
itself. We reserve the right to remove an assistance animal from the premises if it:
  • Is out of control, and the handler does not take effective action to control it.
  • Poses a direct threat to the health or safety of others.
  • Is not housebroken.

If a service dog must be removed from the premises, absent other circumstances, the owner may re-enter the
premises and attend church or ministry activities without the service dog. Handlers and Service Dogs seating will be on the outside seating of the Sanctuary.

Understand that the state of {INSERT NAME} may have enacted laws that supplement the federal Americans with Disabilities Act (ADA) when it comes to service animals—including laws that:
  • Set specific access rules for public and private facilities, including churches and religious organizations in certain contexts
  • Define service animals more narrowly or strictly than federal law,
  • Establish penalties for misrepresenting a pet as a service animal, and
  • Set specific access rules for public and private facilities, including churches and religious organizations in certain contexts.

Signed,

{CHURCH REPRESENTATIVE}

I have read and understand this policy. (The Service Dog’s handler may acknowledge the policy.)
Name: ____________________________________________________
Signature: _____________________________________Date: _______
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: sittipong phokawattana | Getty

What if Your Church Receives a Large Donation of Virtual Currency?

So your church just received a large donation of virtual currency. What next? What are the tax implications?

Mike Batts and Michele Wales

Last Reviewed: May 8, 2025

Whatever you may think about virtual currencies, one reality is that a significant number of people have invested in them. A sizable portion of those investors have seen their investments increase in value dramatically (despite extreme volatility). And a growing number of investors holding virtual currencies that have appreciated in value are considering donating some of their holdings to their church or favorite charitable organization.

Get a Helpful Overview of Virtual Currency

Mike Batts defines virtual currency, explains why this form of currency is relevant, and offers insights for preparing your church to receive it.

Charitable organizations, including churches, must be prepared in the event an investor wishes to donate a sizable amount of virtual currency.

Logistical aspects of accepting a donation of virtual currency

In order to accept any donation of virtual currency, a church must take certain steps. The church can establish its own “wallet” (the term used in the virtual currency arena for an account)—either directly or with an exchange like Coinbase (not an endorsement). Establishing and maintaining its own virtual currency wallet is the most challenging approach for most churches.

Alternatively, the church can work with a donor-advised fund sponsoring organization to accept such gifts and convert them to cash for the benefit of the church. Or the church can utilize third-party donation processors like The Giving Block or Engiven (not endorsements) that allow the church to add a virtual currency giving button to its website. The processor receives the virtual currency donation on behalf of the church, converts it to cash, and transfers the funds to the church’s bank account—all for a fee, of course.

Each approach has its own challenges and risks. Regardless of the approach a church may take to accepting virtual currency donations, the church should keep data security and internal controls top of mind.

Virtual currencies are considered noncash property

The Internal Revenue Service (IRS) considers virtual currencies to be noncash property. So, if a taxpayer buys units of a virtual currency and later sells them at a gain, the taxpayer will be subject to tax on the gain pursuant to the rules for taxing capital gains.

The advantage of donating appreciated virtual currency over selling and donating the sales proceeds

If a taxpayer donates the appreciated virtual currency directly to a qualified charity, he or she will not be taxed on the appreciation in value. And the even better news: neither will the charity! That is because capital gains of 501(c)(3) public charities (which include churches) are not typically subject to federal income tax. The amount deductible by the donor will vary depending on the facts, but if the donor holds the virtual currency for more than a year prior to donating it, he or she may be entitled to a deduction of the full fair market value of the virtual currency contributed, with no tax on the gain!

When a virtual currency donation is valued by the donor at more than $5,000

Churches and other nonprofits need to understand the rules for substantiating a charitable contribution deduction of virtual currency valued by the donor at more than $5,000. Keep the following points in mind.

The IRS is a stickler

Federal income tax law requirements for substantiating charitable contribution deductions are strict, especially for noncash contributions. A donor who plans to take a charitable contribution deduction on his or her tax return should carefully follow the substantiation requirements.

The IRS frequently limits charitable deductions or denies them altogether where it finds that the donor (and his or her tax preparer) have not closely followed the law. Courts generally back the IRS in strictly applying the charitable contribution substantiation rules to donors

The $5,000 threshold

This article focuses on contributions of virtual currency. The rules described here generally apply to contributions of noncash items (other than publicly traded securities) valued by the donor at more than $5,000, and for which a charitable contribution deduction will be claimed.

The $5,000 threshold can be met if a single noncash item valued by the donor at more than $5,000 is donated, or if a group of similar items (for example, books) with a combined value of more than $5,000 is donated during the year. The similar items do not all have to be donated at the same time, or even to the same organization, for the $5,000 threshold to be triggered.

Special rules apply to contributions of automobiles, boats, and airplanes—a subject outside the scope of this article.

Substantiation requirements

In order to properly substantiate the deduction on the donor’s tax return of a noncash contribution in excess of the $5,000 threshold, the donor must:
  1. Obtain a qualified appraisal,
  2. Obtain a contemporaneous written acknowledgment from the charitable organization,
  3. Prepare and submit Form 8283 with his or her tax return, and
  4. Maintain specific records.

Each of these requirements is described further below.

1. Obtain a qualified appraisal

For purposes of determining the fair market value of virtual currency donated to a charitable organization and valued by the donor at more than $5,000, the IRS requires donors to obtain a written qualified appraisal.

The donor is responsible for obtaining a qualified written appraisal prepared by a qualified appraiser. A qualified appraiser for this purpose is an individual who has earned an appraisal designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or that has met certain minimum education and experience requirements.

Further, the appraiser generally cannot be the donor, the charity receiving the donation, or an employee or agent of the donor or charity.

A qualified appraisal must be prepared in accordance with generally accepted appraisal standards and must include certain information, including: a description of the type and condition of the property; the valuation effective date; the fair market value of the contributed property on the valuation date; the method and basis of valuation; the terms of any agreement between the donor and the charity regarding the future use or sale of the donated property; identifying information regarding the qualified appraiser and the appraiser’s qualifications; and a statement that the appraisal was prepared for income tax purposes.

The qualified appraisal must be made, signed, and dated no earlier than 60 days prior to the date the appraised property was donated, and no later than the due date of the taxpayer’s return (including extensions) for the year of the donation. Further, the appraisal fee generally cannot be based on a percentage of the appraised value of the property.

Charitable Solutions, LLC (not an endorsement) is one firm that provides appraisals for virtual currency.

2. Obtain a contemporaneous written acknowledgment

It is important to note that a donor must obtain a written acknowledgment from the charity for all cash and property contributions of $250 or more, including those for which an appraisal must also be obtained.

The acknowledgment must be obtained by the earlier of the date on which the donor files his or her income tax return for the year in which the contribution was made or the due date (including extensions) of the return.

The acknowledgment should include the legal name of the charity, the name of the donor, the date and amount of the contribution, a description (but not the value) of any noncash contributions, and a statement (if true) that no goods or services were received by the donor in exchange for the donation.

If the donor received anything from the charity in return for the donation (other than certain de minimis items), the acknowledgment must include a “good faith estimate” of the value of the goods and services the donor received and a disclosure indicating that the donor may only deduct as a charitable contribution the excess of the amount donated over the fair market value of the items or services received in exchange for the donation.

3. Prepare and submit Form 8283 with the donor’s tax return

In addition to the above requirements, a donor of noncash property valued at over $5,000 must complete Section B of Form 8283 and submit it with the donor’s income tax return for the year in which the contribution was made. Section B of the Form 8283 must be signed by both the qualified appraiser and the charitable organization that received the donation. Both the appraiser and the charitable organization must also provide their address and tax identification number.

Additionally, the following information must be reported in Section B of the Form 8283: a description of the donated property; a brief summary of the overall physical condition of the property (if the donated property is tangible personal property); the appraised fair market value of the property; the date and manner of acquisition by the donor of the property; the cost or adjusted basis of the donated property; the amount claimed by the donor as a charitable contribution deduction; and the date of the contribution.

Generally, the qualified appraisal itself is not required to be submitted with the donor’s tax return unless the value of the property contributed exceeds $500,000.

Note. Completing Form 8283—even one signed by the recipient charity—does not eliminate the donor’s requirement to obtain a contemporaneous written acknowledgement as described above.

4. Maintain records

The donor is required to maintain certain records in connection with the charitable contribution deduction taken on the return. Generally, these records must include the contemporaneous written acknowledgment obtained from the charity, as well as the information included in Section B of Form 8283 outlined above. A copy of the qualified appraisal should also be retained by the donor.

For additional information on individuals contributions of noncash property valued by a donor at more than $5,000, see chapter 8 of Richard Hammar’s annual Church & Clergy Tax Guide.

Strict requirements

Charitable donations of virtual currency are on the rise. Until and unless the IRS or Congress simplifies the substantiation rules for such donations, strict substantiation and documentation requirements apply for charitable deductions related to such donations, particularly those valued at greater than $5,000. Donors and their tax preparers must carefully follow the rules in order to avoid challenges by the IRS of deductions for charitable donations of virtual currency.

This information was adapted from an article that originally appeared in the Batts Morrison Wales & Lee Nonprofit OnPoint e-newsletter. Used with permission. We’ve used a combination of AI and human review to make this content easier to read and understand.
Mike Batts, CPA, is the managing partner of Batts Morrison Wales & Lee (BMWL) and a senior editorial advisor for Church Law & Tax. Michele Wales, CPA, is a partner and the national director for tax services at BMWL. BMWL is an accounting firm dedicated exclusively to serving churches and nonprofit organizations nationwide.
Image: getty/RapidEye

Every Church Is at Risk for Fraud. Here’s Why.

Church Law & Tax’s nationwide survey shows churches of all sizes, ages, and locations are susceptible to financial misconduct.

Matthew Branaugh, Attorney and Editor
Bio

Last Reviewed: May 13, 2025

A nationwide survey of more than 700 church leaders conducted by Church Law & Tax shows nearly one-third serve in congregations that have suffered from some form of financial misconduct.

Included in This Series

Part 1: Every Church Is at Risk for Fraud. Here’s Why.

Part 2: Loved and Trusted: What Shocks Us Most About Fraud Perpetrators

Part 3: Reporting Financial Crime as a Matter of Stewardship

Among those experiencing it, half said an incident occurred within the past 10 years.

Prior research conducted by other organizations throughout the past 20 years has usually pegged the figure closer to 10 percent or 15 percent for houses of worship. Still, church financial experts have long estimated that the figure was at least one-third or even higher for all congregations across the nation—a figure that appears to track closely with the Church Law & Tax study from 2021.

“It was disheartening to see 30 percent of churches responding had experienced fraud,” said CPA Vonna Laue, a senior editorial advisor for Church Law & Tax who co-led the survey project. “It did confirm to me how prevalent this situation is in churches.”

Churches of all sizes, ages, and locations are susceptible, according to the survey’s findings—and fraud prevention experts say the vulnerabilities that perpetrators commonly exploit are ones easily remedied.

“The primary types of financial misconduct that occurred are the most preventable with a good internal control structure,” Laue said.

Yet many churches do not install simple safeguards out of a perceived high level of trust among their ranks, a noted frustration among the financial experts who reviewed Church Law & Tax’s results and provided comment.

“It will never happen here”

Two-thirds of survey respondents who said they weren’t aware of fraud in their churches also said they believe the problem is unlikely or “will never” happen in their churches. Ironically, among those who endured misconduct, half said they shared a similar “it-will-never-happen” sentiment before uncovering a case—and 80 percent then implemented several basic measures after the fact.

“This is one of the most important takeaways from this study,” noted Rollie Dimos, a Certified Fraud Examiner (CFE) and author of Integrity at Stake: Safeguarding Your Church from Financial Fraud. “Most people think that their church is immune from the risk of fraud because [their] staff and volunteers are trustworthy. . . . We trust people to do the right thing, but we can fail them if we don’t hold them accountable or provide controls to protect them.”

Nathan Salsbery, a CFE and a partner and executive vice president for nonprofit CPA firm CapinCrouse, said many congregations “do not implement effective internal controls until they feel the pain of fraud firsthand.”

Salsbery is currently assisting fraud investigations at three different churches. “Had these churches implemented a few basic internal controls, they would have either prevented the fraud or would have detected it much sooner,” he added.

A costly toll

The failure to prevent or quickly detect financial misconduct exacts heavy tolls on congregations. In a 2022 study, Gordon-Conwell Theological Seminary’s Center for the Study of Global Christianity estimates church fraud globally will total $70 billion a year by 2025.

Case Study: One Church’s Response

Find out how a church responded when a trusted minister embezzled funds.

The fallout extends beyond pure dollars, though, and often with devastating effects. In an analysis of the language used by respondents to Church Law & Tax’s survey, words associated with anger and sadness appeared repeatedly among respondents who experienced fraud.

“The financial losses can be staggering,” Salsbery said. “While the financial losses are bad enough, there are usually many other losses that result from the inevitable broken trust and relationships damaged by such long-term acts.”

Such damage is understandable, given the typical identity of the perpetrator and the amounts that he or she steals.

As the Church Law & Tax research shows, the profiles of offenders frequently included treasurers, board members, and middle-aged pastors. Financial losses were the largest among perpetrators with long tenures at their churches (see “Loved and Trusted: What Shocks Us Most about Fraud Perpetrators”).

As for the amounts stolen, Church Law & Tax’s research showed 69 percent of those victimized said their losses measured less than $100,000. About 14 percent said the amounts topped $100,000, while another 15 percent said they did not know how much was taken.

Precise financial losses are difficult to pinpoint since the perpetrator may not know or may lie. And churches that choose not to contact law enforcement likely will miss out on learning the full extent because a thorough investigation never happens. Nearly 70 percent of victimized churches chose not to report their cases to police. Overall, only 22 percent of all respondents said their boards would contact law enforcement in the event a future suspected or actual case arose (see “Reporting Financial Crime as a Matter of Stewardship”).

Easy opportunities

Nearly 42 percent of cases involved “inappropriate expenses or inappropriate expense reimbursements,” the survey showed. Slightly more than 30 percent involved stealing contributions. Payroll fraud and inaccurate timesheets combined constituted 12 percent of the cases. And another 11 percent took tangible church property, while about 9 percent forged check signatures. (Note: Respondents to the “Types of Financial Misconduct” infographic were asked to check all that apply.)

While the type of theft men and women committed against their churches varied, according to the survey, it generally boiled down to one thing: easy opportunities.

“While TV shows often depict fraud as grand and complicated schemes, most fraud committed in the church is simply an individual taking advantage of a situation where no one is looking,” Salsbery observed.

Just assigning another set of eyes to monitor a variety of financial activities could greatly reduce easy opportunities. For instance, the leading “red flag” for persons who committed fraud was excessive control over his or her duties or an “unwillingness to have others cover his/her job duties.”

“Nearly half of fraud schemes found were detected as a result of another employee performing a person’s duties” in their absence, noted CPA Michael Batts, another Church Law & Tax senior editorial advisor who reviewed the results. “The rotating duties of workers performing certain financial duties is, itself, an effective internal control mechanism, especially where adequate segregation of duties for a particular position is not in place.”

Encouraging signs—but much room for improvement

While the ease with which perpetrators stole from their churches is troubling, many of the practices best positioned to thwart such efforts do not require extensive time or expense.

On an encouraging note, many respondents indicated at least some best practices are already in place.

About 86 percent of all respondents regularly generate and review financial statements, and 83 percent make certain two unrelated people work together to handle financial tasks.

Around three-quarters of those who had experienced fraud said they use separate individuals—the “segregation of duties” in accounting parlance—for authorizing cash disbursements, maintaining custody or control over cash, and handling accounting responsibilities. (Note: Most of those who responded to the question about “segregation of duties” were in churches that had experienced fraud. Respondents highlighted in the “Top measures churches take to prevent financial misconduct” infographic were asked to check all that apply.)

Still, the responses for these categories show between 17 percent and 25 percent of churches are not performing these basic measures.

The percentages worsen when considering other areas of financial accountability or internal controls recommended by experts. For instance:
  • Slightly more than half of respondents said one person in their church has the ability to perform all aspects of cash disbursements without requiring another individual’s involvement. “That is a staggering statistic,” Laue noted.

Dimos said this problem, along with improper expenses or expense reimbursements—the leading type of fraud found in the survey—can be easily prevented by “[r]equiring a second person to review and approve all credit card purchases or reviewing invoices or reimbursement requests before signing checks.”

Additionally, “disciplined monthly reviews of cancelled checks (or images) and reviews of monthly credit card statements and related documentation and support [can] significantly reduce risk,” Salsbery said.
  • Only one-third of churches store their collections in a safe and secure manner and require dual controls for access when they cannot be immediately deposited at the bank (again, stolen contributions constituted the second-highest type of fraud in the survey).
  • Only one-third of churches have their payroll approved by someone other than the preparer and then reconciled to the church’s accounting system.
  • Only 22 percent apply accounting procedures to tangible property susceptible to theft, such as electronic equipment or bookstore inventories.

“The addition of internal controls to protect your church will not cost the church anything,” Dimos observed. “Having a second person—like a staff member, trusted volunteer, or board member—be responsible to review the bank reconciliation and bank statements, or review a general ledger detail report, can provide a great deal of accountability, but not add any extra expense for the church.”

Audits and assessments

Financial audits and fraud risk assessments offer additional protections for churches, although unlike the previously mentioned preventive steps, these typically come with a cost.

An ongoing audit process “can help a church greatly reduce the risk of misappropriation and embezzlement,” Batts said. Dimos agreed, adding the use of fraud risk assessments can go one step further and “help a church test their controls and identify potential weaknesses and risk areas.”

In the survey, about 24 percent of respondents conducted outside audits with a CPA, which involves documentation and third-party support of the financial information, Laue said. Thirty percent hired a CPA or financial expert to perform a less intensive outside review, which relies on inquiries and analytical procedures, Laue noted. Almost 38 percent said they perform internal audits using church staff and volunteers.

In terms of fraud risk assessments, nearly 51 percent said they do not use them at all.

Learning from “hard lessons”

Church Law & Tax’s survey “presents a strong case for churches to be proactive in preventing fraud,” Dimos said.

The fact that 30 percent of churches reported experiencing financial misconduct at some point, and that the possibility exists even more experience it without realizing it, reveals “the risk of fraud is very real in all churches,” Salsbery said.

While many will think the steps are unnecessary, or shouldn’t be necessary because people should know better, Salsbery pointed to examples of fraud contained in the Bible—including Judas’s thefts from Jesus and the disciples’ ministry account or Ananias and Sapphira’s attempt to deceive Peter—as reminders that anyone can succumb to temptation.

“Just as policies are put in place to help prevent other sins from damaging the church, controls are needed to protect churches from the sin of fraud,” Salsbery said.

And taking time now to review practices and strengthen them—especially when no apparent problem exists—only ensures church leaders are stewarding resources well, Laue added.

“Let’s learn from the hard lessons of others,” Laue said. “I strongly encourage churches to take the step and carefully review internal controls or even hire someone to help assess and implement better internal controls now. Even if fraud was never to occur, it won’t hurt for us to operate with good processes in place.”

NEW! Safeguarding Your Church’s Finances—a multi-session video course for pastors, board members, staff, and volunteers on the basics of fraud prevention. LEARN MORE!
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Posted: Last Reviewed:
Man in black suit putting cash in his coat pocket.
Image: getty/bymuratdeniz

Reporting Financial Crime as a Matter of Stewardship

Reporting financial crime in your church is a matter of stewardship, yet many church leaders report not doing so, or even knowing how.

Richard R. Hammar, Attorney, CPA
Bio

Reporting financial crime is a matter of stewardship, yet nearly 70 percent of churches that have experienced fraud chose not to report it to the police, according to a 2021 survey of more than 700 church leaders.

Included in This Series

The spring 2021 study on financial misconduct surveyed 706 church leaders.

About one-third of leaders said financial misconduct had taken place in their churches. Among those churches that experienced fraud, only a third filed a report with law enforcement.

In my own experience, the vast majority of churches that know or believe financial misconduct occurred are reluctant to contact law enforcement.

These leaders told me they would rather handle the matter internally. Church Law & Tax’s nationwide survey confirms this.

Additionally, nearly half of the respondents said their church boards have not discussed how they would respond to suspected fraud.

Why leaders do not report financial crimes

In the survey, leaders most frequently gave these explanations as to why they did not contact authorities:
  • We were able to recover the money without having to take legal action (27.7 percent).
  • We wanted to work on restoration with the individual(s) (26.5 percent).
  • We did not want to make it public to protect the church’s reputation (20.5 percent).
  • The church chose to forgive rather than report to the authorities (19.3 percent).
  • We did not want to make it public to protect the individual(s) (16.9 percent).
  • Legal action would go against the church’s ministry philosophy (7.2 percent).

(Note: Respondents were asked to check all that apply.)

When I speak with church leaders, their hesitations for contacting law enforcement often arise because the suspected embezzler is almost always a trusted member or employee, and church leaders are reluctant to accuse such a person without irrefutable evidence of guilt.

Seldom does such evidence exist. The pastor may confront the person about the suspicion, but the individual will often deny any wrongdoing—even if guilty. This only increases the frustration of church officials who do not know how to proceed.

Thinking of not reporting a financial crime?

Caution 1: The fraud is often far greater than the church realizes. A failure to report a financial crime may hide the true depth and extent of the crime committed. CPA Vonna Laue’s experience certainly affirms this. “Each time I have been brought into a ministry’s financial fraud situation, the amount of loss grew as more information was uncovered,” said Laue, a Church Law & Tax senior editorial advisor who advised this nationwide survey project. “It was always more than the perpetrator indicated and sometimes even they were surprised by the total.”

Caution 2: It does not matter whether the embezzler intended to pay back the embezzled funds someday. This intent in no way justifies or excuses the crime. The crime is complete when the funds are converted to one’s own use—whether or not there was an intent to pay them back.

Of course, an offender’s repayment may make it less likely that a prosecutor will prosecute the case. And even if the embezzler is prosecuted, this evidence may lessen the punishment. But the courts have consistently ruled that an actual return of embezzled property does not purge the offense of its criminal nature or absolve the embezzler from punishment for his or her wrongdoing. Also, note that church officials seldom know if all embezzled funds are being returned. They are relying almost entirely on the word of the thief.

Caution 3: Whether a church opts to notify law enforcement or not, there are tax law obligations with the Internal Revenue Service (IRS) that must be fulfilled.

Responding to suspected cases of fraud

Church leaders often learn of suspected financial misconduct because discrepancies or irregularities arise or someone submits a tip.

Top Six Red Flags

The survey indentified these signs that someone might be committing fraud:

1. Excessive control or unwillingness to have others cover his/her job duties

2. Repeated lying/deception

3. Family problems

4. Living beyond his/her means

5. Other moral or spiritual failures.

6. High levels of debt (e.g., credit card, student loans)

Along with these red flags, consider the following scenarios that point to the possibility that fraud might be taking place:
  • Giving is always higher when the person who usually does the counting is on vacation or ill during a weekend service.
  • A church bookkeeper lives a higher standard of living than is realistic given her or her income.
  • Church offerings have remained constant, or increased slightly, despite that attendance has steadily increased.
  • A church official with sole signature authority on the church checking account has purchased a number of expensive items from unknown companies without any documentation to prove what was purchased and why.

Safeguarding Your Church’s Finances—a multi-session video course for pastors, board members, staff, and volunteers on the basics of fraud prevention. LEARN MORE!

When unusual activity gets detected, or a tip is received, church leaders should take these steps in response:

1. Carefully gather information before reporting a financial crime

When evidence of actual or suspected financial misconduct surfaces, the pastor and/or church leaders should gather as much information as possible. Compile all documents and records that point to the possible irregularities and inconsistencies. The church should contact its attorney. It also should strongly consider hiring a qualified CPA firm or Certified Fraud Examiner (CFE) to conduct a more thorough investigation.

Note. Some churches have used CFEs to detect embezzlement and estimate the amount of loss. But note that CFEs are not required to be CPAs, and many have far less familiarity with accounting records than a CPA. The ideal professional would be a CPA who is also a CFE. For more information on CFEs, and to find one nearby, go to the website of the Association of Certified Fraud Examiners.

A deeper investigation offers the best way to quickly determine if the irregularities and inconsistencies are a product of human error or misconduct, and the amounts of money lost. If the cause is error, then the church can address the problem while avoiding making any erroneous and harmful accusations. If the cause is misconduct, then the church knows it must take appropriate next steps in whether to report a financial crime.

2. Sit down with the suspected perpetrator

If sufficient information points to a suspected perpetrator, at least two church leaders, and possibly the church’s attorney and the CPA or CFE (if one is hired) should meet with the person. Provide some general descriptions about the irregularities or inconsistencies that have arisen and ask the person what they can tell you about them. Take careful notes, including any questions or comments the person makes.

If the person confesses and asks how things will be handled, explain the criminal nature of the offense. Also explain the legal requirements to contact the IRS (see more below).

Caution. Always keep in mind that embezzlement is a criminal offense. Depending on the amount of funds or property taken, it may be a felony that can result in a sentence in the state penitentiary.

If the person confesses, evaluate with the church’s attorney the possible ways the person can possibly repay the stolen funds—but know that such a step does not absolve the person of his or her crime, nor does it eliminate potential consequences with the IRS. Also know upfront that such agreements by embezzlers to repay funds often are not honored.

3. Contact authorities

If there is a confession, or if the evidence clearly indicates the person stole church funds, church leaders must consider turning the matter over to the police or local prosecutor and the IRS. These are very difficult decisions, since doing them may result in the prosecution, penalization, and possible incarceration of a member of the congregation.

Note. Embezzlers never report their illegally obtained “income” on their tax returns. Nor do they suspect that failure to do so may subject them to criminal tax evasion charges. In fact, in some cases. it is actually more likely that the IRS will prosecute the embezzler for tax evasion than the local prosecutor will prosecute for the crime of embezzlement. Along with contacting local authorities, your church also should contact the IRS regarding the matter.

Before you “forgive and forget”

In some cases, a person confesses to the misconduct. Often, this is to prevent the church from turning the case over to the police or the IRS. Perpetrators believe they will receive “better treatment” from their own church than from the government. In many cases, they are correct.

Lead Your Church With Confidence—Become a Church Law & Tax Member Today.

It often is astonishing how quickly church members will rally in support of the embezzler once he or she confesses—no matter how much money was stolen from the church. This is especially true when the perpetrator used the stolen funds for a “noble” purpose, such as medical bills for a sick child.

Many church members demand forgiveness for the perpeator. The idea of turning the perpetrator over to the authorities is both shocking and repulsive. But is it this simple? Should church leaders join in the outpouring of sympathy? If the embezzler confesses, should church leaders leave it at that?

These are questions that each church will have to answer for itself, depending on the circumstances of each case.

Before forgiving the embezzler and dropping the matter, though, church leaders should consider the following.

Embezzlement is a crime breaches a sacred trust

The church should insist, at a minimum, that the embezzler must:
  • disclose how much money was embezzled,
  • make full restitution by paying back all embezzled funds within a specified period of time, and
  • immediately and permanently be removed from any position within the church involving access to church funds.

Closely scrutinize and question the amount of funds the embezzler claims to have taken. Remember, you are relying on the word of an admitted thief. That is why it is important to involve the church’s attorney, as well as a CPA or CFE, when suspicions first arise.

The embezzler must return the stolen money within a specific time or sign a promissory note agreeing to pay back the funds within a specific time.

Caution. An attorney should be consulted before the church has any discussions about an agreement with the embezzler about paying back stolen funds.

The church faces tax consequences for not reporting financial crime to IRS

The church needs to tell the embezzler that the stolen money is taxable income. Therefore, failure to agree to either of the above alternatives will force the church to issue him or her a 1099 (or a corrected W-2 if the embezzler is an employee) reporting the embezzled funds as taxable income.

If funds were embezzled in prior years, then the employee will need to file amended tax returns for each of those years to report the illegal income since embezzlement occurs in the year the funds are misappropriated.

Failure to report taxable income will subject the church to a potential penalty (up to $10,000) for aiding and abetting in the substantial understatement of taxable income under section 6701 of the tax code.

Note. If an employer is able to determine the actual amount of embezzled funds as well as the perpetrator’s identity, the full amount may be added to the employee’s W-2, or it can be reported on a Form 1099 as miscellaneous income. But remember, do not use this option unless you are certain that you know the amount that was stolen as well as the thief’s identity.

If the full amount of the embezzlement is not known with certainty, then church leaders have the option of filing a Form 3949-A (“Information Referral”) with the IRS. Form 3949-A is a form that allows employers to report suspected illegal activity, including embezzlement, to the IRS. The IRS will launch an investigation based on the information provided on the Form 3949-A. If the employee in fact has embezzled funds and not reported them as taxable income, the IRS may assess criminal sanctions for failure to report taxable income.

Caution. If the embezzler agrees to pay back the stolen money and does so, does this convert the embezzled funds into a loan, thereby relieving the employee and the church of any obligation to report the funds as taxable income in the year the embezzlement occurred? The answer is no.

Most people who embezzle funds insist that they intended to pay the money back and were simply “borrowing” the funds temporarily. An intent to pay back embezzled funds is not a defense to the crime of embezzlement.

The courts are not persuaded by the claims of embezzlers that they intended to fully pay back the funds they misappropriated. The crime is complete when the embezzler misappropriates the church’s funds to his or her own personal use.

There is yet another problem with attempting to recharacterize embezzled funds as a loan. If the church enters into a loan agreement with the embezzler, this may require congregational approval. Many church bylaws require congregational authorization of any indebtedness, and this would include any attempt to reclassify embezzled funds as a loan. Of course, this would have the collateral consequence of apprising the congregation of what has happened.

Reporting financial crime may be a matter of fiduciary responsibility and good stewardship

Viewing the offender with mercy does not mean forgiving the debt and ignoring the crime. Churches are public charities that exist to serve religious purposes.

Donors give money in support of those purposes.

Forgiving and ignoring embezzlement may not serve those purposes.

The church should care about other churches

As Church Law & Tax’s findings also reveal, the average tenure of embezzlers tended to be less than 10 years, and oftentimes measured less than 5 years.

Letting an offender off the hook and sending them on their way exposes other churches to the same behavior. No record of the offender’s activities will be available—and that means even a church that follows healthy screening and selection steps (including criminal background checks) will be unable to detect this person’s past offenses.

As Laue, the CPA who advised the survey project, also notes: “We have a responsibility to protect Kingdom resources, whether they are ours or someone else’s, and we can’t do that if we don’t take the necessary steps to make others aware of the fraudulent activity.”

The bottom line: Churches should report financial misconduct as an act of stewardship for the global church.

Case Study: A Repeat Embezzler. A church administrator embezzled over $350,000 from his church. He wrote unauthorized checks to himself and others from the church’s accounts, and used the church’s credit card on over 300 occasions to purchase personal items. Police officers were called and he made a full confession.

The church secured a $1 million civil judgment against him. He was prosecuted and convicted on four felony counts including forgery and theft, and he was sentenced to 32 years in prison based on “aggravated circumstances” (the large amount of money that had been stolen, the care and planning that went into the crimes and their concealment, the fact that a great number of checks were stolen and unauthorized credit card charges made, and breach of trust).

Several years earlier, the administrator embezzled a large amount from a prior church employer. However, that church chose not to initiate criminal charges, believing that he had learned his lesson.

This case study is taken from the “Embezzlement” section of the Legal Library.

Answers to other key questions about reporting financial crimes

Find detailed answers to the following questions about embezzlement in the Legal Library:
  • How does embezzlement occur?
  • How does a pastor handle someone who confesses to embezzlement during a confidential counseling session?
  • Can a church require a suspected embezzler to take a polygraph test?
  • How can a church avoid making false accusations?
  • How should a church discuss embezzlement with the congregation?

And as both the study and my own experience show, a most-troubling aspect of financial misconduct in churches is the unfortunate reality that many pastors and other leaders choose to handle fraud or suspected fraud internally—meaning they avoid involving a CPA or CFE, the IRS, and law enforcement. But the failure to report can be problematic for the reasons I have detailed in this article.

For the sake of practicing good financial stewardship, it is my hope and prayer that churches will carefully consider the advice I offer in this article. Most importantly, my hope is that churches will seek do all they can to prevent financial misconduct from happening in the first place through implementing a system of sound internal control.

Attorney Matthew J. Branaugh, content editor for Church Law & Tax, contributed to this article.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Loved and Trusted: What Shocks Us Most About Fraud Perpetrators

A closer look at the men and women who steal from churches—and the red flags leaders should watch for.

Matthew Branaugh, Attorney and Editor
Bio

Last Reviewed: May 13, 2025

Church Law & Tax’s nationwide survey of congregations and the financial misconduct they experience paints four portraits of the types of individuals who most commonly steal from their churches.

What’s most shocking?

The positions of trust the men and women who commit these crimes carry.

Included in This Series

Part 1: Every Church Is at Risk for Fraud. Here’s Why.

Part 2: Loved and Trusted: What Shocks Us Most About Fraud Perpetrators

Part 3: Reporting Financial Crime as a Matter of Stewardship

The study revealed that common perpetrators included middle-aged men who served as treasurers or board members, sometimes for upwards of 10 years; men and women in their 30s and 40s who worked in their roles as administrators and treasurers for less than 5 years; and male pastors in their 40s.

And then there’s the group of perpetrators that may be the most surprising of all: men and women, typically 60 or older, who held their positions for 20 years or more. The crimes committed by these individuals “were disproportionately expensive” compared with other offenders, according to Arbor Research Group, the firm Church Law & Tax commissioned to survey church leaders nationwide.

“Just as fraud can happen in any sized church, fraudsters can be any age, any gender, and perform any function in the church,” said Rollie Dimos, a Certified Fraud Examiner (CFE) who reviewed the survey results ahead of publication and provided comment. “That’s why it is so important to put financial processes in place to actually protect our church team members from being tempted to steal God’s money. Internal controls are like guardrails that help keep people honest and accountable.”

Portraits of the perpetrators

The national survey fielded responses from 706 leaders and revealed nearly 30 percent served in churches that had experienced some form of financial misconduct. Nearly half said the crimes occurred within the past 10 years (see “Every Church Is at Risk for Fraud. Here’s Why”).

Those who suffered from some form of fraud answered questions exploring the acts committed and the people responsible for them. Through those responses, Arbor was able to classify the four classes of perpetrators, shedding more light on the common traits they possess.

Class 1

Arbor characterized this group as “middle-aged, non-pastoral male leaders with some experience in their roles.” These men frequently served as treasurers, board members, or in non-pastoral leadership roles.

Class 2

This group constituted “older, experienced men or women in leadership,” Arbor noted. They often served in their roles—which varied—for 20 years or more. A quarter of these cases resulted in losses of $250,000 or more, while half caused losses ranging anywhere from $10,000 to $250,000.

“The worst-case scenario for a church is to have fraud committed by long-tenured leaders in the church,” said Nathan Salsbery, a CFE and a partner and executive vice president for nonprofit CPA firm CapinCrouse who also previewed the survey results. “And if those leaders had unmonitored access to the cash coming in, the cash going out, and the accounting records, the financial losses can be staggering.”

More on Those Who Embezzle

Find additional examples of people steal from churches and how they do so—along with the consequences of such theft and ways to prevent and respond to it—see the “Embezzlement” section of Church Law & Tax’s Legal Library.

Class 3

This class featured the highest number of perpetrators, Arbor said. It, too, was evenly represented by men and women, but their ages ranged from 30 to 49 and their average tenures were 5 years or less. Among these individuals, about one-third worked as administrators, while 20 percent served as treasurers. Overall, 20 percent were unpaid volunteers.

Class 4

This group was comprised entirely of male pastors “typically 40 to 49 years of age and in their role 1 to 5 years,” Arbor noted. The thought of a pastor betraying his congregation in this way exacts significant tangible and intangible damage, Salsbery noted. “Lack of healthy accountability for senior leadership is one of the most significant risks to a church,” he said.

Red flags to monitor

The top “red flag” identified among the fraud cases disclosed in the survey—representing 32 percent—was “excessive control or unwillingness to have others cover his/her job duties,” according to the results. In fact, 47 percent of the cases weren’t discovered until another person performed the perpetrator’s duties for one reason or another.

The second-highest red flag was “repeated lying or deception,” followed by “family problems,” “living beyond his/her means,” and “other moral or spiritual failures.”

Lower on the list were “medical issues in family,” “expressed lack of job satisfaction,” and “loss of spouse’s job.”

When asked about red flags, a sizable portion of respondents selected “Other.” Asked to clarify, the bulk of the respondents said there either were no red flags, the person wasn’t caught and the fraud was later detected, or the red flags weren’t exhibited within the church and only learned of later.

In his comments about red flags, Dimos noted the “fraud triangle”—the illustration often used to describe financial misconduct. It forms a triangle with these three points: pressure (or incentive), rationalization, and opportunity.

“As church leaders, we can’t control what financial pressure someone may experience, like a family medical issue, nor can we stop people from rationalizing that it is okay to steal from the church,” he said. “But church leaders can create processes that prevent someone from having the opportunity to abuse funds.”

Red flags are consistent in other sectors

Interestingly, Church Law & Tax’s survey results closely tracked with the 2020 Report to the Nations by the Association of Certified Fraud Examiners (ACFE), Salsbery said. In particular, with greater positions of authority and tenure came greater degrees of losses for the organizations, he added.

The ACFE report showed the median losses for employee-caused fraud measured $21,000, then jumped to $95,000 for managers and supervisors, and $250,000 for executive-level positions.

“This correlation of higher fraud losses for long-tenured, experienced leaders makes sense. Given their influential leadership roles, they usually have more access to the assets of the church and have had that access for a long time,” Salsbery said. “The first two questions I ask ministries when I conduct [fraud investigations] is: (1) How long was the person in the role? and (2) What access did they have to bank accounts, other assets, and financial activities of the church during that time?”

Given the frequency and consistency of the red flags, whether in secular settings or church settings, leaders are actually positioned well to help protect their churches, noted Vonna Laue, a CPA and senior editorial advisor for Church Law & Tax who co-led the survey project.

“The red flags have not changed over the years in any study you review, and they are the same across entities from churches to Fortune 500 companies,” Laue said.

Leaders need “an awareness of the red flags,” she added, and give careful consideration when those serving in financial roles exhibit “at-risk behaviors.”

NEW! Safeguarding Your Church’s Finances—a multi-session video course for pastors, board members, staff, and volunteers on the basics of fraud prevention. LEARN MORE!

Matthew Branaugh is an attorney and editor for Church Law & Tax.
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Image: mathisworks | Getty

Video Series

Religious Land Use & The Church: A Virtual Roundtable

A virtual roundtable of attorneys discusses an often overlooked religious land use law.

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. But nearly 25 years later, 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.

Not yet a member? View the series introduction and one case study for free.

This virtual roundtable, featuring attorneys Midgett Parker, John Mauck, Noel Sterrett, and Eric Treene, explores why every church should understand the ins and outs of this valuable law, even if your congregation has yet to experience any obstacles from local government or zoning officials or neighborhood associations. It is conveniently set up in five segments for church leaders to watch either individually or as a board, committee, or leadership team.

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 1: Roundtable Introduction

Jump to:

Case Studies

Image: Tom Werner | Getty

17 Changes Relevant to Churches in Newest Robert’s Rules of Order

Leaders should note these changes before their next official church business meeting.

Richard R. Hammar, Attorney, CPA
Bio

Does Your Church Use Robert’s Rules?

If your church references Robert’s Rules of Order Newly Revised in its bylaws—or uses it by tradition—it’s important to know that the 12th edition, released in late 2020, is now the current authority. This edition contains more than 89 substantive changes, and if your bylaws don’t specify an edition, the 12th edition now applies automatically.

Why This Matters

Most church bylaws that name Robert’s Rules automatically default to the latest edition. If your bylaws specify an older edition, such as the 7th (1970), you must use that version unless you amend your bylaws to state “the current edition.”

Key Point: If your church uses Robert’s Rules but hasn’t reviewed the updates in the 12th edition, now is the time.

Other Parliamentary Authorities

While Robert’s Rules is the most common, other options exist. See Common Sources of Parliamentary Procedure for alternatives.

What’s New in the 12th Edition?

Below are 17 significant changes church leaders should understand.

1. Motion to Lay on the Table
  • Cannot be used to kill debate.
  • Should only be used to set aside discussion temporarily for urgent matters.
  • Use “Postpone Indefinitely” to permanently end debate.

2. Vice President’s Role Clarified
  • Vice presidents act only when the president is absent.
  • Cannot appoint committees if the bylaws assign that to the president.
  • In succession cases, the VP becomes president unless bylaws state otherwise.

3. Executive Sessions
  • Discussions in executive session are secret.
  • Actions taken can be disclosed only as needed to implement them.
  • Assemblies may vote to release more info by amending previously adopted actions.

4. Electronic Voting
  • Secret ballots can be conducted using electronic keypads.
  • Write-in options and independent tallies are required for elections.

5. Board Minutes Access
  • Normally, only board members may view minutes.
  • Assemblies can vote to release minutes with a two-thirds vote or majority vote with notice.

6. Terms of Office
  • Actual terms may vary depending on meeting dates.
  • Bylaws should specify start and end points clearly.

7. Bylaw Revisions Must Be Authorized
  • Only a properly authorized committee can draft a full bylaw revision.

Critical Distinctions: Bylaws vs. Robert’s Rules

Robert’s Rules has increasingly addressed church governance areas better left to:
  • Church charters
  • Bylaws
  • Denominational documents
  • Nonprofit corporation laws

Rule 1: Church bylaws always override Robert’s Rules.

Rule 2: If Robert’s Rules covers non-parliamentary topics, those provisions are secondary to governing documents.

Examples:
  • If bylaws state a 20% quorum, and state law says 10%, use the bylaws.
  • The sequence of articles in your bylaws does not need to match Robert’s Rules.

Additional Key Updates from the 12th Edition

8. Sample Rules for Electronic Meetings
  • Includes templates for various formats: internet, phone, hybrid.
  • Legal review is advised before adoption.

9. Excluding Nonmembers from Meetings
  • Assemblies can exclude nonmembers by a majority vote without entering executive session.

10. Ratifying Invalid Meetings
  • Actions taken at unauthorized meetings can be ratified.
  • Example: Online meeting held without bylaw approval can be validated post hoc.

11. Changing Ballots
  • Votes taken by secret ballot cannot be changed after submission.

12. Secrecy of Ballots
  • Ballot voting requirements cannot be suspended, even by unanimous vote.

13. Secret Ballots = Ballots
  • Clarifies that all ballots are considered secret by definition.

14. Ballot Voting by Mail
  • Bylaws should address tie-breaking procedures.

15. Ex Officio Officers
  • If not under the organization’s authority, they can vote but aren’t counted in quorum.
  • If they are officers, they must participate and count toward quorum.

16. Receiving Reports
  • No motion needed to “receive” a report.
  • Reports without recommendations can be filed.
  • Accepting a report = endorsing it fully.

17. Notice of Bylaw Amendments
  • Bylaws should specify deadlines for notice and delivery of amendment text.

Navigating Conflicts Between Authorities

Use this general order of precedence:
  1. Church charter or articles of incorporation
  2. Constitution (if any)
  3. Bylaws
  4. Denominational rules (if applicable)
  5. State nonprofit law
  6. Robert’s Rules of Order

If a conflict arises (e.g., quorum size or officer removal), always defer to the highest-ranked authority relevant to the issue.

Caution: If your bylaws or state law already cover an issue (like discipline or quorum), Robert’s Rules is not controlling.

Bottom Line for Church Leaders

Before adopting the 12th edition of Robert’s Rules—or assuming it applies—review your bylaws and understand what governs your church. If needed, seek legal counsel.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Advantage Member Exclusive

Getting Your Church Employment Questions Answered

On-Demand Webinar: Addressing some of the most challenging and confusing issues churches face as employers.

Frank Sommerville, Attorney, CPA
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Editor’s Note. This video is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

Churches today face an unprecedented number of employment-related issues, thanks to evolving state and federal laws and court decisions. Church leaders understandably wrestle with numerous questions as result, whether about the ministerial exception, discrimination laws, FLSA—and more.

Attorney and CPA Frank Sommerville, a Church Law & Tax Senior Editorial Advisor, recently published an article series covering ministerial exception, job descriptions, employee handbooks, and internships for ChurchLawAndTax.com. Now, in this one-hour webinar for Church Law & Tax, Sommerville provides his more than 30 years of legal and accounting expertise just for Advantage Members and their employment-related questions.

This exclusive webinar will help you and your pastors, executive pastors, HR directors, business administrators, and board members address any uncertainties, concerns, and ambiguities you face with employment matters.

For more information on this topic, check out Sommerville’s series covering four key employee issues unique to churches.
Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
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Part 3 of 6

Internships: Blessings or Blind Spots?

Explore the essential guide to church internship programs, covering legal compliance, FLSA rules, risk management, and strategies for training future church leaders while protecting your ministry.

Frank Sommerville, Attorney, CPA
Bio

Last Reviewed: January 28, 2025

This series of articles on church employment aims to help give clarity, offer best practices, and encourage tax and labor law compliance in several key areas of church employment:

Part 1 Applying the Ministerial Exception to Church Employees

Part 2 Developing Strong Job Descriptions for Employees and Volunteers

Part 3 Internships: Blessings or Blind Spots?

Part 4 The Importance of a Legally Sound Employee Handbook

Part 5 Title VII and Church Employment Practies

Part 6 The Remote Worker and the FLSA

Many churches believe that part of their mission is to train the next generation of ministers and lay leaders. While Bible schools and seminaries provide information and knowledge, most individuals need hands-on experience to apply what they have learned.

In a tradition that goes back to Joshua serving and learning from Moses, churches open their doors to qualified individuals seeking hands-on experience. Churches frequently use the term “intern” to describe these workers.

Interns benefit from the work experience, résumé enhancement, career exploration, networking opportunities, and, sometimes, the potential for a job offer from the church. Unfortunately, the term “intern” does not have a statutory definition, so each church defines the term to suit its purposes. While the meaning of “intern” varies among churches, churches often believe that using the term allows them to escape all employment rules.

Note. For purposes of this article, the term “intern” means temporary workers serving the church as part of either formal or informal training to prepare for future service to a local church.

In addition to frequently failing to apply employment laws to interns, churches frequently fail to recognize the risks associated with interns. This article guides churches regarding the regulatory and risk environments for their internship programs, assisting them in constructing legally compliant internship programs, and avoiding common risks.

Applying employment laws to interns

The Fair Labor Standards Act (FLSA) imposes minimum wage and overtime requirements on qualifying employers and employees. While attorneys and law professors debate its application to churches, my experience is that most churches qualify as employers under the FLSA.

If a church does not qualify as an employer under the FLSA, individual employees at a church can still be covered by the FLSA. If FLSA does not cover either the church or the employee, then many state employment laws impose similar minimum wage and overtime rules on the relationship between the church and its employees. In any event, the church must consider the employment laws that apply to its relationships with interns.

Note. The definition of an employer for FLSA is beyond the scope of this article. For an overview of the FLSA’s application to churches, see chapter 5 in Elaine Sommerville’s Church Compensation, Second Edition: From Strategic Plan to Compliance.

Also, see the FLSA page from the US Department of Labor (DOL). Consult an employment lawyer or a human resources professional before making decisions about the application of the FLSA to interns and other employees.

Volunteer versus employee

No employment law applies to volunteers. Many churches consider their internship programs to be “volunteer” programs without genuinely understanding the term “volunteer.” As a result, some interns qualify as “volunteers” while many interns fail the volunteer test.

In this context, the volunteer test means the individual receives no compensation, expenses, or benefits from the church and volunteers his or her services solely for humanitarian or religious purposes.

The ban on compensation includes noncash compensation, such as housing, food allowances, and so on. If the church provides compensation (cash, scholarships, stipends, or noncash expenses, such as housing or gas), the worker does not qualify as a volunteer, and employment laws likely apply to that relationship.

FLSA and interns

Before reviewing the application of employment laws to interns, it is necessary to remember that no employment laws apply to workers classified under the ministerial exception. Therefore, it is essential, as with any other worker, to first evaluate the application of the ministerial exception to the intern position. If an intern receives compensation but qualifies for the ministerial exception, then the FLSA or state law equivalent does not apply to that intern.

Every intern that receives compensation and is not subject to the ministerial exception is likely an employee under either the FLSA or applicable state law despite common misconceptions held by many churches.

Defining who is an ‘intern’ under FLSA

The DOL has applied the FLSA to some interns since its inception in 1938, resulting in a US Supreme Court decision in 1947 (Walling v. Portland Terminal Co., 330 U.S. 148). The definition of an intern has evolved since then, especially as applied to interns in for-profit settings. Still, there are implications for churches and other nonprofits.

Consider, specifically, the DOL’s Fact Sheet #71, Internship Programs Under The Fair Labor Standards Act. It states that the DOL will apply a “primary beneficiary” analysis to determine the application of the FLSA to unpaid interns. It then lists seven factors that the DOL will consider the extent to which:

The intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa (emphasis added).

The internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

The intern’s formal education program is tied to the internship by integrated coursework or the receipt of academic credit.

The intern’s academic commitments and academic calendar are accommodated by the internship.

The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

The intern and the employer understand that the internship is conducted without entitlement to a paid job after the internship.

Fact Sheet footnote

The DOL Fact Sheet then states in a footnote: “Unpaid internships for public sector and nonprofit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.” Therefore, if interns receive no compensation, they may work at the church as volunteers. The FLSA will not apply even if the above DOL criteria are not fully implemented into the program.

Once the church provides any compensation (cash or noncash, actual or implied), the FLSA likely applies to the position, regardless of whether or not the compensation triggers tax consequences. Unless the ministerial exception applies, it is unlikely interns can be classified as “exempt” employees because they are typically paid less than the minimum salary requirement of $684 per week. So, the church must pay minimum wage and overtime to compensated interns.

Note. Twenty-nine states have set a higher minimum wage than the federal minimum wage. Also, California measures overtime on a daily basis.

The FLSA allows a lower minimum wage for certain qualified newly hired employees under the age of 20. This lower minimum wage applies only to the first 90 days of employment to allow for training. This lower minimum wage has many additional requirements, including that the younger worker cannot replace a regular worker. Unless the church specifically designed its internship program to meet the requirements of the lower minimum wage with the assistance of an employment attorney, this lower minimum wage will not apply to interns.

Calculating intern pay when the FLSA applies

Since interns are generally nonexempt, churches must require interns to keep timesheets because they need to prove interns are paid at least minimum wage.

Churches may pay a flat weekly amount (salary) as long as the timesheets show that the weekly amount meets or exceeds minimum wage, and that any overtime is paid if earned. Under the salary model, the salary cannot be reduced if the intern works less than 40 hours, and the church must pay overtime for all hours over 40.

Consider, for example, that an intern receives $400 per week. If the intern works 40 hours that week, the intern received at least the federal minimum wage.

But if the intern worked 60 hours, the intern has not received minimum wage ($6.15 per hour instead of $7.25 per hour). In that case, the church must increase the weekly amount to $435 (60 times $7.25). Now the church must add overtime compensation.

Two potential methods exist:

Method 1: 20 hours x $10.875 (1.5 x $7.25 x 20 hours) = $217.60. Under Method 1, the intern receives $435 + $217.60 = $652.60.

Method 2 (only applies if the salary model applies): 20 hours x $3.625 (.5 x $7.25) = $72.50. Under Method 2, the intern receives $435 + $72.50 = $507.50.

The DOL more thoroughly explains this calculation in Fact Sheet #82, Fluctuating Workweek Method of Computing Overtime Under the Fair Labor Standards Act (FLSA)/“Bonus Rule” Final Rule.

State labor laws

No discussion on interns is complete without considering state labor laws. Forty-five states have minimum wage laws. (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee do not have state minimum wage laws as of August of 2021.)

If a church believes that the FLSA does not apply to it, that church still must comply with state labor laws. If its internship program meets the state definition of a training program and the intern qualifies for a lower minimum wage because they are less than 20 years of age, the church may pay qualifying interns a reduced minimum wage.

Consult an attorney

As noted above, many states have modified or eliminated this lower minimum wage program. Churches should confirm all the state and local minimum wage requirements before implementing an internship program at this lower minimum wage. The church should also work with a local employment attorney to design the internship program to meet the local, state, and federal requirements.

Further, all states have enacted a version of a payday law to protect employees from employers who may not always pay them what they are owed.

Additional Reading: Attorney Richard Hammar analyzes notable court decisions about common employment disputes.

These payday laws govern how frequently employees must be paid. For example, some churches only pay the intern at the end of the internship to encourage them to complete the internship term. But such practices violate state payday laws.

The mandatory maximum payday frequency ranges from one week to one month. 

Here is a chart of maximum payday frequency maintained by the DOL.

Caution. There are penalties for violating payday laws, and the penalties can be stiff. For example, the Texas Payday Law imposes a $1,000 penalty for each violation.

Example. An internship lasts eight weeks. In Texas, since the intern is nonexempt, the payday law requires payment semimonthly. If the church paid a lump sum at the end of eight weeks, it would be subject to a penalty for each failure to pay the intern semimonthly during the eight weeks. Since only the last payday was timely, the church could owe up to a $1,000 penalty for each of three prior paydays.

Payday laws also prevent employers from deducting unauthorized amounts from an employee’s pay. Churches cannot deduct any amount other than payroll taxes from an employee’s pay without their specific written permission.

Payday law penalties apply if the church deducts anything other than payroll taxes from an intern’s paycheck without the intern’s written authorization, even if the church maintains a separate policy that requires the deduction from workers’ pay for amounts owed to the church.

Compensable Time Calculations

Churches must compensate non-volunteer and nonministerial exception interns for all time worked and on standby as defined by the FLSA because they are nonexempt. As mentioned earlier, all non-volunteer and nonministerial exception interns must maintain timesheets and provide them to the church.

The FLSA allows the employer to select the minimum time increment to measure time worked and/or on standby. Time can be measured in increments of a tenth of an hour (6 minutes) up to a maximum of a one-quarter hour (or 15 minutes).

Time worked and/or on standby

If interns subject to minimum wage laws show up early and sit at their desks, they begin accruing time paid for work when they sat at their desks. It does not matter if they were working or not. The same rule applies at lunchtime (see below) and if they linger after their shift ended.

If the church does not want to pay interns who report early or stay late, it should provide a breakroom for interns to use and not owe them pay for that time.

What about the compensation rules for off-duty calls, emails, and texts? In determining whether time spent responding to such communications is compensable, the factors that courts have considered include:

  • the average number of calls, texts, or emails the employee responds to during the off-duty period;
  • the required response time: in other words, how quickly the employee must respond and the amount of time spent responding;
  • whether an employee is subject to discipline for missing or being late to a call-back;
  • the extent to which an employee can engage in other activities while on-call; and
  • the nature of the employee’s occupation (in some jobs, it is the nature of the job to be paid to be available to respond immediately to a situation).

Some states require employers to pay a minimum amount of time for each off-duty call, email, or text where the person responded during off-duty time.

Travel

Business travel during a typical workday is compensable. Travel on weekends is compensable if during the typical weekday work hours.

Training

All training related to the employer is compensable.

Breaks, lunch, retreats, and camps

Breaks less than 20 minutes are compensable. Lunches of 30 minutes or more are not compensable. If the intern is on-duty 24 hours straight, then mealtimes and sleep are compensable.

Note. Some states have mandatory breaks and lunchtimes that must be compensated.

Employers who require interns to remain on the employer’s premises and to respond to calls and interruptions during an intern’s meal periods and sleep time are required, in most circumstances, to pay the interns for their meal periods and sleep time.

Retreats and camps present challenges to compensating interns. Frequently, the intern is required to be on duty 24 hours a day during the retreat or camp. Under the usual FLSA rules, the intern must be paid for 24 hours a day.

However, a church can avoid paying for on-duty sleep periods only if it has an express or implied agreement to exclude such periods from work time, the church has furnished adequate sleeping facilities, and the intern’s workday is 24 hours or longer.

Caution. Under no circumstances may a church avoid paying for on-duty sleep time if the intern has not had the opportunity to receive five or more hours of uninterrupted sleep. Finally, under no circumstances can a church exclude more than 8 hours of on-duty sleep time per 24-hour shift when computing an intern’s overtime pay. Some states have additional rules for camp workers that may apply to interns as well.

Tax Issues

If the intern receives compensation in any form, it is taxable unless a specific Internal Revenue Code section excludes the item from taxation.

The Internal Revenue Code, Section 119, excludes from taxation employer-provided meals and housing if (1) the employee must live in the housing and accept the meals as a condition of employment, (2) the housing or meals are located on the business premises of the employer, and (3) the meals that are provided must be required for the convenience of the employer.

A church cannot exclude the value of meals or housing from the intern’s taxable income unless it meets Section 119 requirements.

Example. A church rented an off-campus apartment for two interns during its program. Since the apartment rent does not qualify for exclusion under Section 119, the apartment cost must be split two ways and included in both interns’ taxable income.

Business expenses that are paid or reimbursed under a qualifying accountable expense reimbursement plan are excluded from taxable income. Intern meals and lodging cannot be reimbursed under a qualifying accountable business expense plan unless the expense would also be allowed for other church employees. For example, if an intern rented an apartment, the reimbursement of the cost of the apartment is added to the intern’s taxable compensation. On the other hand, if an intern conducted a Bible study with several students and bought pizza for them, then the pizza cost can be reimbursed tax free.

If an intern has received a ministerial credential (ordained, licensed, or commissioned) from a church, and the intern performs ministerial duties, a church may designate part of the intern’s compensation as a housing allowance under Section 107 of the tax code.

Note. If an intern qualifies as a minister for federal tax purposes, the church is also prohibited from withholding payroll taxes from that intern.

Craft job descriptions for all interns

Churches should have written job descriptions for interns. These written instructions help guide the church and the intern regarding expectations.

If the internship is for ministerial students, the church should draft a job description to qualify for the ministerial exception. If the internship involves nonministerial students, the church should consider structuring the program as a volunteer program to avoid employment compliance issues.

Again, though, even unpaid interns should have a job description detailing his or her responsibilities.

A Plan for Minimizing Risk

Unfortunately, the rigorous hiring and training processes utilized for other church employees are not always applied to interns. Yet, the church must proactively protect vulnerable youth and children from harm, and such protective measures with screening and selection should not be ignored for internship programs. In fact, interns can represent a significant risk to the church.

Protecting vulnerable populations requires a church committed to proper screening, selection, and supervision of pastors, ministry leaders, and volunteers—not just interns.

Learn more about how to do this with attorney and senior editor Richard Hammar’s 14-step plan for minimizing the risk of child and youth abuse in churches.

Churches should also utilize the other youth and child resources at Church Law & Tax to minimize this risk. Misconduct by a single intern in one summer can cost the church millions of dollars, cause the loss of members, and injure individuals that will carry serious emotional scars for life.

An opportunity to train

On the flipside, an internship provides an excellent opportunity to train the next generation about safely ministering in the real world and understanding the importance of protecting vulnerable populations.

Screening candidates, following up on references, and consistently enforcing policies and procedures can help mitigate risks.

Churches must screen interns with the same careful vetting process they use for potential employees. If the intern will work in the youth or children’s ministries, he or she should go through the same process used for any youth or children’s workers.

Reference checks for minors

Churches are hampered in using background checks because most interns are young and have little or no criminal history due to their ages, or such records are sealed as juvenile offenses. Reference checks and personal interviews will become the church’s primary screening tools.

For interns who will work in youth or children’s ministries, churches ideally should request references from youth-serving institutions where the prospective interns previously served. As attorney Richard Hammar, the senior editor for Church Law & Tax, notes, “The key question to ask is whether the institution is aware of any information indicating that the applicant poses a risk of harm to minors or is in any other respect not suitable for youth or children’s ministry.”

Churches also should request the names and contact information for the prospective intern’s current pastor, as well as his or her former pastors. If candidates do not list their former pastors as references, the church should still contact those pastors.

If a reference or former pastor refuses to respond to requests for a conversation about the candidate, the candidate should be rejected.

The church should include both men and women as reference interviewers to add their perspectives and impressions about the candidates.

Enforce policies and rules

In addition to the screening process, churches need policies and processes to protect vulnerable populations from interns who engage in risky behavior.

All church safety policies should be applied to interns. Since this is likely one of the intern’s first professional ministry experiences, the church must educate the interns about the church’s policies.

Note. All interns must complete the church’s sexual misconduct awareness training before interacting with church members.

Actively enforce the rules

The church should actively take steps to make sure the rules are followed. Interns must understand that any violation will end the intern’s participation in the program.

Policies and rules regarding relationships and contact with children and youth should be strictly enforced. The church should prohibit interns from becoming involved romantically with any youth during their term at the church.

As a risk management tool, interns working with youth should be at least five years older than those in their ministry group. The church’s policy should prohibit interns from engaging in any one-on-one visits with children or teens that are not held in public areas on the church’s premises.

Phone calls, texting, and emails

Additionally, phone calls, texting, and emails with children and youth should not be allowed unless another adult (such as the child’s parent or youth pastor) is included in the communication.

Nearly all interns will use their personal cellphones to conduct church business during their internship. But cellphones present a frequent tool for grooming children and youth for harm.

Due to the risks arising from cellphone use, the church should notify intern applicants that the church may want to check their cellphones for inappropriate interactions with children and youth during their internships. Further, the intern could be told that the church requires its interns to submit their cellphones for surprise inspections by the church’s information technology (IT) department. (The church would keep all data from the phone unrelated to church business confidential.) The applicant should sign a written consent to the search as a condition of admission into the internship. If the applicant objects, the church may want to decline to invite that applicant.

Some churches require interns to submit a weekly written report of their interactions with their ministry groups outside of formal church events. The interns also should affirm weekly, in writing, that they have followed all policies and procedures required by the church.

Note. Not only should the interns be familiar with these rules, but parents and youth must also be familiar with these rules. No matter whether the church is addressing volunteers, employees, or interns, it is vital that the church educate parents, teens, and children about these rules and the grooming tactics predators use to gain the trust of victims and their families. Parents and youth must understand the importance of the rules in protecting everyone’s safety.

Additionally, the church should provide an easy way for parents and youth to easily report rule violations to church leaders.

Training future leaders

Internship programs provide valuable avenues for training the next generation of ministers and Christian leaders. However, as beneficial as these programs can be, incorrectly administered programs can also create substantial unforeseen liabilities.

The goal is to create internship programs that are either exempt from all employment laws or comply with all the employment and tax laws. It’s also essential that rules and policies are enforced that mitigate the risks noted above.

With careful planning, an internship program can provide meaningful assistance to training the next generation of ministers and future church leaders. It also provides the church with an excellent avenue of ministry.

Thanks to CPA Elaine Sommerville for her useful comments and edits to this article.

Return to series home page.

Churches should also utilize the other youth and child resources at Church Law & Tax to minimize this risk. Misconduct by a single intern in one summer can cost the church millions of dollars, cause the loss of members, and injure individuals that will carry serious emotional scars for life.

On the flipside, an internship provides an excellent opportunity to train the next generation about safely ministering in the real world and understanding the importance of protecting vulnerable populations.

Screening candidates, following up on references, and consistently enforcing policies and procedures can help mitigate risks.

Screen all candidates.

Churches must screen interns with the same careful vetting process they use for potential employees. If the intern will work in the youth or children’s ministries, he or she should go through the same process used for any youth or children’s workers.

Churches are hampered in using background checks because most interns are young and have little or no criminal history due to their ages, or such records are sealed as juvenile offenses. Reference checks and personal interviews will become the church’s primary screening tools.

For interns who will work in youth or children’s ministries, churches ideally should request references from youth-serving institutions where the prospective interns previously served. As attorney Richard Hammar, the senior editor for Church Law & Tax, notes, “The key question to ask is whether the institution is aware of any information indicating that the applicant poses a risk of harm to minors or is in any other respect not suitable for youth or children’s ministry.”

Churches also should request the names and contact information for the prospective intern’s current pastor, as well as his or her former pastors. If candidates do not list their former pastors as references, the church should still contact those pastors.

If a reference or former pastor refuses to respond to requests for a conversation about the candidate, the candidate should be rejected.

The church should include both men and women as reference interviewers to add their perspectives and impressions about the candidates.

Enforce policies and rules

In addition to the screening process, churches need policies and processes to protect vulnerable populations from interns who engage in risky behavior.

All church safety policies should be applied to interns. Since this is likely one of the intern’s first professional ministry experiences, the church must educate the interns about the church’s policies.

The church should actively take steps to make sure the rules are followed. Interns must understand that any violation will end the intern’s participation in the program.

Policies and rules regarding relationships and contact with children and youth should be strictly enforced. The church should prohibit interns from becoming involved romantically with any youth during their term at the church.

As a risk management tool, interns working with youth should be at least five years older than those in their ministry group. The church’s policy should prohibit interns from engaging in any one-on-one visits with children or teens that are not held in public areas on the church’s premises.

Phone calls, texts, and emails

Additionally, phone calls, texting, and emails with children and youth should not be allowed unless another adult (such as the child’s parent or youth pastor) is included in the communication.

Nearly all interns will use their personal cellphones to conduct church business during their internship. But cellphones present a frequent tool for grooming children and youth for harm.

Due to the risks arising from cellphone use, the church should notify intern applicants that the church may want to check their cellphones for inappropriate interactions with children and youth during their internships. Further, the intern could be told that the church requires its interns to submit their cellphones for surprise inspections by the church’s information technology (IT) department. (The church would keep all data from the phone unrelated to church business confidential.) The applicant should sign a written consent to the search as a condition of admission into the internship. If the applicant objects, the church may want to decline to invite that applicant.

Some churches require interns to submit a weekly written report of their interactions with their ministry groups outside of formal church events. The interns also should affirm weekly, in writing, that they have followed all policies and procedures required by the church.

Training future leaders

Internship programs provide valuable avenues for training the next generation of ministers and Christian leaders. However, as beneficial as these programs can be, incorrectly administered programs can also create substantial unforeseen liabilities.

The goal is to create internship programs that are either exempt from all employment laws or comply with all the employment and tax laws. It’s also essential that rules and policies are enforced that mitigate the risks noted above.

With careful planning, an internship program can provide meaningful assistance to training the next generation of ministers and future church leaders. It also provides the church with an excellent avenue of ministry.

The author thanks CPA Elaine Sommerville for her useful comments and edits to this article.

Return to series home page.

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