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.
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 (5thCir. 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 the business owner for Church Law & Tax.
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.
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.
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.
Reading & Resources:
Download the 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.
Image: AdobeStock/ Rawpixel.com
Mastering Meeting Basics
A five-part series providing simple and straightforward guidance to church leaders.
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.
On-Demand Webinar: Quick tips and insights for effectively running anything from a board meeting to a congregational meeting.
Sarah E. Merkle
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.
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.
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.
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)
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
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.
To maintain their exemption from federal income taxes, churches and other religious organizations must comply with several requirements specified in section 501(c)(3) of the tax code. One requirement is that the church not participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office. Another requirement limits how much a church can lobby for or against legislation, referendums, and ballot measures.
Many churches have violated these requirements in the past with few, if any, adverse consequences. Over the past 30 years, for instance, there has been only one high-profile case involving the revocation of a church’s tax-exempt status letter by the Internal Revenue Service (IRS) due to the church’s engagement in prohibited political campaign activities (a decision that, notably, was later upheld by an appellate court).
Enforcement of the prohibitions on lobbying activities also has been limited at best. Even with such limited enforcement by the IRS, though, the tax consequences for a violation can be significant. As leaders evaluate the ways in which they believe their congregations are called to address political matters, they should carefully note the requirements—and the potential consequences triggered if they violate them.
Background
The participation by churches and church leaders in political campaigns is an American tradition dating back to the founding of the republic. Common examples include:
inviting candidates to speak during worship services;
distributing “voter education” literature reflecting candidates’ views on selected topics;
voter registration activities;
enlisting volunteers for a particular candidate’s campaign;
collecting contributions for a particular candidate; and
statements made by ministers during worship services either supporting or opposing various candidates for office.
Unfortunately, it is not well understood that some of these kinds of activities, as well-meaning as they may be, may jeopardize a church’s exemption from federal income taxation.
This is because section 501(c)(3) of the tax code specifies that a church or other public charity is exempt from federal income taxation 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 (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”
Note that there are two distinct limitations here. First, churches may not engage in substantial efforts to influence legislation. Second, churches may not participate or intervene in any candidate’s political campaign, even to an insubstantial degree.
It should be emphasized that none of the political activities is “illegal” for churches to conduct. The primary consequence of church political activity is that the church’s exemption from federal income taxation may be jeopardized.
Evaluating IRS enforcement
To be sure, there have been violations of these limitations by churches with hardly a word of protest from the IRS. That appeared to change in the 1990s, when the IRS for the first time revoked a church’s exemption letter for its involvement in a presidential campaign. However, in the years since, the IRS typically has only made several pronouncements indicating that politically related activities by churches no longer will be ignored.
In part, the IRS’s inaction over the years was due to a provision in a federal law (the Church Audit Procedures Act) that imposes limitations on IRS examinations of churches. The Act provides that the IRS may begin a “church tax inquiry” only if an appropriate “high-level Treasury official” (a regional IRS commissioner, or higher Treasury official) reasonably believes, on the basis of written evidence, that the church is not exempt, may be carrying on an unrelated trade or business, or is otherwise engaged in activities subject to taxation.
In 2009, a federal court in Minnesota ruled the IRS Director of Exempt Organizations (Examinations) was not a “high-level Treasury official” and therefore was not authorized to initiate a church tax inquiry on the basis of a reasonable belief determination that sufficient written evidence existed to warrant a church tax inquiry.
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.
Frustrated by the 2009 federal court ruling, the Freedom From Religion Foundation (FFRF) in 2012 sued the IRS to compel it to enforce the ban on campaign intervention by churches. Two years later, the parties reached a settlement approved by a federal court in Wisconsin. The court’s order said FFRF was satisfied that the IRS “does not have a policy . . . of non-enforcement specific to churches and religious institutions.” A separate brief from FFRF said the organization believed “the IRS has a procedure in place for signature authority to initiate church tax investigations/examinations.”
The message seemed clear: The IRS was ready to monitor political campaign activities by churches, investigate possible violations, and enforce penalties. However, in the years to follow, a group of ministers openly and intentionally defied the campaign prohibition on the ground that it violated their constitutional rights to speak and to exercise their religion—with little, if any, response by the IRS.
While IRS enforcement of churches apparently remains limited, the possibility remains that political activities by churches can trigger IRS scrutiny. It is essential for church leaders to understand the ban on church involvement in political campaigns, the limitations on substantial lobbying activities related to legislation and ballot measures, and then to accordingly evaluate their church’s practices.
Political campaigns
In 1954, US Congress passed the “Johnson Amendment.” It is the basis of the income tax regulations in section 501(c)(3) of the tax code that limit political campaign intervention by tax-exempt entities, including churches. The language provides that neither a church nor any other organization can be exempt from federal income taxation if its charter empowers it “directly or indirectly to 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.” The regulations further provide:
The term “candidate for public office” means an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, state, or local.
Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate. Treas. Reg. 1.501(c)(3)- 1(c)(3)(iii).
This regulation provides some clarification. In particular, it clarifies that:
A “candidate” for public office includes local, state, and national candidates;
The prohibited intervention or participation in a political campaign can be satisfied either by the making of oral statements or by the publishing or distribution of written statements; and
Statements made in opposition to, as well as on behalf of, a particular candidate are prohibited.
Additionally, church leaders should note the IRS has determined political campaign intervention can be found even in very early stages of elective processes. IRS General Counsel Memorandum 39811.
IRS Guidance on Political Campaign Activities
IRS Publication 1828 (the “Publication”) includes IRS guidance regarding political campaign activities.
Below is a summary of some of the Publication’s most relevant parts for churches with respect to political campaign activities.
Political campaign activity: individual political activity by religious leaders
The Publication acknowledges that the campaign activity prohibition “is not intended to restrict free expression on political matters by leaders of churches or religious organizations speaking for themselves, as individuals. Nor are leaders prohibited from speaking about important issues of public policy.” However, “religious leaders can’t make partisan comments in official organization publications or at official church functions.”
At a Glance
Reference this chart to quickly assess the IRS’s views regarding various political activities and their potential effects on a church’s tax-exempt status. For more details, including additional examples of permissible and prohibited activities based on IRS Publication 1828, see chapter 12 of Richard Hammar’s annual Church & Clergy Tax Guide.
To avoid potential “attribution” of their comments outside of church functions and publications, “religious leaders who speak or write in their individual capacity are encouraged to clearly indicate that their comments are personal and not intended to represent the views of the organization.”
Political campaign activity: inviting a candidate to speak
Many churches have invited political candidates to address the congregation during a worship service. Sometimes the candidate is a member of the church. In other cases, the candidate contacts the senior pastor and asks for permission to address the congregation.
Do such activities jeopardize a church’s tax-exempt status? The Publication addresses this question directly in two separate contexts:
political candidates who address a church congregation as a candidate; and
political candidates who do not address a church congregation as a candidate.
Speaking as a candidate
Churches “may invite political candidates to speak at its events without jeopardizing its tax-exempt status,” the Publication says. “Candidates may also appear without an invitation” at public events hosted by the church.
The Publication notes that when a candidate is invited to speak at a church as a political candidate the church must take steps to ensure that:
it provides an equal opportunity to the political candidates seeking the same office;
it does not indicate any support of, or opposition to, the candidate (stated explicitly when the candidate is introduced and in communications concerning the candidate’s attendance);
no political fundraising occurs;
the candidate is chosen to speak solely for reasons other than candidacy for public office;
a nonpartisan atmosphere is maintained on the premises or at the event where the candidate is present; and
the church clearly indicates the capacity in which the candidate is appearing and does not mention the individual’s political candidacy or the upcoming election in the communications announcing the candidate’s attendance at the event.
The Publication notes that in determining whether candidates are given an equal opportunity to participate, a church should consider the nature of the event to which each candidate is invited, in addition to the manner of presentation.
For example, “a church that invites one candidate to speak at its well-attended annual banquet, but invites the opposing candidate to speak at a sparsely attended general meeting, will likely be found to have violated the political campaign prohibition, even if the manner of presentation for both speakers is otherwise neutral.”
Speaking as a noncandidate
The Publication acknowledges that a church may invite political candidates (including church members) to speak in a noncandidate capacity. For example, some candidates are invited to speak at church services because they are “public figures” (such as “an expert in a non-political field,” a celebrity, or one who has “led a distinguished military, legal, or public service career”). When a candidate is invited to speak at an event in a noncandidate capacity, it is not necessary for the church or religious organization to provide equal access to all political candidates.
However, the church or religious organization must ensure that:
the individual speaks only in a noncandidate capacity and the church clearly maintains that noncandidate capacity through its promotions and any distributed materials;
neither the individual nor any representative of the church makes any mention of the individual’s candidacy or the election;
no campaign activity occurs in connection with the candidate’s attendance;
the “individual is chosen to speak solely for reasons other than candidacy for public office”; and
the church maintains a “nonpartisan atmosphere,” either “on the premises or at the event where the candidate is present.”
Public forums
Sometimes a church invites several candidates to speak at a public forum. The Publication warns that if such a forum is operated to show a bias for or against any candidate, then it would be prohibited campaign activity since it would be considered intervention or participation in a political campaign. The Publication suggests that when a church invites several candidates to speak at a forum, it should consider the following factors:
“whether questions for the candidate are prepared and presented by an independent nonpartisan panel”;
“whether the topics discussed by the candidates cover a broad range of issues that the candidates would address if elected to the office sought and are of interest to the public”;
“whether each candidate is given an equal opportunity to present his or her views on the issues discussed”;
“whether the candidates are asked to agree or disagree with positions, agendas, platforms, or statements of the organization”; and
“whether a moderator comments on the questions or otherwise implies approval or disapproval of the candidates.”
Voter education
The tax code notes that churches “are permitted to conduct certain voter education activities (including the presentation of public forums and the publication of voter education guides) if they are carried out in a nonpartisan manner.”
Churches may conduct voter registration and get-out-the-vote drives, but only if “conducted in a nonpartisan manner.” Any voter education or registration activities that favor or oppose one or more candidates “is prohibited.”
During an election season, some churches distribute voter guides, often with information covering how candidates stand on various issues. This type of activity will not jeopardize a church’s tax-exempt status unless the guide “attempt[s] to favor or oppose candidates for public elected office.”
The following factors are considered when evaluating whether a voter guide constitutes prohibited political campaign activity:
whether the candidates’ positions are compared to the church’s positions—if so, it constitutes prohibited political campaign activity, and in guidance issued in 2006, the IRS said prohibited comparisons can arise through the content shared, the design and format of the guide, or the manner in which the guide is distributed;
whether the guide covers a variety of issues that the candidates would address if elected;
whether “the description of issues is neutral”;
whether all candidates running for the office are included; and
whether the descriptions of the positions use “the candidates’ own words in response to questions” or “a neutral, unbiased and complete compilation of all candidates’ positions.”
Also in 2006, the IRS made an important clarification regarding third-party voter guides. The agency said “[e]ach organization that distributes one or more voter guides is responsible for its own actions. If the voter guide is biased, distribution of the [third-party] voter guide is an act of political campaign intervention.”
Pamphleteering on church premises
The Publication is silent about whether churches can permit individuals (whether church members or not) or outside groups to distribute campaign literature on church property before and after worship services. In understanding how the IRS views political campaign activities (including public forums and, as addressed below, websites), church leaders should exercise caution.
Individuals and outside groups often are not subject to the ban on intervention in political campaigns, and so they can freely distribute campaign literature no matter how biased it may be. However, when they do so on church premises, they are jeopardizing the church’s tax-exempt status since the church, by allowing them to distribute biased campaign literature, may be viewed as indirectly intervening or participating in a political campaign. As a result, church leaders should not assume that they can safely permit others to do on church property what the church itself cannot.
Key point. Many church members have returned to their vehicles in the church parking lot following a worship service to find political campaign literature on their windshield. How does this affect the church’s exempt status? If church leaders were not aware of the pamphleteering, and did not condone or authorize it, there is no problem. However, if a person or group obtains permission from the pastor or other church leader to distribute literature on windshields, and if the literature is biased in favor of one candidate or political party, then the church’s exempt status is jeopardized.
Business activity
The Publication notes certain business activities by churches can constitute prohibited political campaign activity. The Publication does not give an exhaustive list of business activities, but includes the following in a general description:
“the selling or renting of mailing lists”;
“the leasing of office space”; and
“the acceptance of paid political advertising.”
The IRS also notes the possible tax treatment of any income received by the church from such activities.
The agency outlines the following four factors it considers when determining whether such business activities constitute prohibited political campaign activity:
“whether the good, service or facility is available to the candidates equally”;
“whether the good, service or facility is available only to candidates and not to the general public”;
whether any fees charged by the church are at “customary and usual rates”; and
whether the church regularly conducts the activity or does so “only for the candidate.”
Websites
Most churches today operate websites. It is common for many to use their sites to share information, statements, and links to other websites. The Publication describes the ways in which a church website can run afoul of the political campaign prohibition. It notes:
A church posting content favoring or opposing a candidate for public office “will be treated the same as if it distributed printed material, oral statements or broadcasts that favored or opposed a candidate.”
A church is responsible “for the consequences of establishing and maintaining” links to other sites, “even if the [church] doesn’t have control over the content of the linked site[s].” The Publication suggests churches should regularly monitor links to other websites to “reduce the risk of political campaign intervention.”
A church will not necessarily violate political campaign prohibitions by linking to candidate-related material. However, the IRS will evaluate the “facts and circumstances,” including (but not limited to) “the context for the link on the [church’s] website, whether all candidates are represented, any exempt purpose served by offering the link, and the directness of the links between the [church’s] website and the web page that contains material favoring or opposing a candidate.”
Lobbying activities
A church will lose its tax-exempt status “if a substantial part of its activities” engages in lobbying, according to 501(c)(3) of the tax code. The lobbying limitation was enacted by the US Congress in 1934.
The Publication defines lobbying as “attempting to influence legislation.” It defines legislation as “acts, bills, resolutions or similar items (such as legislative confirmation of appointive offices)” considered by US Congress, state legislatures, or local councils. It also defines legislation to include referendums, ballot initiatives, and constitutional amendments voted on by the public.
However, excluded from the IRS list are activities carried on by executive or judicial offices as well as administrative agencies.
The IRS provides clarification about permissible and prohibited lobbying activities by churches. It notes:
A church or religious organization will be regarded as attempting to influence legislation if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting or opposing legislation, or if the organization advocates the adoption or rejection of legislation.
However, general efforts to address public policy issues are not classified as lobbying, the IRS says, and may include educational meetings and educational materials if provided “in an educational manner.”
What constitutes “substantial”?
The Publication is vague about how much lobbying constitutes a “substantial” part of a church’s overall activities. The agency says it employs a “substantial part test” for churches, evaluating all “pertinent facts and circumstances” in relation to “a variety of factors.” Among the factors considered:
time devoted by employees and volunteers for the lobbying; and
money and resources spent by the church for the lobbying.
The IRS has never endorsed a specific percentage in its definition of “substantial.” At least two courts have attempted to do so, with one court concluding activities are not substantial if less than 5 percent of an organization’s time and effort is devoted to lobbying activities. Seasongood v. Commissioner, 227 F.2d 907 (6th Cir. 1955). The other court concluded “substantial” meant when an organization devoted 16 percent to 20 percent of its budget to lobbying activities. Haswell v. U.S., 500 F.2d 1133 (Ct. Cl. 1974).
A federal appeals court in 1972 rejected the Seasongood “5-percent test.” The IRS, in its Internal Revenue Manual (the “Manual”), notes the Seasongood decision “provides only limited guidance because the court’s view of activities to measure is no longer supported by the weight of precedent.” The Manual also says most courts have either avoided using a percentage test or concluded a percentage test is not conclusive.
Unfortunately, this means churches have no clear standard to guide them with respect to whether particular efforts to influence legislation are “substantial.”
Defining “substantial”
Churches and religious organizations have rarely lost their tax-exempt statuses for making “substantial” attempts to influence legislation.
A federal court in 1972 used a broad definition of “attempting to influence legislation” in affirming the revocation of the tax-exempt status of Christian Echoes, a Christian ministry. Four years later, US Congress refused to approve or disapprove of the decision, and no other federal court (including the US Supreme Court) has endorsed the definition with respect to a church or religious organization. The decision is binding only in the 10th federal circuit (which includes the states of Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming). Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849 (10th Circ. 1972).
Possible tax implications of church political activities
The IRS describes several potential consequences for churches that violate the political campaign and lobbying prohibitions outlined in the tax code.
Potential consequences for political campaign violations
Should a church be found in violation of political campaign limitations, it “jeopardizes both its tax-exempt status . . . and its eligibility to receive tax-deductible contributions. In addition, it may become subject to an excise tax on its political expenditures,” the Publication says.
The excise tax may be imposed along with revocation of the church’s tax-exempt status, or instead of revocation, according to the Publication.
The excise tax entails the following:
10 percent of the church’s political expenditures, levied against the church;
2.5 percent of the church’s political expenditures, levied against “organization managers (jointly and severally) who, without reasonable cause, agreed to the expenditures knowing they were political expenditures” (not to exceed $5,000 for any one expenditure);
an additional tax of 100 percent of the church’s political expenditures, levied against the church, if the expenditures are not corrected within the period allowed by law; and
an additional tax of 50 percent of the church’s political expenditures, levied against managers (jointly and severally) who refuse to make the correction (not to exceed $10,000 for any one expenditure).
The Publication says the correction of a violating political expenditure involves “recovery of the expenditure, to the extent possible, and establishment of safeguards to prevent future political expenditures.”
The Publication also advises churches to evaluate local and state election laws, which may impose their own limitations and penalties for political campaign activities by tax-exempt entities.
Potential consequences for lobbying violations
Should a church be found to be conducting excessive lobbying activity “in any taxable year may lose its tax-exempt status, resulting in all its income being subject to tax,” the Publication notes.
The Publication also says a religious organization and its managers are subject to excise taxes for the political expenditures. However, the Publication does not explicitly include churches with its remarks about the excise taxes for lobbying violations.
What would losing tax-exempt status mean?
Were a church to experience revocation of its tax-exempt status, whether due to violating political campaign or lobbying limitations, several potential penalties would arise, including the following:
the church’s net income would be subject to federal income taxation;
the church’s net income would be subject to state income taxation (except in those few states not having an income tax);
donors no longer could deduct charitable contributions they make to the church;
the church would be ineligible to establish or maintain “403(b)” tax-sheltered annuities;
possible loss of property tax exemption under state law;
possible loss of sales tax exemption under state law;
possible loss of exemption from unemployment tax under state and federal law;
loss of preferential mailing rates;
a minister’s housing allowance might be affected;
the significant protections available to a church under the Church Audit Procedures Act may no longer apply; and
the exemption of the church from the ban on religious discrimination under various federal and state civil rights laws may be affected.
These consequences should be considered when deciding whether or not to engage in political activities.
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.
Image: Joaquin Corbalan | Getty
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 confront a dilemma summed up in a question: What can they do or say about the upcoming election and how far is too far?
Many churches earnestly attempt to navigate this dilemma while others are simply silent.
If I were to ask you what your church may legally do during an election year, could you answer with any clarity? 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, but especially considering the constitutional guarantees churches enjoy.
Through exploring and explaining the Johnson Amendment, the legislation behind much of the confusion, leaders will learn more from this article about their constitutional protections—and the cautions to still note—with 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, who was the motivating factor in adding the provision to the tax code in 1954.
The history behind the passage of the Johnson Amendment suggests that Johnson proposed the Amendment to silence two powerful, secular nonprofit organizations that 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 and 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 but 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 of the Johnson Amendment, and the ambiguous IRS regulations interpreting and enforcing it, is to chill the speech of America’s churches and pastors.
Just ask any number of pastors, and they will likely tell you they have no idea exactly what is or is not prohibited speech when it comes to candidates or elections. So, most just say nothing, and 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 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, preferring a status quo in which the law is never clarified, and the result is self-censorship by most churches. In fact, no court to date has squarely confronted the constitutionality of government regulation of a church’s speech on elections or candidates during a church service or event. Yet this is precisely what the Johnson Amendment claims authority to do.
Moreover, some organizations that advocate for a radical enforcement of the “separation of church and state” take advantage of the vagueness of the Johnson Amendment. One organization even conducted a nationwide advocacy campaign one election year 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 would not even act on such complaints. Merely the threat, or in some cases an actual complaint followed by a press release, was enough to perpetuate the chill on 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 to determine whether the church violated the law. 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 and are usually unconstitutional because these kinds of restrictions give the government far too much power to censor speech it does not like.
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—even though the Constitution (by virtue of the First Amendment’s Establishment Clause) requires the government to exempt a church from taxation.
Think about it this way: 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) or only 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—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 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. Among the handful of churches that have been investigated by the IRS for Johnson Amendment violations, most if not all settled with the IRS to avoid the draconian tax penalties and their 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, which does not look to be forthcoming any time in the future, 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 but to get rid of the 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 and 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, a Republican from Pennsylvania, in an attempt to silence a nonprofit organization, the National Economy League, that had come into direct conflict 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.
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.
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.
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.
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.
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 congregationif 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 the time of their founding, but whether they incorporate or not, nearly all will adopt a governing document commonly known as the bylaws. It is within the bylaws that systems and processes for making and ratifying decisions for the church get set.
Generally speaking, one of the following governance models is most often set in a church’s bylaws:
A board-led church. The board is authorized to act on behalf of the congregation. This governing body may be known as the board of elders, the board of trustees, the board of directors, or a similar title. As a general matter, and unless required by state statute or other related measure, the congregation is not advised of, or invited to participate in, the decisions regarding the church’s operations.
A congregation-led church. As defined by the church’s bylaws, the church’s members vote on most, if not all, issues of significance, including major decisions.
A denomination-led church (where the local church is a part of a denominational hierarchy). This usually means that there is a Book of Discipline or similar manual outlining the operations from the denominational level all the way to the local church level. There is usually little wiggle room for how a local church operates as the Book of Discipline outlines the mission, doctrine, structure, and membership.
A healthy church typically should include three prongs of a sound governance ecosystem: (1) the pastoral leadership, (2) the governing board (often known as board of elders, board of trustees, or board of directors), and (3) the congregation. All three prongs can be present under each of the most common governance models.
I have written, reviewed, and revised hundreds of church bylaws in my more than 20 years of representing churches as an attorney. While congregationally governed churches remain the most common model, especially among certain denominations, significant changes are afoot.
More churches of varying sizes and denominations are contemplating—and in many cases adopting through revised bylaws—structures that consolidate the decision-making power to fewer individuals, such as a group of elders or the board of directors.
When the governance structure is changed in a congregation-led church, either eliminating or significantly limiting the congregation’s role in making major church decisions, the implications can be significant. When one of those prongs of a healthy governance ecosystem quietly gets cut out, problems usually arise.
The role of members
Problems arise because church members often are the lifeblood of a church—and their sudden loss of input into church decisions can be jarring.
Take, for instance, my childhood church. Some might say I was born into the church. I grew up in a small rural congregation with fewer than 200 members.
Even though the church was small, the families in that church were significant in the way they connected to each other. They were the most dedicated members I have ever seen. There were lots of Sunday dinners where, quite traditionally, the ladies of the church would prepare food so that everyone could share a meal together. When someone took ill, the first persons to show up at the hospital were likely their fellow church members, with family filing in later.
The church members kept the building clean, provided the worship music, and took care of administrative tasks—all without pay. They also deeply cared about the decisions that affected the church’s operations.
Quarterly business meetings allowed members to vote on issues ranging from scheduling of special church events to whether the budget could support a contemplated purchase. The concept of membership was simple: the people who joined the church (generally noted by baptism and taking the right hand of fellowship) were the members.
My experience vividly illustrates the congregation-led model in action. Churches will define membership different ways and set very different processes for how someone becomes a member. But no matter how it happens, if a church follows a congregation-led governance structure, its members expect to play direct and vital roles in the church’s direction and decision-making.
When that structure is suddenly changed, and with little or no prior notice, members will understandably feel blindsided.
Moving away from the congregation-led model
Why would a church’s leadership move away from a congregation-led structure?
One common reason is the desire to avoid conflict—the “brouhahas” that can erupt during some church meetings.
Another reason is convenience. Many church leaders often want to remove the “red tape” of having to go to the congregation with important decisions. There is truth to this sentiment. It is a more complicated model and it likely takes more time to move matters forward in a congregation-led church.
But many would argue that moving fast doesn’t always mean moving wisely. In fact, the requirements of seeking out a majority or two-thirds of a congregation’s support for major decisions is intentionally designed to ensure no ill-advised actions are made in haste. Perhaps just as importantly, the members—the lifeblood of the church—know what issues are under consideration and provide direct say regarding their outcomes.
A cause of conflict
As more churches contemplate changes to their governance structures, I have watched a corresponding increase in litigation. The lawsuits involve conflicts over the ways a church’s membership is defined, how the governance structure works, and how changes to the definitions of either—or both—were made, especially with little or no communication. The ensuing court battles often are protracted.
In each instance, the question of membership (and, therefore, who has the right to vote on major decisions) has been a foundational decision to be made by the judge or jury asked to decide the outcome of the trial. In my experience, judges are suspicious when they learn that the people who have attended the church regularly and given donations to the church are no longer considered voting members.
Courts are increasingly willing to weigh in on such lawsuits, too. Despite recent decisions from the US Supreme Court affirming the general right for churches to self-govern without government intrusion (the so-called “ecclesiastical abstention doctrine”), there are instances in which courts can make decisions regarding corporate documents when they do not require interpreting church doctrine or polity.
Conflicts erupting from church meetings and elections is one major reason why some churches have shifted to a governance model where decisions generally do not involve the people in the pews. While there are certainly considerations to avoid church meetings going off the rails (Episode 5 of the Church Law podcast gives excellent tips on this specific issue), removing the congregation from decision-making should not be a first resort since it is likely to create a new series of problems.
The decline of Seattle’s Mars Hill Church offers another cautionary tale with respect to governance and alterations made to decision-making structures. The church never used a congregation-led governance structure. However, a quiet change to further consolidate power within its elder-led model further illustrates how such an approach can go wrong.
Founded in 1996 as a home Bible study, Mars Hill grew to more than 12,000 people at 15 locations in weekly attendance. After a series of internal conflicts and troublesome behaviors of its lead pastor, Mark Driscoll, the church experienced a dramatic collapse in 2014.
One of the decisions initiated by Driscoll was to revise the church’s bylaws, taking its elder-led model of governance and further consolidating it into a smaller group of elders and pastoral leaders that included himself. As a result, this quietly increased power to the leadership role, which turned out to be implosive.
The damaging repercussions of Mars Hill’s change were many, as Episode 7 of The Rise and Fall of Mars Hill podcast recounts. Fewer voices could speak into the church’s direction. And major decisions required convincing fewer people for approval. Ultimately, the church fell apart, not because of the governance change alone—but certainly the collapse of the church was enabled by the change.
The issue of how a church defines (or redefines) its governance model, and to what degree it involves the membership, is a matter more important than many church leaders may have thought. If a church makes the decision to alter its governance structure in a manner that limits the voices at the table when critical decisions are made, then there are several key considerations.
Six key considerations
Pastors and boards should understand at least six key matters if they are considering changing from a congregation-led model to a board-led model.
First, leadership should make a detailed assessment of the church’s current governance (its articles of incorporation, bylaws, and any denominational documents). Learn the church’s current legal structure, and what must be followed to implement a change if one is desired. Church leaders must make sure they don’t break any legal or fiduciary duties under the current model (because doing so will invalidate any action they take).
Second, a review of the corporate requirements in the jurisdiction in which the church is based will be essential. While the law gives churches wide latitude to govern in a way that best suits the church, many states require congregational votes in certain instances, no matter the governance structure. Your church’s leadership will not want to run afoul of such regulations.
Third, if a congregation-led model is currently set by the bylaws, consider (or reconsider) the reasons why.
Fourth, church leaders should spend time evaluating the board- and elder-led governance models. What are the desirable characteristics of each model? What might be the downsides? Are there alternative ways of accomplishing what is desired within the current congregation-led model instead?
Fifth, consider how the church should bring about discussion, deliberation, and a decision about a potential change. How will church leadership share the possibility with the congregation? What requirements are set out in the bylaws dictate how a change can be adopted? What potential fallout within the church may result? Will this change be communicated to the congregation? When? And consider what role the congregation will play in effectuating this change (per state regulations and the governance-related requirements discussed above).
Finally, if a decision to shift from a congregation-led model to an elder- or board-led model is reached, leaders must be prepared for numerous legal and administrative tasks. For instance, the church’s articles of incorporation and other corporate documents will need to be reviewed and likely revised to ensure they work in harmony.
Extreme caution is needed
While The Rise and Fall of Mars Hill podcast highlights many cautions for a church that wants to remain healthy, one of the most significant points any church leader should walk away with is this: A change in a church’s governance structure without full transparency and extreme caution can have disastrous outcomes.
Additional Insights and Cautions
For more information on this important topic, listen to Erika Cole’s interview on the Church Law podcast with Mike Cosper, creator and host of The Rise and Fall of Mars Hill. Advantage Members can sign up for Cole’s Church Law & Tax webinar on April 27, which will cover church governance structures and the cautions churches should consider before making subtle, sudden changes.
Quietly attempting to shrink who has a voice in major decisions regarding church operations is likely to be a cause for concern. A methodical examination of the sincere reasons for such a change, along with a detailed review of the internal governing documents and state law on the role of the congregation in certain decisions, should be conducted.
Whether you need to carefully review your governing documents or if you are considering altering your governing model, here is one thing you should always do: Seek the guidance of seasoned legal counsel with knowledge of church governance matters.
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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Can Churches Bar Service Animals?
Before your church considers barring service animals, it is good to understand the legal and ministerial dimensions.
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.
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
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:
Is the dog serving someone with a disability?
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?
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.
Seek legal assistance
Church leaders should seek legal counsel when responding to requests by employees, job applicants, church members, and visitors.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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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
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:
Obtain a qualified appraisal,
Obtain a contemporaneous written acknowledgment from the charitable organization,
Prepare and submit Form 8283 with his or her tax return, and
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.
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.
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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.
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.
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.
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.
Image: AdobeStock/Pixel-Shot
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.
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.
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 the business owner for Church Law & Tax.
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.
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
Segment 2: The History of RLUIPA
Segment 3: Key Provisions of RLUIPA
Segment 4: RLUIPA Resources
Segment 5: How RLUIPA May Help Your Church in the Future
Case Study 1: Christian Fellowship Centers
Case Study 2: City Walk Urban Mission
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.
Does your church use Robert’s Rules of Order Newly Revised as its parliamentary authority, either by a specific reference in the church bylaws or by common usage? If so, it is important for you to be familiar with the key provisions in the new and revised 12th edition of Robert’s Rules of Order Newly Revised to ensure that your board and membership meetings are being conducted consistently with your parliamentary authority.
Other Authorities for Parliamentary Procedure
While the 12th edition Robert’s Rules of Order, Newly Revised is by far the most widely used parliamentary authority, other authorities exist. For three other sources, see “Common Sources of Parliamentary Procedure.”
In late 2020, the new and fully revised 12th edition of Robert’s Rules of Order Newly Revised was released. It replaces all earlier editions, including the most recent 11th edition that was published in 2010.
The preface to the new edition explains the need for a revision as follows:
This Twelfth Edition of Robert’s Rules of Order Newly Revised clarifies, modifies, and expands upon the rules in previous editions, as situations occurring in assemblies point to a need for more fully developed rules to go by in particular cases.
This new edition contains more than 89 substantive changes in parliamentary procedure. It is important for church leaders to be aware of this development since most church bylaws identify Robert’s Rules of Order Newly Revised as the official parliamentary authority in the conduct of membership meetings. The preface to the 12th edition of Robert’s Rules of Order Newly Revised states:
This Twelfth Edition supersedes all previous editions and is intended automatically to become the parliamentary authority in organizations whose bylaws prescribe “Robert’s Rules of Order,” “Robert’s Rules of Order Revised,” “Robert’s Rules of Order Newly Revised,” or “the current edition of” any of these titles, or the like, without specifying a particular edition. If the bylaws specifically identify one of the 11 previous editions of the work as parliamentary authority, the bylaws should be amended to prescribe “the current edition of Robert’s Rules of Order Newly Revised.”
As a result, any church that has identified Robert’s Rules of Order or Robert’s Rules of Order Newly Revised in its governing document will be bound by the rules contained in the 12th edition of Robert’s Rules of Order Newly Revised. It is for this reason that church leaders should be familiar with the new text. This article will explain the 17 most important changes that are relevant to church meetings and practice.
Example. A church’s bylaws state that “the parliamentary authority for all church business meetings shall be Robert’s Rules of Order Newly Revised (7th edition 1970). The church must use this edition as it’s parliamentary authority. The church should amend its bylaws to define its parliamentary authority as “the current edition” of Robert’s Rules of Order or Robert’s Rules of Order Newly Revised.
Example. A church’s bylaws state that “the parliamentary authority for all church business meetings shall be Robert’s Rules of Order Newly Revised.” The preface to the 12th edition of Robert’s Rules of Order Newly Revised states that the 12th edition “is intended automatically to become the parliamentary authority in organizations whose bylaws prescribe ‘Robert’s Rules of Order,’ ‘Robert’s Rules of Order Revised,’ ‘Robert’s Rules of Order Newly Revised,’ or ‘the current edition of’ any of these titles . . . without specifying a particular edition.”
Note. Each example that follows assumes that a church has adopted the current edition of Roberts Rules of Order Newly Revised as its parliamentary authority.
1. Rearranges the rules that apply to the motion to Lay on the Table
One of the most misunderstood motions in parliamentary law is the motion to Lay on the Table. It is common during the consideration of a motion for someone to blurt out “Table” or “Table it,” as a way to kill any further discussion of a pending motion. But there is no such motion in Robert’s Rules of Order Newly Revised and so it is an improper motion. Here are the key points to note, as set forth in section 17 of the 12th edition :
Section 17.2 states that “in ordinary assemblies, the motion to Lay on the Table is not in order if the evident intent is to kill or avoid dealing with a measure.”
The motion to Lay on the Table does not kill consideration of a motion, but rather enables the assembly to lay the pending question aside temporarily when something else of immediate urgency has arisen or when something else needs to be addressed before consideration of the pending question is resolved, with the understanding that consideration of the pending motion is resumed by vote of the majority.
Robert’s Rules of Order Newly Revised does recognize a motion to Postpone Indefinitely which is designed to allow members to permanently kill a pending motion.
Example. During debate on a motion during a church business meeting, a member shouts “I move that we table the motion” with the intent to kill any further discussion of the pending motion. The chair should inform the member that there is no motion to table in Roberts Rules of Order, but that if his intent is to kill further consideration of the motion, the way to do so is by a motion to Postpone Indefinitely. Such a motion requires a second, is debatable, is not amendable, cannot interrupt a pending motion, and requires a majority vote to pass.
Example. A church convenes its annual business meeting at 10 a.m. on a Saturday morning in the sanctuary. The meeting takes longer than expected. At 1 p.m., the members are engaged in consideration of an important motion. Several members are concerned that the meeting may last for at least a few more hours. A member moves to Lay on the Table the pending motion so that members can break for lunch. Following a one-hour lunch break, the meeting resumes, and a motion is offered to take the motion from the table. Such a motion requires a majority vote.
2. Rules pertaining to the office of vice-president
Section 47:23-31 of the 12th edition consolidates and clarifies the rules pertaining to the office of vice-president. In prior editions of Robert’s Rules of Order Newly Revised, these rules were scattered throughout the text. Here are the main provisions:
In the absence of the president, or when for any reason the president vacates the chair, the vice-president serves in his or her stead.
When a vice-president is presiding over a meeting, he or she is addressed as “Mr. President” or Madam President,” unless confusion might result, for example, when the president is also on the platform. In which case, the form “Mr. Vice President” or “Madam Vice President” may be used.
If the bylaws provide that the president shall appoint all committees, this power does not transfer to a vice-president occupying the chair, even when the president is absent.
The president and vice-president may have occasion to make reports in connection with their duties prescribed in the bylaws. If the president has prepared a report but cannot attend a meeting at which it is to be presented, the vice-president should present it. But the vice-president cannot modify the president’s report, or substitute a different one for it, simply because the president is absent.
In the case of the president’s resignation, death, or removal, the vice-president automatically becomes president for the remainder of the term, unless the bylaws expressly provided otherwise for filling a vacancy in the office of president.
Although in many cases the outgoing vice-president will be the logical nominee for president for the next term, the church has the freedom to make its own choice and to elect the most promising candidate at that time, unless stated otherwise in the bylaws.
3. Executive session
An executive session in general parliamentary usage has come to mean any meeting of a deliberative assembly, or a portion of a meeting, at which the proceedings are secret. As a general rule, anything that occurs in executive session may not be divulged to nonmembers (except any entitled to attend). However, section 9:26-27 of the 12th edition provides the following clarification:
[A]ction taken, as distinct from that which was said in debate, may be divulged to the extent—and only to the extent—necessary to carry it out. . . . If an assembly wishes to further lift the secrecy of action taken in an executive session, it may adopt a motion to do so, which is a motion to Amend Something Previously Adopted.
4. Electronic voting
Section 45:42 of the 12th edition clarifies that the use of electronic devices, such as voting keypads, can fulfill a requirement that voting be by ballot:
[The use of such devices to conduct voting] may be directed by a special rule of order or convention standing rule. . . . Members must be able to indicate their choices without revealing how they have voted. If the devices are to be used for an election, provision must be made to allow voters to cast write-in votes. If the devices are to be used to conduct voting on several questions or several independent offices simultaneously, then they must be programmed to allow the number of votes cast for purposes of computing the majority to be tallied independently for each question or office.
5. Making board minutes available to others
Robert’s Rules of Order Newly Revised has long provided that a record of a board’s proceedings is kept by the secretary, and only members of the board have the right to examine the minute book kept by the secretary unless the board orders otherwise. The board can order that any specified persons, including, for example, all members of the assembly, be permitted to view or be furnished copies of board minutes.
Section 49:19 of the 12th edition further provides:
Whether or not board minutes are protected by the secrecy of an executive session, the assembly of the society can adopt a motion granting such permission, or can order that the board’s minutes be produced and read at a meeting of the assembly, by a two-thirds vote, the vote of the majority of the entire membership of the assembly, or a majority vote if previous notice has been given.
Example. During the annual business meeting of a church, a motion is offered to require the minutes of the board of deacons to be read at each annual business meeting of the church. The motion receives a vote of 60 percent. While not entirely clear, section 49:19 seems to require a two-thirds vote for the board minutes to be read at a meeting of the assembly, and as a result the motion is lost.
Example. Same facts as the previous example except that valid notice of the meeting was provided to the membership pursuant to the church bylaws. Section 49:19 specifies that the church can by majority vote grant the motion if previous notice has been given.
Tip. A church not wanting a broad distribution of board minutes has the option of amending the church bylaws to restrict distribution of board minutes solely to members of the board.
6. Terms of office
Section 56:27 of the 12th edition contains the following helpful clarification regarding terms of office:
When the bylaws specify the number of years in a term of office, it is understood that the actual term may be more or less than a whole number of calendar years, owing to permissible variation in the dates on which successive elections are scheduled.
Section 57:27 illustrates this clarification with the following example:
Example. The bylaws provide that the annual meeting for the election of officers shall take place “in October or November,” that their terms of office shall begin “at the close of the annual meeting,” and that they shall serve for a term of “one-year and until their successors are elected.” If the annual meeting is held on October 20 of one year and on November 1 of the next, the officers elected at the second meeting take office immediately upon the adjournment of that meeting—and the previous officers remain in office until that time—even though this represents a term of office longer than one calendar year.
7. A bylaw revision must be prepared by a committee authorized to draft it
Section 57:5 of the 12th edition specifies that “consideration of a revision of the bylaws is in order only when prepared by a committee that has been properly authorized to draft it, either by the membership or by an executive board that has the power to refer such matters to a committee.”
This provision, and many others described in this article, illustrate a fundamental flaw that has plagued the last several editions of Robert’s Rules of Order Newly Revised. Henry Robert’s purpose in compiling his original Robert’s Rules of Order in 1876 is described in the preface as follows:
There appears to be much needed a work on parliamentary law . . . adapted, in its details, to the use of ordinary societies. Such a work should give, not only the methods of organizing and conducting the meetings, the duties of the officers and the names of the ordinary motions, but in addition, should state in a systematic manner, in reference to each motion, its object and effect; whether it can be amended or debated; if debatable, the extent to which it opens the main question to debate; the circumstances under which it can be made, and what other motions can be made while it is pending.
That is, Robert’s Rules of Order was written to provide a body of rules to assist organizations in conducting meetings with order, decorum, consistency, and efficiency. The original work was devoted entirely to an explanation of these rules. Its table of contents included two parts: rules of order and conduct of business.
But subsequent editions of Robert’s Rules of Order and Robert’s Rules of Order Newly Revised have introduced several new subjects pertaining to matters of church governance and administration rather than “rules of order.” These include the following:
The selection and duties of the vice-president, secretary, and treasurer; honorary officers; appointed officers; and filling vacancies.
The content and form of minutes of board and member meetings.
The selection, authority, and removal of board members; ex officio board members; the appointment of committees; and the conduct of business in boards and committees.
Church bylaws almost always define a quorum for both board and membership meetings, a quorum being the minimum number of members present in order for business to be transacted. If a church’s bylaws fail to designate a quorum, then the state nonprofit corporation law under which the church is incorporated will define a quorum. It is almost inconceivable that Robert’s Rules of Order Newly Revised will ever be the authority that defines a quorum in meetings of a church’s board or members.
The content and composition of bylaws; drafting of bylaws; appointment of a bylaws committee; articles to be included in bylaws (Article I: Name, Article II: Object, Article III: Members, Article IV: Officers, Article V: Meetings, Article VI: Board of Directors, Article VII: Committees, Article VIII: Parliamentary Authority, Article IX: Amendments); a sample set of bylaws; principles of interpretation; amendment of bylaws; giving members notice of bylaw amendments; and when bylaw amendments take effect.
The discipline and punishment of members; removal of officers for dereliction of duties; investigations; trials; rights of the accused; and fair procedures.
These subjects address matters of church governance and administration that are addressed in a church’s bylaws or, in some cases, in the nonprofit corporation law under which a church is incorporated. They have nothing to do with parliamentary procedure and therefore their inclusion in Robert’s Rules of Order Newly Revised not only is inappropriate, but it creates needless confusion due to the inevitable conflicts that will arise between a church’s bylaws and its parliamentary authority.
Note the following two rules of construction:
Rule 1. A church’s bylaws always take precedence over conflicting provisions in Robert’s Rules of Order Newly Revised, since bylaws are a higher legal authority and are superseded only by a church’s charter (articles of incorporation) and, in some cases, by a church’s constitution and denominational rules.
Rule 2. Any provision in Robert’s Rules of Order Newly Revised that does not pertain to parliamentary procedure exceeds the scope and purpose of Robert’s Rules and is superseded by conflicting provisions in a church’s charter, constitution, or bylaws.
These rules are illustrated by the following examples.
Example. A church’s bylaws specify that the quorum for annual membership meetings is 20 percent of all members. State nonprofit corporation law under which the church is incorporated specifies that a quorum is 10 percent of members. Robert’s Rules of Order Newly Revised specifies that the quorum in church meetings “consists of those who attend.” This is a perfect example of the impropriety of Robert’s Rules of Order Newly Revised addressing issues of governance. The definition of a quorum in Robert’s Rules of Order Newly Revised is irrelevant. The operative quorum is the 20 percent specified in the church’s bylaws.
Example. Section 56 in the 12th edition of Robert’s Rules of Order Newly Revised states that the sequence of articles in an organization’s bylaws should be as follows: Article I: Name, Article II: Object, Article III: Members, Article IV: Officers, Article V: Meetings, Article VI: Board of Directors, Article VII: Committees, Article VIII: Parliamentary Authority, Article IX: Amendments. A church’s bylaws include several articles not referenced in Robert’s Rules of Order Newly Revised. Does this mean that the bylaws need to be amended to delete the additional articles in order to correspond to Robert’s Rules of Order Newly Revised? Of course not. Remember, the bylaws control over conflicting provisions in Robert’s Rules of Order Newly Revised, and this is especially true for those provisions in Robert’s Rules of Order Newly Revised having nothing to do with parliamentary procedure.
Why does a manual on parliamentary procedure address the discipline and removal of officers? Not only does this make no sense when this topic is covered under both corporation law (both nonprofit and for-profit) and an entity’s bylaws or articles of incorporation, but it will lead to needless confusion as to the controlling rule (articles, bylaws, nonprofit corporation law, or parliamentary authority).
How should church leaders determine the governing document when there is a conflict in the various sources of authority? Consider the previous example of a church that is trying to determine the quorum requirement for its annual business meeting. Its bylaws specify 20 percent, the applicable nonprofit corporation statute says 10 percent, and Robert’s Rules of Order Newly Revised says “those who attend.” It is easy to see how these conflicts can lead to needless confusion and uncertainty.
Some may challenge the legality of a meeting based on noncompliance with one or more of these sources of authority. Table 1 provides church leaders with a tool for determining the ranking of various sources of authority in “congregational” churches (those that function independently of a religious hierarchy). Start at the top, and go down the list until you find the highest authority to address a particular question.
This process will guide you to the controlling authority. In the church quorum example, the highest ranked authority would be the church’s bylaws, meaning that the applicable quorum is 20 percent of all members. So, a meeting at which 12 percent of members attend would not satisfy the quorum requirement even though it would satisfy the quorum definition under the state nonprofit corporation law and Robert’s Rules.
Caution. According to Table 1, the revised section in Robert’s Rules of Order Newly Revised pertaining to the discipline of officers would have no relevance or application to the discipline of officers in a church that is incorporated under the Model Nonprofit Corporation Act or whose charter, constitution, or bylaws address the discipline of officers, making conflicting provisions in Robert’s Rules of Order Newly Revised inapplicable and irrelevant.
8. Appendix containing sample rules for electronic meetings
The 12th edition includes a 15-page Appendix that provides rules to follow when conducting electronic meetings. Separate rules, and sample bylaw amendments, are provided for the following categories:
A. Full-featured internet meeting services that integrate audio, video, text, and voting capabilities.
B. Telephone meetings, with internet services for conducting secret votes and sharing documents.
C. A speakerphone in the meeting room to allow members who are not physically present to participate by telephone.
D. Telephone meetings without internet support and without any central meeting room.
To illustrate, the following sample bylaw amendment is provided for category “A”:
Meetings held electronically. Except as otherwise provided in these bylaws, meetings of the Board shall be conducted through use of Internet meeting services designated by the President that support anonymous voting and support visible displays identifying those participating, identifying those seeking recognition to speak, showing (or permitting the retrieval of) the text of pending motions, and showing the results of votes. These electronic meetings of the Board shall be subject to all rules adopted by the Board, or by the Society, to govern them, which may include any reasonable limitations on, and requirements for, Board members’ participation. Any such rules adopted by the Board shall supersede any conflicting roles in the parliamentary authority, but may not otherwise conflict with or alter any rules or decision of the Society. An anonymous vote conducted through the designated Internet meeting service shall be deemed a ballot vote, fulfilling any requirement in the bylaws or rules that a vote be conducted by ballot.
Note. This proposed bylaw provision is inadequate in some respects and should not be relied upon without the advice of legal counsel. Further, it is superseded by any provisions in a church’s bylaws or applicable nonprofit corporation law pertaining to electronic voting.
The 12th edition includes sample rules that can be adopted to assist with the conduct of electronic meetings. These rules, for category “A” scenarios, include the following subjects:
Login information
Login time
Signing in and out
Quorum calls
Technical requirements and malfunctions
Forced disconnections
Assignment of the floor
Interrupting a member
Motions submitted in writing
Display of motions
Voting
Video display
9. Excluding nonmembers from a meeting without going into executive session
“Executive session” refers to a meeting, or part of a meeting, of a board or other deliberative assembly that is conducted in secret with only members and invited guests being present.
Section 9:25 of the 12th edition contains a new provision allowing a board to exclude nonmembers from a meeting without going into executive session. It states:
[I]n the case of a board or committee meeting being held in executive session, all persons—whether or not they are members of the organization–who are not members of the board or committee (and who are not otherwise specifically invited or entitled to attend) are excluded from the meeting. When it is desired to similarly restrict attendance at a particular meeting without imposing (or to remove a previously imposed restriction on attendance), this may also be done by majority vote.
Example. A church board is discussing the discipline of a member during a scheduled meeting of the board. Two church members (who are not board members) show up and request permission to attend. The board can exclude these two members from attending either by transitioning into executive session or by voting to exclude them (majority vote). Executive session is appropriate if confidential matters will be discussed. The second option is appropriate if there is no confidential information to protect.
Example. A church member begins attending board meetings insisting that it is his right to do so. The board can exclude this member from attending either by transitioning into executive session, or by voting to exclude him (majority vote). Executive session is appropriate if confidential matters will be discussed. The second option is appropriate if there is no confidential information to protect.
10. Ratification of actions taken without a valid meeting
Ratification means the formal approval of a previously unauthorized act. For example, a church board votes to sell a home that was donated to the church. The church’s bylaws state that only the members in a membership meeting have the authority to sell church property. While the sale was unauthorized, it can be ratified by the membership in a church business meeting.
Section 10:54 in the 12th edition adds the following new information regarding ratification:
The motion to ratify (also called approve or confirm) . . . is used to confirm or make valid an action already taken that cannot become valid until approved by the assembly. Cases where the procedure of ratification is applicable include . . . action taken by officers, committees, delegates, subordinate bodies, or staff in excess of their instructions or authority including action to carry out decisions made without a valid meeting, such as by approval obtained separately from all board members or at an electronic meeting of a body for which such meetings are not authorized.
Example. A church conducted its annual business meeting by means of a virtual internet connection. Church leaders later discovered that its bylaws did not authorize electronic meetings. The unauthorized actions taken at this meeting can be ratified in a subsequent business meeting of the members.
11. Changing one’s ballot
Section 45 of the previous 11th edition of Robert’s Rules of Order Newly Revised specified that a member has a right to change his vote “up to the time the result is announced; after that, you can make the change only by the unanimous consent of the assembly requested and granted, without debate, immediately following the chair’s announcement of the results of the vote.”
Section 45:8 of the new 12th edition modifies this language as follows:
Except when the vote has been taken by ballot (or some other method that provides secrecy), a member has a right to change his vote up to the time the vote is announced but afterward can make the change only by the unanimous consent of the assembly requested and granted, without debate, immediately following the chair’s announcement of the results of the vote.
According to this language, the right of a member to change a vote does not apply when the vote is taken by ballot or some other method providing secrecy.
Example. A church conducts an election for two officers by ballot, during its annual business meeting. Following the chair’s announcement of the vote, a member rises and requests permission to change her vote. The chair should rule that this request is out of order since under the newly revised 12th edition of Robert’s Rules of Order Newly Revised the right of a member to change a vote does not apply when the vote is taken by ballot or some other method providing secrecy.
12. Secrecy of ballot votes
Section 45 of the previous 11th edition of Robert’s Rules of Order Newly Revised specified:
When a vote is to be taken, or has been taken, by ballot, whether or not the bylaws require that form of voting, no motion is in order that would force the disclosure of a member’s vote our views on the matter.
Section 45 of the new 12th edition modifies this language as follows:
When the bylaws require a vote to be taken by ballot, this requirement cannot be suspended—even by unanimous vote—so as to take the vote by a non-secret method.
Example. During a church business meeting, the election of a pastor is on the agenda. The church board presents one candidate for consideration. The chair, in an effort to expedite business, asks for unanimous approval to vote by a show of hands even though the church’s bylaws require voting by ballot. According to the new 12th edition of Robert’s Rules of Order Newly Revised, the bylaw requirement for voting by ballot cannot be disregarded even by unanimous vote.
13. “Secret ballots”
Section 45:18 of the new 12th edition clarifies that voting by ballot is synonymous with voting by secret ballot. This was never clarified in previous editions of Robert’s Rules.
14. Balloting by mail
Section 45 of the previous 11th edition of Robert’s Rules of Order Newly Revised specified that elections by ballot can be conducted by mail if the bylaws so provide. However, “unless repeated balloting by mail is feasible in cases where no candidate attains a majority, the bylaws should authorize the use of some form of preferential voting or should provide that a plurality shout aloud.”
The new 12th edition adds that the bylaws should provide for a method of election if there is a tie.
15. Ex officio officers
Section 45 of the previous 11th edition of Robert’s Rules of Order Newly Revised specified that an ex officio board member who is “under the authority” of the organization in the sense that he or she is a member, employee, or elected or appointed officer, is treated the same as any other director. An ex officio member has both the benefits and obligations of being a director.
However, an ex officio director who is not under the authority of the organization “should not be counted in determining the number required for a quorum or whether a quorum is present at a meeting.” Further, “whenever an ex officio board member is also ex officio an officer of the board, he of course has the obligation to serve as a regular working member.”
Section 49:8 of the 12th edition provides the following clarification:
If the ex officio member is not under the authority of the society, he has all the privileges of board membership, including the right to make motions and to vote, but none of the obligations. . . . The latter class of ex officio board members, who [have] no obligation to participate, [are] not counted in determining the number required for a quorum or whether a quorum is present at the meeting. Whenever an ex officio board member is also ex officio an officer of the board, he of course has the obligation to serve as a regular working member and is therefore counted in the quorum.
Example. A church classifies a former board member who had served on the board for 30 years as an ex officio member of the board. While this director may vote and make motions, he or she is not required to participate in any board meetings and in fact rarely does so. Since this ex officio member has no obligation to participate in board meetings, he or she is not counted in determining the number required for a quorum or whether a quorum is present at a meeting.
Example. A church designates an ex officio member as an ex officio officer. The new 12th edition of Robert’s Rules of Order Newly Revised provides that “whenever an ex officio board member is also ex officio an officer of the board, he of course has the obligation to serve as a regular working member and is therefore counted in the quorum.”
16. Correct procedure for “receiving” a report
Previous editions of Robert’s Rules of Order Newly Revised specified that reports of officers, boards, and committees were “received” when read: “When the assembly hears the report thus read or orally rendered, it receives the report.”
In other words, the person reading the report presents it, while the listeners receive it. As a result, it is incorrect parliamentary practice for a motion to be made at a board or membership meeting to “receive” a report after it is presented, since the act of presenting it constitutes reception by the hearers.
Section 51:28 of the new 12th edition goes a step further and states that a motion to receive a report is out of order:
A common error is to move that a report “received” after it has been read—apparently on the supposition that such a motion is necessary in order for the report to be taken under consideration or to be recorded as having been made. In fact, this motion is meaningless and therefore not in order, since the report has already been received.
Example. During a church business meeting, the secretary presents her report and a motion is made to “receive” the report. The chair should rule this motion out of order since the presentation of the report constitutes its receipt. The new 12th edition states: “[T]his motion is meaningless and therefore not in order, since the report has already been received.”
The 12 edition states that motions to adopt or accept the report of an officer or committee are synonymous, and signify that the entire report becomes “the act or statement of the assembly.” Such motions are common in church board and membership meetings.
To illustrate, it is common for motions to be made and passed to accept a treasurer’s report or the minutes of the previous meeting. It is important to understand, however, that such motions have the effect of “the assembly’s endorsing every word of the report, including the indicated facts and reasoning, as its own statement.”
This may not be a problem in some, or even most, cases. For example, a board may want to formally adopt the minutes of each meeting, since they reflect the actions of the board itself. But there can be situations in which it would be more appropriate for a board or assembly to merely receive a report (by having it presented), and then referring it to the secretary of the board.
In some organizations, the treasurer’s reports to the board of directors are not accepted or adopted (so long as they contain no specific recommendations for action).
Instead, the chairperson requests the secretary to file these reports without action. At the end of the fiscal year, the board adopts a motion to accept the report of the CPA firm that audits the organization’s books.
This has the effect of relieving the treasurer of any personal culpability for his or her reports (excepting fraudulent or illegal activity). It also may minimize the board’s culpability that might otherwise exist if it adopted or accepted each report of its treasurer. The organization itself, at its annual business meeting, also adopts or accepts by motion the CPA’s audit report.
The 12th edition states:
[N]o action of acceptance by the assembly is required, or proper, on a financial report of the treasurer unless it is a sufficient importance, as an annual report, to be referred to auditors. In the latter case it is the auditors’ report which the assembly accepts. The treasurer’s financial report should therefore be prepared long enough in advance for the audit to be completed before the report is made at the meeting of the society.
Some reports of officers or committees contain one or more recommendations for action. In such cases, it is appropriate and necessary for a motion to adopt the recommendation. Usually, such a motion is made by the person presenting the report. But again, many reports made by officers and committees to a board or assembly are for informational purposes and contain no recommendations or motions. There is no need for a motion to accept or adopt such a report, since it is for informational purposes only and contains no recommended action.
The appropriate response by the chairperson to the reading of such reports is to refer them to the secretary for filing with the minutes, without any formal motion. In this regard, Robert’s Rules of Order Newly Revised states: “Apart from filing such a report . . . no action on it is necessary and usually none should be taken.”
Example. At a regularly scheduled meeting of a church board, a committee member reads a report that contains no proposed actions. It would be appropriate for the chairperson to thank the committee and request that the report be placed on file, and then move to the next item of business. A motion to accept or adopt the report is not necessary, since it is informational.
17. Notice of proposed bylaw amendments
The 12th edition states:
Where assemblies meet regularly only once a year, instead of requiring amendments to be submitted at the previous annual meeting, the bylaws should provide for both notice and copies of the proposed amendments to be sent to the member delegates . . . a specified minimum number of days in advance (emphasis added).
The previous 11th Edition ofRobert’s Rules stated that “the bylaws should provide for both notice and copies of the proposed amendment to be sent to the member delegates,” but did not recommend that the bylaws be amended to include such a provision.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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.
Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Image: AdobeStock/ Irina
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.
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 1Applying 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
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.
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.
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 extent to which 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 extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job after the internship.
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.
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 decisionsabout 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.
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.
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.
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.
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.
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.
This series of articles on church employment aims to 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
Additional Reading: Attorney Richard Hammar analyzes notable court decisionsabout common employment disputes.
Employee handbooks, sometimes called employee manuals or employee policies, often represent the Achilles’ heel of church legal compliance.
Employee lawsuits frequently appear near the top of all types of lawsuits against churches. Employee handbooks may assist in avoiding these lawsuits, but this critical documentation is often neglected or copied from secular sources that neglect the unique nature of churches and other religious organizations.
In the employment arena, an employee handbook (handbook) plays the same role in employee relations as the Bible does to a Christian’s everyday life.
Just as the Bible includes rules for relationships and how we should conduct our lives, a handbook includes the rules, policies, and procedures governing and establishing expectations for the relationship between the church and its employees.
A carefully created handbook should include the church’s history, culture, core values, and mission. It should guide the church and its employees’ lives together and address employer and employee expectations arising from the relationship.
This article—the fourth in my series on church employment—is intended to guide churches and ministries to create and maintain this vital ministry and risk-management tool.
Common excuses for not having an employee handbook
Over the last 30 years of offering legal guidance to churches, I have heard lots of excuses for not having a handbook. Many small churches believe they are too small to need one. Other churches claim they lack the time, talent, and money to create and maintain a handbook. Some churches believe that a handbook frustrates and hinders the spiritual side of their work environments.
Then there are church leaders who dislike the restrictions that come with using a handbook. Many leaders believe the church is best served by making ad hoc decisions on an employee-by-employee basis, despite the fact that the resulting inconsistent employment decisions inevitably lead to adverse legal and nonlegal consequences.
Risks with Using Online Templates
Instead of drafting a handbook, some churches copy or download a handbook from the internet. This practice can create more problems than not having a handbook.
First, employee handbooks from secular sources will not reflect the unique nature of the church and its exemptions from some employment laws.
Second, the copied handbook may not reflect state laws and local ordinances accurately.
Finally, the church has no assurance that the source of the copied handbook is accurate or whether a competent church employment attorney reviewed it. It may be better for a church not to have a handbook than to have one that’s unreliable and inaccurate.
When closely examining these excuses from church leaders, all of them fail. And that failure likely results in legal liability. While most employment laws require a minimum number of employees, and thus do not apply to many churches, some employment laws apply to churches with just two or more employees. The legal vulnerability is real.
Mishandling employment-related matters may lead to disruption among the ranks of employees or, worse, charges of unlawful employment actions–even if unintended. That’s why church leaders must make a concerted effort to create a well-drafted handbook.
While doing so requires effort, it will save church leaders time managing their staffs, reducing conflicts and legal liabilities. More important, the handbook can enhance the faith, trust, and community within the church.
While larger churches require professional assistance, the fundamental expertise needed to create and maintain a handbook is readily available from numerous reliable sources, including articles like this one on ChurchLawAndTax.com.
Advantages of a handbook
Here are six key advantages to implementing a well-drafted handbook.
Provides organizational structure
In Part 2 of this article series, I discussed the importance of using job descriptions as the set of instructions that give structure for people to accomplish their respective roles in a church. Good structure doesn’t stop there, though. Every organization also needs policies and procedures that guide those leaders and employees.
A church may adopt dozens of individual policies and procedures, so wise church leaders will want those policies and procedures to be coordinated and consistent with each other. The church will also want assurances that it has addressed all the employment-related topics in its policies and procedures. Therefore, it makes sense to address all the employment-related policies and procedures in a single document, with references or hyperlinks to the detailed policies and procedures.
The church must also manage the handbook’s length to avoid making it too long to be useful. If the handbook exceeds 50 pages, many employees will not read it.
Assures compliance with employment laws
Church leaders must adopt policies and procedures to protect the church, to define the relationship between the church and its employees, and to comply with applicable laws. The handbook provides an important tool to accomplish these goals.
The governing body should approve and require continual maintenance of the handbook. The personnel committee, for example, should review the handbook annually to ensure that it complies with currently applicable laws. Governing bodies and personnel committees then must hold church leaders accountable for following and enforcing the policies and procedures referenced in the handbook.
Welcomes new employees to the church
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The handbook introduces a new employee to the culture and work environment created by the church.
Nearly everyone experiences anxiety when reporting to a new job. The handbook should make new employees feel welcome. It should also answer most new employee’s questions about practices and benefits.
The handbook should describe the church’s culture and explain the relationship between the employee and the church, including the church’s expectations. The new employee’s compliance with these expectations helps assimilate him or her into the church team and reduces conflict. The handbook helps the new employee more quickly become a productive team member.
Assists with communication
The handbook should help prevent miscommunication between church leaders and church employees.
For example, listing the church’s rules of conduct and the employment benefits it offers provides a basis for a common understanding between church leaders and staff.
Handbooks, however, are of little use if they are not read or understood by employees. Churches want to encourage new employees to ask questions early in the relationship. If an employee does not understand a part of the employee handbook, the church needs to know as soon as possible.
So, churches should require new employees to read the handbook within the first few weeks of employment, and signal they understand it by signing a statement to that effect. When the church later disciplines an employee for violating a provision in the handbook, the typical employee excuse is, “I did not understand.” This signed document refutes that notion and supports the church’s disciplinary action.
Church leaders should refer employees to the handbook for common employment-related questions. While no handbook will answer all questions, it should reduce the time leaders spend responding to employee questions.
Avoids unreasonable employee demands
One crucial benefit of a handbook is to maintain consistency and to avoid situations where an employee might make unreasonable requests based on difficult or emotionally charged circumstances.
Consider, for example, the employee who sought a raise because his son was starting college and the employee had no resources for college. Or consider a pastor who requested his church to continue his compensation for as long as he or his spouse live because he had failed to participate in the church retirement plan.
By addressing these and similar issues in the handbook, the church establishes objective rules and expectations that help protect the church and its decision-makers from the unreasonable demands of employees, including pastors.
Helps protect the church from litigation
Most employment laws authorize employees to sue the employer for violations of those laws. In addition, some churches must comply with dozens of federal, state, and local employment laws and ordinances.
While church leaders rarely have the time to learn about all the employment laws and ordinances that apply to their church, the handbook can include instructions on how the church complies with employment laws and ordinances. If the church follows its handbook, the opportunity for employees to sue the church is reduced.
A handbook is a legal document, although usually not enforceable as a contract (see “Recommended disclaimers” below).
To ensure it is properly constructed and remains current, it should be regularly reviewed by an attorney or human resources (HR) professional, ideally one locally based who specializes in church employment law.
Decide on the tone
The tone of the handbook should reflect the culture of the church.
If the church culture is formal, the handbook should reflect formal language. If the church culture is informal, the handbook should use a conversational style.
Some churches include photos and illustrations to break up page after page of text. Some handbooks are made more engaging by including hypotheticals and examples. Sometimes churches use anecdotes to illustrate the text and make it more understandable.
Tip. If the “why” behind the policy is explained, employees will more readily adhere to the policy.
Most handbooks for churches start with a letter from the pastor that welcomes employees to the church. This letter helps set the tone for the handbook and introduces employees to the church’s culture, mission, and values. In addition, many handbooks include a history of the church, vision statement, mission statement, and core values statement.
What goes into an employee handbook?
Churches should review the following topics to determine whether they apply to them.
Statement of faith
One of the most critical parts of a handbook is the church’s statement of faith. As a religious organization, churches have the freedom to practice their faith in many of their employment decisions. The statement of faith demonstrates to employees and outside authorities alike that these are sincerely held religious beliefs.
The statement of faith should not be a lengthy treatise. Instead, it should reflect the church’s fundamental beliefs, especially as those beliefs relate to the current culture. Typically, the statement of faith is one to two pages long.
I recommend that churches require job applicants to agree to the statement of faith before applying for a job. I do not recommend copying another church’s statement of faith unless the source church is part of the same denomination or faith group. The statement of faith must reflect the local church’s beliefs as practiced by that church.
Code of conduct
The handbook should include a code of conduct that applies to all employees, including pastors.
Violations of the code of conduct should cause a disciplinary action against the employee. Some states allow the church to apply the code of conduct based on the employee’s conduct both at work and away from work.
The code of conduct should reflect the church’s values, along with the actions expected of its employees. The code should be practical and expressed in terms of right and wrong behaviors. This code should include the church’s expectations of honesty and integrity while condemning dishonest and unlawful behaviors. It should reflect the church’s doctrine and practices as applied in the current culture. I suggest supplying Scripture references where applicable.
Recommended disclaimers
The handbook should include the following disclaimers.
First, it should state that all employees serve at the pleasure of the church and that the church follows the employment “at will” doctrine (except in Montana). The employment “at will” doctrine means either the employer or employee can terminate the relationship at any time, with or without a reason, as long as the reason does not violate an employment statute.
Second, the handbook should state that it does not create a contract between the church and the employee. The existence of an employment contract alters or eliminates the employment “at will” doctrine. Without this disclaimer, some courts have ruled that the handbook eliminated the “at will“ doctrine and enforced the handbook as a contract.
Third, it should notify employees that the handbook can be changed at any time without notice, although employees still should be informed of changes in a timely manner.
Finally, it should make it clear that employment is not for any specific length of time.
Topics based on federal statutes
Most churches must adhere to federal employment statutes. The best way to assure compliance with these statutes is to adopt policies and procedures that reflect how the church complies with those statutes. Therefore, the church should consider whether its handbook should address each of the topics arising from the federal employment statutes below as they apply to the church. While I have attempted to list all federal employment statutes applicable to churches, the list may not be comprehensive.
Note. While most churches are subject to federal employment statutes, all states also have employment statutes. Usually they mirror the federal statute and apply to employers that would otherwise be exempt from the federal statute. If a conflict between the statutes arises, the most-employee-favorable statute will apply. Additional information on state statutes is given below in the “Topics based on state and local statutes and ordinances” section.
Churches also should note the applicability (or not) of statutes based on the ministerial exception for ministerial positions.
As explained in Part 1 of this series, the ministerial exception doctrine requires that no federal or state employment statute applies to positions involved in the practice of the religion. The handbook should include an extensive discussion about the ministerial exception and its application to employment laws. For help in understanding and correctly applying the ministerial exception, see Part 1.
Title VII, Civil Rights Act of 1964
This statute applies to churches engaged in interstate commerce with 15 or more employees during 20 or more weeks during a calendar year. In addition, Title VII prohibits employers from refusing to hire, discharge, or otherwise discriminate against any individual about compensation, terms, conditions, or privileges of employment based on race, skin color, religion, gender, ancestry, or national origin.
Note. In June 2020, the Supreme Court expanded the definition of prohibited gender discrimination to include sexual orientation, sexual perception, and gender identity. While the Court’s decision excluded its application to religious employers, the church should be prepared to address its position on these categories with assistance from an attorney.
The church should not fail or refuse to hire, discharge, or discriminate against any individual within any protected class unless a religious exception applies (see “Exception” below). The church cannot limit, segregate, or classify its employees or applicants for employment that would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect their status because the employee is in a protected class.
This statute applies to all terms of employment, including recruiting, hiring, placement, promotion, termination, layoff, recall, transfer, leaves of absence, compensation, and training.
Exception. As mentioned briefly above, churches may discriminate based on religion for positions involved in the practice of the religion.
If an adverse employment decision involves a mix of religious reasons and other protected class characteristics, the church may still be liable for discriminating against the other protected class or classes.
The handbook should include a statement that the church follows Title VII to the extent it applies to employment positions at the church.
Still, the handbook should not include religion in the list of classes protected by Title VII. Instead, the handbook should state the church bases employment decisions on religion when allowed by law and it reserves all rights available under Title VII.
Americans with Disabilities Act (ADA)
This statute applies to churches engaged in interstate commerce with 15 or more employees.
The church may not discriminate against disabled individuals as defined by the ADA. A person has a disability if he or she has a physical or mental impairment that substantially limits a major life activity.
The ADA also protects individuals who have a record of a substantially limiting impairment and people who are regarded as having a substantially limiting impairment. A substantial impairment significantly limits or restricts a major life activity such as hearing, seeing, speaking, breathing, performing manual tasks, walking, caring for oneself, learning, or working.
The handbook should state that the church complies with the ADA if it has 15 or more employees.
Caution. The church must evaluate applicants for positions based on their ability to perform the job’s core functions, with or without accommodation. Those core functions should be described in the job description.
The church should reasonably accommodate qualified individuals with known disabilities unless, by doing so, the church experiences undue hardship. These concepts should be included in the handbook to ensure they are top of mind for the church’s decision-makers.
Pregnancy Discrimination Act (PDA)
This statute also only applies to churches with 15 or more employees.
The PDA forbids discrimination based on pregnancy with any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, fringe benefits, such as leave and health insurance, and any other term or condition of employment. In addition, this statute applies even if the individual became pregnant while violating the church’s code of conduct by engaging in sex outside of marriage.
The PDA also prevents discrimination against nursing mothers. The employer must provide a private room, other than a restroom, for expressing milk. It also must provide unpaid breaks to allow nursing mothers time away from their workstations to express their milk for up to one year after giving birth. Some states give nursing mothers additional rights and mandatory accommodations.
The handbook can honor individuals protected by the PDA and state that the church complies with the PDA if it has 15 or more employees.
Harassment
Title VII applies to harassment based on the Title VII protected classes. Harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted).
Churches must protect employees from harassment by members, vendors, volunteers, and other employees. The handbook should include:
A definition of harassment. Harassment can include “sexual harassment,” including unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. Many courts have expanded harassment to include bullying.
The process for reporting the harassment. The church should include multiple places and ways to report harassment. Some female employees are reluctant to report sexual harassment to a male. The available places to report harassment should include at least one female. Also, the church cannot have a subordinate receiving harassment reports against a higher-level employee. If the harassment report is against a church leader, the handbook should include a way to report to a governance board member or the church’s outside law firm.
The process for investigating the harassment. Remember that subordinates cannot investigate claims of harassment against persons above them in the organizational chart. The church’s HR director frequently investigates claims against nonleadership employees. The investigation should be completed and reported to the complaining employee within ten days after receipt of the claim.
The penalties for harassment. The handbook should state the penalty can include termination or probation. It should also bar retaliatory actions against those who file a report, but it should allow disciplinary actions against those who file a false report or file one in bad faith.
Occupational Safety and Health Act (OSHA)
Employee safety needs to be addressed in the handbook. Churches must report to OSHA all work-related deaths, in-patient hospitalizations, amputations, and eye losses. If the death occurs within 30 days of the work-related incident, the church must report the death within 8 hours of learning of it.
For any in-patient hospitalization, amputation, or eye loss that occurs within 24 hours of a work-related incident, the church must report the event to OSHA within 24 hours of learning of it.
The handbook should state that the church takes employee safety seriously and complies with the employee safety requirements and OSHA rules that apply to the church.
Note. OSHA does not apply to a church’s religious employees. Also, while much of OSHA’s detailed recordkeeping does not apply to a church, all other provisions may apply to church-operated schools, daycare centers, and other administrative personnel of the church.
Fair Labor Standards Act (FLSA)
FLSA applies to most churches because it covers enterprises that engage in interstate commerce. Thus, even if the church conducts no activities or business outside its home state, the FLSA also applies to individual positions involved in interstate commerce. For example, if an administrative assistant regularly orders office supplies over the internet, the position is likely covered by the FLSA even if the church is not a covered enterprise.
Note. Forty-five states have a similar statute that applies even if the FLSA does not apply. Sometimes the state version of the FLSA is more employee-favorable than the FLSA. If the FLSA does not apply, then the state law equivalent will apply. I recommend that all churches follow the FLSA and state minimum wage and overtime laws because employees expect it, and noncompliance can be costly.
FLSA requires employers to pay minimum wage and overtime to nonexempt workers. Therefore, the handbook should address these issues:
Worker classifications. A brief description of the different FLSA classifications: ministerial exception, exempt, and nonexempt. Many churches wrongfully classify certain workers as exempt. Churches may have numerous different and self-made definitions of various employee categories. The handbook should be tailored to meet the church’s employment model, but the church should be cautious of creating employee categories that cannot be managed lawfully and efficiently.The US Department of Labor (DOL) provides a safe harbor for the misclassification of exempt and nonexempt employees. If the handbook allows employees to appeal their misclassifications to the church’s senior leaders and those leaders carefully review the classification, then the DOL will usually grant leniency if an employee is ultimately deemed to have been misclassified by the church. (For help classifying employees according to the FLSA, see chapter 5 in Elaine Sommerville’s Church Compensation, Second Edition: From Strategic Plan to Compliance.)
Church workweek. Federal overtime is based on the employee working over 40 hours during a workweek. The handbook should include the church’s definition of “workweek” for the FLSA. A workweek is 7 days. The church may select any day as the start of the workweek. The handbook should tell nonexempt employees overtime applies when the nonexempt employee works over 40 hours. The payment of paid time off (holidays, vacations, personal days, and sick leave) does not create overtime.
Note: California generally measures overtime based on working more than 8 hours within a 24-hour period instead of the workweek. All other states use the federal workweek definition.
Definition of work time. The handbook should define when a nonexempt employee is “on the clock.” In today’s 24 hours a day/7 days a week world, the church cannot expect nonexempt employees to be available 24/7 without paying them 24/7, and being on call counts as compensable time. (If the church requires church attendance, the church must pay the employees for church attendance.)
Timekeeping. Since the FLSA requires nonexempt employees to keep timesheets, the handbook should include instructions on using the church’s timesheet system.
Authorizing overtime. The handbook should tell employees which managers and executive leaders may authorize overtime. However, the handbook cannot prohibit the church from paying overtime, even if the overtime was not authorized. If an employee repeatedly works unauthorized overtime, the church may discipline the employee for violating the church’s policy requiring advance approval.
Compensatory time off. The handbook cannot authorize compensatory time off to avoid paying overtime to nonexempt employees. Since a workweek measures overtime payments, the church may not avoid paying overtime by allowing an employee paid time off outside the same workweek as the overtime was worked.
Volunteer time for the church. The handbook should inform employees that they may not volunteer to serve the church in a similar role as their work role. The DOL believes that nonprofit employers might pressure employees to work without compensation (i.e., in a volunteer capacity) to avoid paying overtime.
Equal Pay Act
The Equal Pay Act, included in the FLSA, applies to every employer subject to the FLSA. It requires that equally situated employees must be paid equally.
The handbook should state that the church complies with this statute, and the church should establish a compensation protocol that honors the Equal Pay Act.
Immigration Laws
Churches are subject to the immigration statutes that require the church only to hire citizens and those authorized to work in the United States.
Churches must secure a Form I-9 (Employment Eligibility Verification) from each new employee. The church must maintain a physical copy of each Form I-9.
The handbook should notify employees that the church follows federal immigration laws, and those employees with day-to-day involvement with authorizations to work should understand the requirements.
Tax Laws
Churches must collect payroll taxes from nonministerial employees. Each employee must provide a Form W-4. The best practice is to require this form annually from employees.
Note. As authorized by the Internal Revenue Code, a few churches have opted out of withholding FICA and Medicare from their employees on religious grounds. Those churches that filed Form 8274 in a timely manner should not withhold FICA and Medicare taxes from their employees. They should tell employees that employees still will owe self-employment taxes on their church compensation.
Ministerial employees may provide a Form W-4, but they must specify the dollar amount they want to be withheld for federal and state income tax purposes. However, the church is prohibited from withholding FICA and Medicare taxes from ministerial employees.
The handbook may contain a general statement of the church’s withholding requirements to appropriately manage employee expectations.
Genetic Information Nondiscrimination Act of 2008 (GINA)
GINA applies to all churches with 15 or more employees. This statute prohibits employers from using genetic information in making employment decisions. The handbook should state the church complies with GINA, and often this compliance initiative is included near or within the policies applicable to Title VII.
Fair Credit Reporting Act (FCRA)
FCRA governs when and if the church may conduct criminal or financial background checks.
The church may conduct background checks only with the applicant or employee’s written consent. The DOL has claimed that background checks have been used to enable unlawful discrimination under Title VII. Therefore, I recommend that churches not conduct the background check until a conditional offer of employment has been made.
The handbook should state which positions, generally, the church may conduct a background check for, when the checks will occur, who will have access to the background check results, how the results will get stored, and when—if ever—the results of the background checks are destroyed. For positions working with children or youth, the background checks should be repeated as often as the church’s insurance carrier requires (typically every three years). For financial positions, the credit report should be repeated every three to five years, or when the church suspects malfeasance.
Family and Medical Leave Act (FMLA)
FMLA applies to churches with 50 or more employees during 20 or more weeks during a calendar year. Like other federal employment statutes, the employee count includes all entities under the church’s control. For example, if the church also operates a school in a separate corporation and the church elects a majority of the school’s board, then the school’s employees are added to the church’s employees to determine whether the FMLA applies.
Except for certain hierarchical churches, denominational bodies do not include local churches in their employee counts because they do not maintain legal control over them.
In addition, the church must offer unpaid leave due to certain medical conditions to qualifying employees.
For situations in which the FMLA applies, the handbook should describe who is qualified for FMLA leave; when it may be taken; how the leave should be coordinated with other types of leave; the documentation required for the leave; the minimum leave time increment available; the availability of fringe benefits during the leave; the notifications required for coming back to work; and the reentry process for when the employee returns to work.
The handbook should also address the different FMLA leave required when the leave involves a military member of the family. The FMLA policy, appropriately crafted, will serve as a tremendous tool for those administering leave that the FMLA covers.
Worker Adjustment and Retraining Notification Act (WARN)
If a church has 100 or more full-time employees, or has 100 or more full-time and part-time employees working 4,000 or more hours per week, WARN requires the church to notify the state employment agency in advance if it plans to lay off or reduce hours for a significant portion of its workforce. The employee count includes all entities under the church’s control.
If applicable, information about WARN should be included in the handbook.
Uniformed Services Employment and Reemployment Rights Act (USERRA)
USERRA requires employers of all sizes to provide a five-year, unpaid leave of absence to individuals called into service with the United States military.
The church must reinstate covered employees to the same or similar position before their military service. The church must compensate and provide benefits as if they had never left employment. Upon returning, they may have the same tenure, compensation, and benefits as those employees who remain continuously employed with the church.
The handbook should include references to USERRA and provide the processes to allow the church to comply with this statute.
Topics from state and local statutes and ordinances
No handbook is complete without addressing state statutes and local ordinances applicable to employment. Also, if a church has employees working in states other than the church’s home state, the church will need to address each state’s statutes and each local government’s ordinances in the handbook. This topic becomes very important for multisite churches that cross state boundaries. Therefore, while I cannot address all the topics and variables among the 50 states, I will list frequent topics addressed in state statutes and local ordinances.
Note. Since this list is not exhaustive, church leaders should familiarize themselves with their state statutes and local ordinances. Any pertinent statutes or ordinances should then be addressed in the handbook. When in doubt, consult a local attorney or HR professional with expertise in state employment law and local ordinances.
Additional classifications protected from discrimination
Many states have adopted a version of Title VII that adds to the federal list of protected classes of individuals. Your church will need to determine whether these additional protected classes apply to them or if an exclusion is available to religious employers. For example, some state laws protect from discrimination because of marital status, sexual orientation, sexual perception, and gender identity.
Payday laws
All states have payday laws, with significant fines and penalties for violations. These laws govern when and how an employer must pay an employee. They apply to all churches and govern various issues, including pay frequency, payment of wages upon separation of service, and withholding authorizations.
While withholding payroll taxes does not require employee authorization, almost every other deduction from an employee’s pay must be voluntary and authorized in writing by the employee.
Employment of minors
Every state regulates the employment of individuals under the age of 18. Therefore, the handbook should either prohibit the employment of individuals under 18 or allow employment authorized by the state statute.
Garnishment
All states allow garnishment of wages by certain classes of creditors with a court or administrative agency order. The handbook should state the church complies with garnishment court orders.
Required time off
Some states require certain types of paid time off, such as paid sick leave; the payment of accrued vacation and sick leave upon separation from employment; and authorized time off to fulfill civic duties, such as jury service and voting—and the time off may be paid or unpaid, depending on state law or the church’s written policy.
The handbook should reflect state law and the church’s business decisions applicable to compensation for required time off.
Mandatory breaks and lunches
Some states require paid and/or unpaid breaks during a workday. All states require an uncompensated lunch or meal break if the employee works a minimum number of consecutive hours.
The handbook should, at a minimum, reflect state law, and the policies may also capture a church philosophy relating to employee health and quality of the employee’s work experience.
State unemployment benefits
Most states do not require that churches participate in the state unemployment benefit plan. However, some churches choose to participate so that former employees will have access to unemployment benefits.
The handbook should inform employees of the church’s decision regarding unemployment. This communication helps establish employee expectations should their employment end with the church.
Further, the policy can serve as additional evidence supporting an exemption if the church must defend against a future claim for unemployment benefits.
Workers’ compensation
Forty-six states require employers to carry workers’ compensation insurance. I recommend that every church purchase workers’ compensation insurance, even if the state does not require it.
The handbook should inform the employees about the church’s decision regarding workers’ compensation insurance and the reporting processes for employee injuries and illnesses.
Topics for policies
The handbook should include, summarize, or reference church policies applicable to employees. The policy topics below may not be required by a statute, but instead, they reflect the church’s management decisions related to their employees. The decision to include, summarize, or exclude a policy should be made in consultation with the church’s lawyer or HR professional. In some cases, those policies may be simply hyperlinked or briefly summarized while letting the employee know where and how to obtain a more detailed copy.
Here are some suggested topics to cover:
Temporary workers
If the church employs workers on a temporary or time-limited basis, this policy should describe their benefits during their employment. Offer letters for a temporary employee then may be tailored to dovetail with the policy to establish employee expectations.
Remote work
The handbook should include the church’s policy on allowing certain employees to work remotely, including the terms and conditions of remote work. A separate “remote work commitment” form may be included so the policy expectations are manageable.
Nepotism and fraternization
The handbook should include the church’s nepotism and fraternization policy. The policy should define how the policy applies to family members.
For example, the nepotism policy might state that it only applies to immediate family members. If the church allows family members to be simultaneously employed by the church, the handbook should detail the hiring and supervision requirements for those family members. For instance, the policy should address whether immediate family members can work in the same department or ministry.
Since romantic relationships frequently occur in the workplace, the church should address this topic. Romantic relations can sometimes develop into unlawful harassment. The policy should also explain the protocol to follow if coworkers become romantically involved so that the risk of harassment is minimized.
Compensation
The handbook should describe the church’s compensation policies, including descriptions of the church’s compensation philosophy, the church’s compensation decision-makers, and its review processes.
Available fringe benefits
This policy should define the available fringe benefits offered by the church and the classes of employees eligible for the benefits. (Often, churches offer fringe benefits to specific groups or “classes” of employees.)
Churches should pay close attention to the different statutory requirements for each fringe benefit. The employee benefit statutes often contain specific definitions that may not fit neatly within the church’s definitions of who should be eligible for benefits.
Caution. An employee benefits attorney should review the church’s classification system to confirm compliance with employment and tax laws.
Policy statements regarding fringe benefits should include a disclaimer that the nature and extent of benefits may change at any time, with or without notice to the employee.
The handbook should express the employer’s discretion to discontinue any benefit. The benefits summary should be a general overview and should allow for flexibility.
Some fringe benefits will reference a separate document or policy. The specific plan documents generally control over the handbook. Often “See HR for details” is an appropriate way to manage expectations and any conflicts between a plan and a policy. The HR department should always have a current list of benefits or plans.
Note. Typical fringe benefits that require separate policies or documents include health benefits, retirement benefits, life insurance, disability benefits, a cafeteria or flex benefit plan, dependent care assistance, educational assistance, tuition discounts, continuing education, mass transit passes, and a legal benefit plan.
The handbook should note that churches are exempt from COBRA continuation rights for health insurance, so that employees become informed about this limitation. However, some states have similar laws that do not exclude churches. Also, some health insurance companies voluntarily offer continuation rights. In any event, the church needs to inform its employees regarding health insurance continuation rights.
Vacation, paid time off, and holidays
A policy should list types of paid time off and other forms of leave. Besides the law-mandated leaves, most churches provide paid holiday pay, vacation, sick leave, bereavement leave, and jury service leave. Due to potential violations of deferred compensation rules, the church should not allow employees to carry unused paid leave to subsequent years.
If the church offers a sabbatical leave, this policy should outline the eligibility and logistical issues. In addition, many churches have a separate sabbatical leave policy that contains more details about this leave.
This policy should describe the circumstances when the church might dock an employee’s pay, such as when the employee reports to work late. In addition, the church should check its docking policy against federal and state laws, such as the FLSA, especially for employees who are classified as exempt from overtime requirements.
The handbook should include a discussion of absenteeism and job abandonment.
Outside employment
This policy should address whether employees may engage in employment outside of the church and any conditions associated with outside employment.
Computer, laptop, tablet, and cellphone
If the church provides computers, laptops, tablets, and/or cellphones to its employees, the policy should describe the terms and conditions associated with appropriate uses or refer to the policy.
Internet usage
Every church requires employees to utilize the internet in performing their job duties. Therefore, this policy should describe the terms and conditions associated with internet usage, even if the employee brings their own device or cellphone to the office.
Social media
Most churches have a social media presence, and most employees also have a personal social media presence. Since social media presents the church to a worldwide audience, everything posted on social media by employees will represent the church. Therefore, the handbook should include the church’s social media policy or reference to it.
Media inquiries
If the church appears in the media, reporters will frequently contact church employees for comments or additional information. This policy prevents unauthorized employees from communicating with any media representatives. The handbook should inform employees about this policy and instruct them to refer the media inquiries to the authorized spokesperson.
Dress code and appearance
Some churches include a dress code in their handbooks. The policy should reflect the church’s culture. For example, the church may want to dictate business attire in a traditional culture, while an informal culture may require business casual attire. In addition, the policy may allow employees to dress appropriately for the job duties.
Some churches base their dress code on sincerely held religious beliefs. If the religious beliefs dictate a different dress code for men than women (or vice versa), the handbook should detail religious reasons for the church’s dress code. For example, some churches require women to wear dresses and skirts because they believe the Bible requires women to wear dresses and skirts.
Caution. If the church has adopted a dress code policy, it must pay close attention to whether the policy unlawfully discriminates against the protected classes covered under Title VII. For example, a policy prohibiting the wearing of shorts or tank tops should apply to both genders.
Workplace safety, violence prevention, and weapons
The church should have a workplace safety policy that includes its safety protocols. The handbook should provide a means for employees to report if they believe an employee, volunteer, or member threatens workplace violence or exhibits a violent temper.
If the church restricts employees from possessing weapons on campus, the handbook should tell the employees the restrictions. Some states’ laws restrict possession of handguns or weapons if the church has a school or daycare on site. The church’s policy should be tailored to comply with any such restrictions.
The church should adopt a security plan to guide employees if an emergency occurs, such as a fire, flood, medical emergency, or unauthorized intruders. The handbook should reference the plan and tell employees how to access it.
Safety
The church should adopt a safe practices policy regarding hazardous chemical usage or power equipment, such as mowers. It will indicate the OSHA requirements applicable to the church. The handbook should alert the employees to the existence of such a policy and how to access it.
Infectious Diseases
Churches should adopt an infectious disease policy that informs employees regarding the requirements to maintain a safe workplace. The policy should prohibit employees from reporting to work sick, or if they have been exposed to an infectious disease. The handbook should summarize and reference the policy.
Child abuse
Churches that maintain children’s or youth programs or daycares should adopt a child abuse reporting policy that addresses state law. Child abuse reporting laws vary from state to state, so any policy should be tailored to meet the applicable legal requirements.
Vehicle operations and cellphone use
The church should address the requirements to operate church vehicles on church business. For example, most vehicle insurance policies require that all drivers be screened for valid licenses and citation history. If the church operates buses, the church should mandate that bus drivers possess a commercial driver’s license.
Employees required to drive a vehicle to conduct church business must understand the hazards and possible legal issues related to using a cellphone while driving. The church might be held liable if the employee uses a cellphone while driving on behalf of the church and causes an accident. Therefore, the church should prohibit cellphone use without a hands-free device while driving on church business, and such a prohibition should be stated in the handbook.
Alcohol and tobacco
If the church restricts employees from using alcohol and/or tobacco, a policy should explain the restrictions.
Drug testing
If the church implements a drug-testing policy that complies with state requirements, the policy should detail when the church may test for illegal substances and the process followed if the presence of drugs is detected.
Intellectual property
Every church needs an intellectual property policy that informs employees about the work for hire doctrine. It should explain how the church applies this doctrine to intellectual property created by employees within the scope of their duties and responsibilities and/or through use of the church’s assets.
Business expense reimbursements and church-issued credit cards
If the church reimburses employees for business expenses incurred by the employee, the handbook should include the policy or refer to the policy. This policy should address any conference and training requirements imposed by the church. It should also convey any restrictions on reimbursements of certain expenses. For example, many churches refuse to reimburse the cost of alcoholic beverages.
If the church provides a church-issued credit card to employees, the handbook should include the credit card policy or a reference to the policy. In addition, the handbook should include whether the church requires employees to enter into a credit card agreement to be issued a credit card.
Whistleblower
Every church must adopt a whistleblower policy to comply with federal law. The handbook should summarize and reference the policy.
Conflict of Interest
The IRS requires every church to adopt and follow a conflict-of-interest policy. The handbook should summarize and reference the policy as applicable to employees.
Confidentiality and privacy
The church handles many confidential matters. The handbook should tell employees how the church defines and handles confidential matters.
The Health Insurance Portability and Accountability Act (HIPAA) applies to some churches, meaning the church must treat all medical information confidentially in accordance with the law.
The church also needs to enact safeguards to keep financial and personal data private.
Note. Financial-related and personal information may also constitute a trade secret, creating a mechanism for pursuing employees who steal such information.
Many employees have a level of expectation of privacy while working. Therefore, the handbook should describe the church’s privacy policies and inform employees how and when the church may use their private information.
A policy should also inform employees about the church’s surveillance tools, including screening emails, surveillance cameras, and scanning computers and laptops assigned to them.
Access to employee files
This policy should detail the files the church maintains on each employee, the contents of each file, and whether an employee has access to that file. The policy should follow state laws regarding this topic.
Employee Discipline
Not every employee performs at the level the church expects. The church has much latitude in implementing a discipline policy. But it should seek to address employee shortcomings fairly and provide a mechanism for employees to initiate reports of unfair treatment by other church employees.
The discipline section should describe the process implemented when an employee fails to meet the church’s expectations. Many churches use a progressive disciplinary system in which an employee receives a verbal warning, a written warning, a performance improvement plan, and termination if the employee fails to meet the church’s expectations.
The handbook should state that employees may not require the church to follow its disciplinary system in all circumstances. It should allow for immediate termination if the church determines that action best serves the church.
Separations from employment
Separations are either voluntary or involuntary.
The policy should state that employees are required to give notice before voluntarily leaving employment.
Involuntary separations include layoffs and employer-initiated separations from employment. A policy may describe how the church will implement a layoff if the need for one arises.
This section should include the church’s policy on separation payments, if any. Since most former church employees cannot claim unemployment benefits based on their church employment, many churches provide for generous separation payments. If the church provides a generous separation payment, the church should consider securing a separation agreement with a release.
This section also should include the exit interview process and discuss the process for rehiring if the employee and church desire.
Retirement
While a church cannot utilize a mandatory retirement age for employees not covered by the ministerial exception, the handbook should describe the process for employees who want to retire. The handbook may describe when the church may require ministerial exception employees to retire.
References
The church should include its policy regarding references provided to former employees. Some states provide immunity to former employers who provide negative references if former employees consent in writing to the reference beforehand. In addition, some churches adopt a policy of providing only the dates of employment, job titles, and final compensation.
Alternate dispute resolution
Should your church have an alternative dispute resolution policy and agreement and, thus, include it in your handbook?
Many churches prefer to use biblically based alternative dispute resolution to resolve disagreements with employees. The main benefit is that disputes are handled privately and outside of a public forum.
Biblically based alternative dispute resolution services will appoint a neutral mediator to see if the dispute can be resolved by an agreement instead of arbitration or a lawsuit. The neutral mediator will utilize biblical principles and legal principles to assist the parties in settling their dispute. Good mediators typically will have an 80-percent success rate.
The most significant disadvantage of mediation or private arbitration is cost. The mediator or arbitrator will require payment for his or her services, while the government pays a judge. If not resolved in mediation, an arbitrator or arbitrators will cost several thousand dollars a day to conduct the arbitration.
My experience is that an arbitration costs slightly less than regular lawsuits. Still, arbitrator fees, experience, and efficiencies can tilt the expense scale otherwise, depending on the dispute in arbitration.
Suppose the church wants to implement a biblically based alternative dispute resolution policy. It should describe the process in the handbook and require all employees to sign an agreement to use alternative dispute resolution as the exclusive remedy for the alleged wrongful decisions.
Caution. Some states restrict the use of alternative dispute resolution for employee disputes. The church should check its state law on the topic before implementing it. Also, because the handbook is not necessarily a contract, and because the policies may be amended without notice to an employee, a policy that seeks to require biblically based alternative dispute resolution may be unenforceable under law.
Due care with the guidance of a qualified attorney should be taken to create an enforceable agreement if biblically based alternate dispute resolution is the church’s choice. Additionally, churches should check with their insurers about coverage. Some insurance companies will not pay the cost of biblically based alternative dispute resolution, while they will pay for defending a lawsuit if the church has employment practices liability insurance.
Implementing an employee handbook
All churches with over two employees should adopt a comprehensive handbook. Smaller churches may adopt a shorter handbook because it will not need to address employment matters inapplicable to a small workforce.
In comparison, larger churches (more than 15 employees) need a more comprehensive handbook because they must consider a greater array of regulations. Whether a small church or large church, implementation represents a significant undertaking.
Tip. By using this PDF checklist, you’ll have a systematic process for tackling this expansive project and covering everything that needs to be included in your handbook.
Suggested steps for developing and reviewing a handbook
Here are suggested steps for developing a handbook and then conducting periodic reviews of it:
The church’s governing body should formally decide the church needs a handbook, and along with its creation, also direct subsequent periodic reviews. Frequently, the governing body will delegate the drafting and updating to a personnel committee, assisted by the church’s HR director, other staff, and the church’s attorney.
The personnel committee will decide what will go in the handbook and utilize the accompanying checklist to help move through the process of developing the handbook or reviewing a current one. The committee will frequently enlist volunteer HR professionals from the church or engage an outside law firm to draft and update the handbook.
Once the personnel committee approves the draft, the church’s attorney should review it for compliance with employment laws applicable to the church.
The senior leadership should then review, comment, and suggest changes to the draft. Afterward, the senior leadership should recommend the handbook and all updates to the governing body for approval. After senior leadership’s approval, the governing body should adopt the handbook and require distributing it to all employees.
Every one to two years, the personnel committee should review the handbook with assistance from church staff, an HR professional, and an attorney.
Any changes should be drafted and approved by the personnel committee and the church’s attorney before presenting them to the senior leadership or governing body.
Once approved by the governing body, the revised handbook should be distributed to all employees. Publishing a handbook has become simpler with the internet. Most churches publish the handbook on the church’s website behind an employee login.
Caution. I do not recommend publishing it on the church’s website without the login because the handbook represents a trade secret under many state laws. This login requirement means that the church may protect its contents from misuse. Also, the handbook should be marked as protected by copyright. This copyright protection means that others cannot copy and use it without the church’s permission.
After approval by the governing body, senior church leaders need to confirm that all employees have read, understood, and agreed with the handbook. Most churches require all new employees to sign an agreement within a few weeks of employment. The agreement reflects that the employee has read, understood, and agreed with the handbook. The employee agreement should be renewed with each subsequent revision.
Stewarding your most valuable earthly asset
Developing an employee handbook may seem like a daunting task. But taking the time and effort to do so will help your church confidently exercise good stewardship over its most valuable earthly asset–its employees.
My hope and prayer is that the guidance and accompanying checklist will help streamline the process and offer the framework needed to both create and implement a handbook that is legally compliant and serves your church and its employees well.
The author thanks CPA Elaine Sommerville for her useful comments and edits to this article.
