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Q&A: Can a Church Reject the Housing Allowance Amount a Minister Requests?

A church’s rejection of the housing allowance amount a minister requests might suggest a breakdown in communication.

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I submitted what I thought was an appropriate amount to meet my housing needs this year, making certain the request fell within the fair market value of my home, but my church’s board rejected it. Is that legal?

I know of no legal requirement that a church must approve a housing allowance for its minister. Stated differently, I do not know of any authority that would confer on a minister a legal right to a housing allowance. Nor do I know of any authority that states that a minister has the right to a housing allowance of a specific amount.

In other words, if the church agrees to designate a portion of the minister’s compensation to be a housing allowance and the minister submits a worksheet showing his or her expected housing expenses for the coming year, I do not know of any statute or regulation that would legally bind the church to set the minister’s housing allowance at a level commensurate with the minister’s projected housing expenses. The church and its leadership are free to set the minister’s compensation, including the level and composition of that compensation, in the manner the church wishes to.

All of this said, assuming you meet the tax code’s definition of a minister for the purpose of the housing allowance, it seems an odd result that a church would deny you a housing allowance altogether. The church leadership could question the amount you requested and set it at a different amount than you requested, although if the requested amount is in line with your anticipated actual expenses and the fair rental value of your home, this too would seem odd.

Such a situation would seem to suggest there was not good communication between you and the board leading up to the point when you made the requested amount. To avoid such a situation, you and your board should make sure the mechanics of the housing allowance are understood by all parties and that your requested amount is supported by documentation. In some cases the church may seek the advice of a local real estate agent as to the fair rental value of your home to ensure the requested housing allowance is in line with the local market.

While the housing allowance cannot be amended to apply retroactively, it is permissible to prospectively authorize or amend a housing allowance. Thus, where a housing allowance was not authorized before the beginning of the tax year or there is a change in circumstances such that a different housing allowance amount is desired, the church’s governing board can authorize a new amount to apply for the remainder of the year.

Ted R. Batson Jr. is a CPA and tax attorney, and serves as a partner and Professional Practice Leader – Tax for CapinCrouse LLP, a national CPA and consulting firm. He speaks and teaches frequently for national conferences and organizations on exempt organization and charitable giving matters.

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Setting Reasonable Compensation

Four steps to avoid triggering costly penalties when setting reasonable compensation.

Elaine Sommerville

Many people may feel like the only type of unreasonable compensation in churches is unreasonably low compensation. The reason is that many churches feel they cannot afford to pay market rates for the talent needed to lead and maintain their operations, and the idea that churches may set compensation too high seems like a foreign concept.

However, the megachurch, multisite church, and international church require advanced skills, which usually requires higher compensation. Other churches may face challenges in filling skilled positions. Small and midsize congregations are more involved in technology and other operations requiring specializations than in the past.

Should you use a compensation consultant for senior leadership staff? Read more.

Today, senior pastors, regardless of church size, face decision-making and management responsibilities that are more akin to the duties of a chief executive officer, rather than those handled by the senior pastors of yesteryear. The expectations that come with these expanded responsibilities, and the skills necessary to meet these expectations, are changing the church employment and financial landscape.

Competition further complicates matters. Churches not only compete for talent, but also increasingly compete with other nonprofit and for-profit employers to attract and retain that talent.

Many churches increasingly feel obliged to pay more, contemplating arrangements that move pastors and staff toward the upper end of the pay scale. However, as “reasonable compensation” now encompasses legal connotations as well as social and market connotations, even churches with small or modest budgets can still violate IRS rules related to compensation. Special bonuses, tuition assistance, and other seemingly low-cost ways of financially blessing leaders can trigger penalties.

Visit our sister-site ChurchSalary, for compensation guidelines based on education, experience, church income, church setting, and more.

In short, regardless of size and setting, if leaders are not cautious with how they handle payments and transactions for pastors and staff, problems can arise.

High stakes and costly penalties

Setting reasonable compensation for tax-compliance purposes is required for both for-profit businesses and churches alike. But a significant difference between businesses and churches is the potential tax consequences.

Businesses usually can keep operating, even when they run afoul of the tax rules. Churches, however, face tax penalties and the loss of tax exemption, both of which can threaten their very being. And if an IRS examination occurs, the IRS’s determination is presumed correct and the burden of proving the reasonableness of compensation is on the church (refer to Hendriks Furniture. Inc., TC Memo 1988-133).

Given the high stakes, the task of determining reasonable compensation in churches becomes critical. And it includes both objective and subjective analyses, shaped by the specific circumstances of each church.

There are a number of tools—such as compensation comparison surveys—available to help church leaders set reasonable compensation packages. These tools are a crucial starting point because, once reasonable compensation for a position is determined, it becomes foundational for developing a compensation plan. This determination creates the overall cap on what may be offered to a worker. This cap serves as the umbrella under which all payments and benefits must fit in order to meet IRS requirements.

While not specifically establishing a maximum compensation amount for nonprofit organizations, Congress enacted a new excise tax on compensation packages exceeding $1 million.

According to Internal Revenue Code Section 4960, nonprofit organizations are now required to pay an excise tax on remuneration paid in excess of $1 million to a covered employee. (Remuneration is compensation paid which is subject to federal income tax withholding.) A covered employee is one of the five highest compensated employees of the organization for the current taxable year. While the law excludes payments for certain medical professionals, it does not provide any other specific exclusions. Therefore, current law applies to churches. However, compensation paid to a minister is not compensation subject to federal income tax withholding. Due to this special definition in the tax code, compensation paid to a minister is not subject to the new excise tax, even if it in excess of $1 million.

Four steps for building reasonable compensation

A church can pay any amount up to a reasonable point for any position. By law, a church must formally analyze compensation paid to its pastor and any other senior leadership, due to the “executive” nature of their roles. But as a best practice, a church really should perform this analysis on all compensated positions. Here are four steps for doing so:

1. Establish the umbrella

As mentioned earlier, view reasonable compensation as an umbrella. Once the reasonable amount is determined for a position, it becomes the umbrella used to evaluate all compensation that will fall under it, including benefits provided by the church in exchange for performing services—both cash and noncash benefits, taxable and nontaxable—as dictated by Reg. Sec. 53.4958-4(b)(ii)(B). A church may choose not to pay this full amount it identified, but it must not exceed that amount.

2. Identify benefits

A regular paycheck does not show the complete picture of all the benefits an employee receives, and reasonable compensation does not stop at the analysis of cash.

Excluded Benefits
Certain economic benefits are disregarded. These include:
1) nontaxable fringe benefits described in IRC Section 132; and 2) amounts paid under an accountable reimbursement plan.

Everything benefiting the employee is key and must be reviewed. This includes all forms of salaries, fees, bonuses, deferred compensation, contributions to qualified retirement plans, medical plans, dental plans, life insurance, severance pay, disability benefits, housing allowance, other allowances, expense reimbursements (except for accountable expense reimbursement plans), automobiles, tuition, and any other benefits. Anything benefiting an employee, whether from the church or an indirect arrangement with another organization related to the church, must be included.

In determining reasonable compensation, it doesn’t matter if a benefit is taxable or nontaxable.

3. Establish a value for benefits

Whether a benefit is a cash benefit or a noncash benefit, it has a value. Even if a benefit is difficult to value, it needs to be valued at fair market value and not simply based on some arbitrary amount the church thinks it should be valued.

When a church determines the fair market value of all noncash benefits and adds them to the rest of the individual’s compensation, the total needs to fit under the umbrella of reasonable compensation. If not, then something in the package must be eliminated in order to meet IRS requirements.

4. Document the compensation package

After determining pay plus benefits, document the compensation package appropriately. Churches have different ways to document compensation packages, but the documentation should at least state the decision was made by a properly authorized group or person, and it should contain written documents demonstrating what was used in the process to reach that decision—such as reputable survey data.

For pastors and senior-level leaders—those considered to be at the executive level of the church’s leadership—documentation is most commonly recorded in the meeting minutes of the governing body that approves the compensation.

For nonexecutive level employees, the governing body frequently delegates the compensation authorization to an executive within a compensation policy and budget. Written minutes or other documentation help show that each benefit provided is consideration for the performance of services.

All documentation should be kept in the church’s custody and securely stored. Individual personnel files should contain summaries of each person’s documented compensation package.

Sample of compensation documentation

First Church’s personnel committee is reviewing compensation for the upcoming year. After consulting several salary surveys, the committee determines that reasonable compensation for the senior pastor is $150,000.

The committee then compiles the details of the senior pastor’s compensation, as demonstrated in Table 1.

TABLE 1
SAMPLE OF COMPENSATION DOCUMENTATION

Cash Salary	$80,000
Housing Allowance	$35,000
Medical Insurance	$12,000
403(b) Contribution	$5,000
Youth Camp for 2 Children	$500
Life Insurance Policy	$2,000
Disability Policy	$800
Tuition Assistance Plan	$3,000
Auto Allowance	$2,000
Discount at the Church-Related School	$4,000
Travel Expenses for Spouse(to attend a conference together)	$1,500
Total Value of Compensation Package	$145,800
Umbrella of Reasonable Compensation	$150,000

The sample compensation package in Table 1 fits under the umbrella of reasonable compensation. There is only $4,200 left in the overall value available for any other benefits and/or bonuses that may occur during the year.

The committee will document the package in the minutes of its meeting. The tax treatment of each component will be determined by the church’s accounting department (or the church’s outside accountant) to assure proper reporting on the pastor’s Form W-2.

Tip. The most commonly overlooked items in a compensation package are the benefits provided through tax-favored plans. Examples include the value of health insurance or a benefit received through a special group plan, such as tuition assistance. The key is to review every item that benefits an employee, despite the item’s tax treatment or whether or not it is part of a group plan provided to other employees.

Elaine Sommerville is a CPA and editorial advisor for Church Law & Tax. This article is adapted from her book Church Compensation, Second Edition.

Tax Law and Compensation Planning

Important information about salaries, housing allowances, and equity allowances.

Richard R. Hammar

Compensation planning for clergy and other church staff presents several unique tax issues that are not well understood by many church leaders and their advisers. This article looks at issues related to three components (or possible components) of the compensation package to review when structuring compensation plans.

1. Salary

The most basic component of church staff compensation is salary. There are two important considerations to keep in mind with respect to staff salaries: the amount of the salary and the use of salary reduction agreements. These two issues will be discussed separately.

Amount

Staff salaries ordinarily are set by the church’s governing authority, such as a board or committee. Churches generally may pay any amount they wish, with one important exception. If a church pays unreasonably high compensation to a pastor or other employee, there are two possible consequences:

1. Loss of tax-exempt status

In order for a church or any other charity to maintain its tax-exempt status, it must meet a number of conditions. One condition is that it cannot pay unreasonably high compensation to any person. There are two considerations to note. First, very few charities have lost their exempt status for paying unreasonable compensation. The IRS has been reluctant to impose this remedy. Second, the law does not define what amount of compensation is unreasonable, and neither the IRS nor the courts have provided much clarification.

EXAMPLE A federal appeals court concluded that combined annual income of $115,680 paid by a religious organization to its founder and his wife was not excessive.

EXAMPLE A court ruled that maximum reasonable compensation for a prominent televangelist was $133,100 in 1984, $146,410 in 1985, $161,051 in 1986, and $177,156 in 1987. The court based its conclusions on a comparison of the salaries of other nonprofit officers in the state.

2. Intermediate sanctions

The IRS can assess substantial excise taxes, called intermediate sanctions, against disqualified persons who are paid an excess benefit by a church or other charity. A disqualified person is any officer or director, or a relative of such a person. An excess benefit is compensation and fringe benefits in excess of what the IRS deems reasonable. Note that the IRS still can revoke the exempt status of a charity that pays excessive compensation to an employee. However, it is more likely that excessive compensation will result in intermediate sanctions rather than loss of exempt status.

The intermediate sanctions the IRS can impose include the following:

Tax on disqualified persons. A disqualified person who benefits from an excess benefit transaction is subject to an excise tax equal to 25 percent of the amount of the excess benefit (the amount by which actual compensation exceeds the fair market value of services rendered). This tax is assessed against the disqualified person directly, not against his or her employer.

Additional tax on disqualified persons. If a disqualified person fails to correct the excess benefit by the time the IRS assesses the 25 percent tax or Form 4720 is filed to report the excess benefit, then the IRS can assess an additional tax of up to 200 percent of the excess benefit. The law specifies that a disqualified person can correct the excess benefit transaction by “undoing the excess benefit to the extent possible, and taking any additional measures necessary to place the organization in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards.”

Tax on organization managers. If the IRS assesses the 25 percent tax against a disqualified person, it is permitted to impose an additional 10 percent tax (up to a maximum of $20,000) on any organization manager who participates in an excess benefit transaction knowing it is such a transaction, unless the manager’s participation “is not willful and is due to reasonable cause.” A manager is an officer, director, or trustee. IRS regulations clarify that the managers collectively cannot be liable for more than $20,000 for any one transaction.

Key point. The intermediate sanctions law imposes an excise tax on members of a church’s governing board who vote for a compensation package that the IRS determines to be excessive. This makes it essential for board members to carefully review the reasonableness of compensation packages.

Churches, disqualified persons, and governing boards may rely on a presumption of reasonableness with respect to a compensation arrangement if it was approved by a board of directors (or committee of the board) that

1. was composed entirely of individuals unrelated to and not subject to the control of the disqualified person involved in the arrangement;

2. obtained and relied upon objective comparability information, such as (a) compensation paid by similar organizations, both taxable and tax-exempt, for comparable positions; (b) independent compensation surveys utilized by compensation experts; or (c) actual written offers from similar institutions competing for the services of the disqualified person; and

3. adequately documented the basis for its decision.

Note. The documentation should include the terms of the transaction and the date of its approval, the members of the board present during the debate and vote on the transaction, the comparability data obtained and relied upon, the actions of any members of the board having a conflict of interest, and the basis for the determination.

Key point. Legislation has been proposed that would limit the rebuttable presumption to comparability data from tax-exempt entities. Be sure to check the status of this legislation before using comparability data from non-exempt entities.

The IRS may refute the presumption of reasonableness only if it develops sufficient contrary evidence to rebut the comparability data relied upon by the board.

Key point. The law creates a presumption that a minister’s compensation package is reasonable if approved by a church board that relied upon objective comparability information, including the use of compensation surveys utilized by compensation experts. Comprehensive compensation surveys for church employees can be found on ChurchSalary.com. This means that most ministers will be able to use the information on this site as one source of comparable compensation. But it also suggests that the IRS may utilize the data on this site in any attempt to impose intermediate sanctions against ministers.

IRS regulations clarify that revenue-based pay arrangements in which an employee’s compensation is based on a percentage of the employer’s total revenues do not automatically result in an excess benefit transaction triggering intermediate sanctions as long as the church pre-establishes a cap on the total compensation. “All relevant facts and circumstances” must be considered.

CAUTION In a series of rulings published in 2004, the IRS assessed intermediate sanctions against a pastor as a result of excess benefits paid to him and members of his family by his church. The IRS concluded that taxable compensation and benefits a church pays to a disqualified person (any church officer or member of his or her family) that are not reported as taxable income to the recipient constitute automatic excess benefits that trigger intermediate sanctions regardless of the amount involved.

The IRS ruled that the following transactions resulted in excess benefits to the pastor because they were not reported as taxable income: (1) personal use of church property (vehicles, cell phones, credit cards, computers, etc.) by the pastor and members of his family; (2) reimbursements of personal expenses; and (3) nonaccountable reimbursements of business expenses (i.e., reimbursements of expenses that were not supported by adequate documentation of the business purpose of each expense). Since these taxable benefits were not reported as taxable income, they amounted to “automatic” excess benefits resulting in intermediate sanctions.

This interpretation of the tax code and regulations directly affects the compensation practices of every church and exposes some ministers and church board members to intermediate sanctions.

Recommendation. A church that pays a minister (or any staff member) significantly more than the highest 25 percent for comparable positions should obtain a legal opinion from an appropriate compensation expert confirming that the amount paid is not “unreasonable” and will not expose the employee or the board to intermediate sanctions.

TIP Ministers and nonclergy employees should carefully review their Form W-2 or Form 1099 to be sure it does not report more income than was actually received. If an error was made, the church should issue a corrected tax form (Form W-2c for an employee, or a corrected Form 1099 for a self-employed worker).

Salary reduction agreements

Many churches have established salary reduction agreements to handle certain staff expenses. The objective is to reduce an employee’s taxable income, since only the income remaining after the various reductions is reported on the employee’s Form W-2 at the end of the year. However, church leaders cannot reduce an employee’s taxable income through salary reductions unless specifically allowed by law.

Here are three ways that taxable income can be reduced through salary reduction agreements:

1. Tax-sheltered annuity contributions. Salary reduction agreements can be used to contribute to a tax-sheltered annuity (sometimes called a 403(b) annuity) if the salary reductions meet certain conditions.

2. Cafeteria plans. Salary reduction agreements can be used to fund cafeteria plans (including flexible spending arrangements) if several conditions are met. A cafeteria plan is a written plan established by an employer that allows employees to choose between cash and a menu of nontaxable benefits specified by law.

3. Housing allowances. A church can designate a portion of a minister’s salary as a housing allowance, and the amount so designated is not subject to income tax if certain conditions are met. Housing allowances are addressed below.

Observation.Most other forms of salary reduction will not accomplish the goal of reducing a minister’s taxable income. The income tax regulations prohibit the widespread practice of funding “accountable” reimbursement arrangements through salary reductions.

For comprehensive tax information about salaries for church staff, see chapter 4 in the Church & Clergy Tax Guide.

2. Housing allowances

The most important tax benefit available to ministers who own or rent their home is the housing allowance. Ministers who own or rent their home do not pay federal income taxes on the amount of their compensation that their employing church designates in advance as a housing allowance to the extent that the allowance represents compensation for ministerial services, is used to pay housing expenses, and does not exceed the annual fair rental value of the home (furnished, plus utilities). Housing-related expenses include mortgage payments, rental payments, utilities, repairs, furnishings, insurance, property taxes, additions, and maintenance.

Unfortunately, many churches fail to designate a portion of a minister’s compensation as a housing allowance. This deprives their minister of an important tax benefit that costs the church nothing.

Exclusions

Ministers who live in a church-owned parsonage that is provided rent free as compensation for ministerial services do not include the annual fair rental value of the parsonage as income in computing their federal income taxes. The annual fair rental value is not deducted from the minister’s income. Rather, it is not reported as additional income anywhere on Form 1040 (as it generally would be by nonclergy workers). Furthermore, ministers who live in a church-provided parsonage do not pay federal income taxes on the amount of their compensation that their employing church designates in advance as a parsonage allowance, to the extent that the allowance represents compensation for ministerial services and is used to pay parsonage-related expenses such as utilities, repairs, and furnishings.

TIP Ministers who live in church parsonages and who incur any out-of-pocket expenses in maintaining the parsonage (such as utilities, property taxes, insurance, furnishings, or lawn care) should ask their employing church to designate a portion of their annual compensation in advance as a parsonage allowance. Such an allowance is not included on the minister’s Form W-2 or Form 1099 at the end of the year and is nontaxable in computing federal income taxes to the extent the minister incurs housing expenses of at least that amount. This is a very important tax benefit for ministers living in church-provided parsonages. Many ministers and church boards are not aware of this benefit or are not taking advantage of it.

Note. The parsonage and housing allowance exclusions only apply in computing federal income taxes. Ministers cannot exclude them when computing their self-employment (Social Security) taxes.

Note. The parsonage or housing allowance designated for a minister must be considered part of their total compensation package when reviewing the reasonableness of the minister’s compensation for “intermediate sanctions” purposes (covered above under “Salary”).

Recommendation. Be sure the designation of a housing or parsonage allowance for the subsequent year is on the agenda of the church board for one of its final meetings of the current year. The designation should be an official action of the board or congregation, and it should be duly recorded in the minutes of the meeting. The IRS also recognizes designations included in employment contracts and budget line items—assuming in each case that the designation was duly adopted by the church board (or the congregation in a business meeting). Also, if the minister is a new hire, be sure the church designates a housing allowance prior to the date he or she begins working.

Designating a housing allowance

How much should a church board or congregation designate as a housing allowance? Many churches base the allowance on their minister’s estimate of actual housing expenses for the new year. The church provides the minister with a form on which anticipated housing expenses for the new year are reported. For ministers who own their home, the form asks for projected expenses in the following categories: down payment, mortgage payments, property taxes, property insurance, utilities, furnishings and appliances, repairs and improvements, maintenance, and miscellaneous.

Churches may designate an allowance in excess of the anticipated expenses itemized by the minister. Basing the allowance solely on a minister’s actual expenses will penalize the minister if housing expenses in fact turn out to be higher than expected. In other words, the allowance should take into account unexpected housing costs and inaccurate projections of expenses. Can a church ever reject the housing allowance amount a minister requests? See the Q&A on page 28 for an answer to this question.

Recommendation. Plan a midyear review of the housing allowance to make sure the designated amount is sufficient to cover actual expenses. If a pastor’s expenses will exceed the allowance, the church may amend the allowance. But any amendment will only operate prospectively.

Observation.ChurchSalary.com reveals that housing allowances are claimed by several associate ministers, administrators, music directors, secretaries, and custodians. However, it is important to note that the housing allowance is available only if two conditions are met: (1) the recipient is a minister, and (2) the allowance is provided as compensation for services performed in the exercise of ministry. In many cases, these conditions will not be satisfied by administrators, music directors, secretaries, or custodians. See chapter 3 in the Church & Clergy Tax Guide.

Status of the legal challenge to the housing allowance

On November 22, 2013, federal district court judge Barbara Crabb of the District Court for the Western District of Wisconsin struck down the ministerial housing allowance as an unconstitutional preference for religion. Freedom From Religion Foundation, Inc., v. Lew, 983 F. Supp.2d 1051 (W.D. Wis. 2013). The ruling was in response to a lawsuit brought by the Freedom From Religion Foundation (FFRF) and two of its officers challenging the constitutionality of the housing allowance and the parsonage exclusion. The federal government, which defended the housing allowance because it is a federal statute, asked the court to dismiss the lawsuit on the ground that the plaintiffs lacked standing to pursue their claim in federal court.

Standing is a constitutional requirement of any plaintiff in a federal case and generally means that a plaintiff must have suffered some direct injury as a result of a challenged law. The Wisconsin court concluded that the plaintiffs had standing on the ground that they would have been denied a housing allowance exclusion had they claimed one on their tax return. The government appealed this ruling to a federal appeals court—the US Court of Appeals for the Seventh Circuit in Chicago.

On November 13, 2014, the appeals court issued its ruling reversing the Wisconsin court’s decision.Freedom From Religion Foundation, Inc., v. Lew, 2014 WL 5861632 (7th Cir. 2014). It concluded that the plaintiffs lacked standing to pursue their challenge to the housing allowance. The plaintiffs had asserted that they had standing due to their “injury” of being denied a tax-free housing allowance should they claim one on their tax returns. But the appeals court refused to base standing on theoretical injury. It concluded: “Only a person that has been denied such a benefit can be deemed to have suffered cognizable injury. The plaintiffs here have never been denied the parsonage exemption because they have never requested it; therefore, they have suffered no injury.”

The appeals court suggested that this deficiency could be overcome if the FFRF’s officers filed tax returns claiming a housing allowance that was later rejected by the IRS in an audit: “The plaintiffs could have sought the exemption by excluding their housing allowances from their reported income on their tax returns and then petitioning the Tax Court if the IRS were to disallow the exclusion. Alternatively, they could have … paid income tax on their housing allowance, claimed refunds from the IRS, and then sued if the IRS rejected or failed to act upon their claims.”

The FFRF responded to the appeals court’s ruling by designating a housing allowance for two of its officers. The officers reported their allowances as taxable income on their tax returns and thereafter filed amended tax returns seeking a refund of the income taxes paid on the amounts of their designated housing allowances. The FFRF claims that in 2015, the IRS denied the refunds sought by its officers (one of whom had died and was represented by her executor).

Having endeavored to correct the standing problem, the FFRF renewed its legal challenge to the housing allowance in the federal district court in Wisconsin. Agreeing that the FFRF had standing, Judge Crabb struck down the ministerial housing allowance as an unconstitutional preference for religion. The federal court’s decision regarding the housing allowance is currently being appealed to the Seventh Circuit, which is expected to deliver a decision sometime this year.

Note the following considerations:

Parsonages. The US Department of Justice, which defends the constitutionality of federal legislation (such as the housing allowance), filed a brief with the Wisconsin federal district court asking it to dismiss the FFRF’s challenge to the constitutionality of the parsonage exclusion. The Department of Justice noted that section 107 of the tax code grants tax exclusions both for the rental value of parsonages provided to clergy as compensation for the performance of ministerial services and for housing allowances provided to clergy who own or rent their home. However, since none of the FFRF’s officers were living in housing owned by FFRF, they lacked standing to challenge the constitutionality of section 107’s exclusion of the rental value of church-owned parsonages. Section 107’s allowance for tax-free parsonage is not challenged in the current case.
Housing allowances. The Department of Justice brief states that “the United States does not contest plaintiffs’ standing to sue under section 107(2)” (i.e., the housing allowance). This concession means that the federal appeals court has the opportunity to address the merits of the FFRF’s constitutional challenge to the housing allowance. The appeals court may still consider the limits of the trial court’s jurisdiction in this matter. The appeals court ultimately may rule on procedural grounds, or that the housing allowance is constitutional. Or it may decide that it is not. Regardless of the outcome, the ruling likely will be appealed to the United States Supreme Court.
Constitutionality. There are arguments that support the constitutionality of the parsonage exclusion and housing allowance. The validity and strength of these arguments will likely be evaluated by the Seventh Circuit.
Impact of the loss of the housing allowance exclusion. Should the FFRF and its officers ultimately prevail in their quest to strike down the housing allowance as an unconstitutional preference for religion, what would be the impact? A ruling by the Seventh Circuit would apply to ministers in that circuit, which includes Illinois, Indiana, and Wisconsin. It would become a national precedent binding on ministers in all states if affirmed by the Supreme Court—an unlikely outcome, because the Supreme Court accepts less than 1 percent of all appeals. It could also be binding on the IRS nationally if the appeals court confirms the trial court’s injunction requiring the IRS to disallow the cash housing allowance for all ministers. Absent affirmation of the injunction, the IRS would have the discretion to follow or not follow such a ruling in other circuits and might be inclined to follow it nationwide to promote consistency in tax administration.

Ministers and churches should be aware that the housing allowance remains under attack and one day may be invalidated

In conclusion, ministers and churches should be aware that the housing allowance remains under attack and one day may be invalidated. Should that occur, two actions will need to be implemented within 180 days after the final court ruling.

First, most affected ministers will experience an immediate increase in income taxes. As a result, they should be prepared to increase their quarterly estimated tax payments to reflect the increase in income taxes in order to avoid an underpayment penalty. Note that there will be no effect on self-employment taxes for which the housing allowance is not tax-exempt. Second, many churches will want to increase affected ministers’ compensation to offset the financial impact. Such an increase could be phased out over a period of years to minimize the impact on the church.

Key point. Ministers should address the continuing availability of the housing allowance with a tax professional.

For comprehensive information about housing and personage allowances, see chapter 6 in the Church & Clergy Tax Guide.

3. Equity allowances

Ministers who live in church-owned parsonages are denied one very important benefit of home ownership: the opportunity to accumulate equity in a home over the course of many years.

Many ministers who have lived in parsonages during much of their active ministry often face retirement without housing. Their fellow ministers who purchased a home early in their ministry can often look forward to retirement with a home that is either substantially or completely debt free. To avoid the potential hardship often suffered by a minister who lives in a parsonage, some churches increase their minister’s compensation by an amount that is sometimes referred to as an equity allowance. The idea is to provide the minister with the equivalent of equity in a home. This is an excellent idea that should be considered by any church having one or more ministers living in church-provided housing. Of course, for the concept to work properly, the equity allowance should not be accessible by the minister until retirement. Therefore, some churches choose to place the allowance directly in a minister’s tax-sheltered retirement account.

Recommendation. Equity allowances should also be considered by a church whose minister rents a home.

CAUTION Some churches attempt to rectify the lack of home equity by giving the parsonage to the minister upon retirement. This solution may provide a home for the pastor, but it creates a significant tax burden since the value of the home must be included in the pastor’s income at the time of the transfer. The transaction may also create unreasonable compensation and result in intermediate sanctions to the minister and the church’s decision-makers.

For comprehensive tax information about equity allowances, see chapter 6, section A.7, in the Church & Clergy Tax Guide.

Participate in the National Church Compensation Survey to provide churches with information they need to determine fair pay.

Compensation-Setting: Aligning Church Priorities with Market Realities

Steps any church can take to set fair, consistent compensation packages.

Bob Cartwright, SPHR/SHRM-SCP

Developing a total compensation strategy and plan for your church does not have to be an overwhelming process, but it is a multifaceted one. There are many factors that need to be considered prior to deciding how and what to compensate ministers and other employees.

Often church leaders pattern their pay strategies and benefits plans after the church down the street or a peer church in another city. But this approach creates a cultural and operational disconnect, while also potentially creating unnecessary legal and tax liabilities. A more effective strategy is designing a plan from scratch—one reflecting the church’s own unique culture and dynamics while recognizing market realities.

Building such a compensation plan from scratch is possible, regardless of a church’s age and current situation. It requires a very intentional process. And it requires collaboration, starting with buy-in from the entire leadership team.

Assess your church’s culture

The ability to update and improve the church’s compensation philosophy and policy depends upon a clear understanding of your internal culture—taking stock of talent needs and financial resources that will later become important as your church assesses the broader employment landscape. This, in turn, begins the process of mapping out a strategy.

This article is not focused on the detailed process of assessing and analyzing your culture, but do keep one thing in mind here: Do not assume that your church’s vision and mission statements or the values of the organization alone represent the culture. These are important pieces of the puzzle for creating it, but how you act as a church matters as much, if not more, than what your church says about itself.

Once there is a collective understanding of the church’s culture—its core values and how they parlay into the vision and mission of the organization—leadership can then move forward in developing a meaningful pay philosophy and policy that blends with that culture. For example, what does your church offer that will draw potential employees to it? What are your unique and most attractive qualities? What is it about your mission that sets it apart from other congregations? The answers to questions like these should be written into your policy.

Shape a policy

A good compensation policy should support your church’s vision, mission, strategic plan, and key performance initiatives, as well as ministry goals, operating objectives, and, ultimately, a compensation-setting strategy.

The components behind a strong policy should cover details such as:

How the church will compensate its employees—identifying the components (pay, benefits, retirement, housing, and so on) that will be offered and explaining how your church will execute the plan.
Direction on how to attract people to become valued members of your church staff.
Guidance on how to motivate employees to perform at the best of their abilities, skill sets, and competencies.
Specific ways you will strive to retain key talent and reward high-performing employees.

It is also important that your policy reflects an understanding of the competitive market of your local community and of the larger church community. The reality is that you are in competition not only with other churches but also with other nonprofit organizations and even some for-profit organizations. A policy that demonstrates a clear understanding of this market reality will guide decisions about base pay and total compensation packages—including pay grades, salary ranges, incentive plans, healthcare offerings, benefits, savings and retirement, and other compensation areas based on financial and operational resources.

A solid policy must also ensure that the church board’s approach to senior leadership compensation and total rewards is reasonable and not excessive. For additional guidance in this area, see the “intermediate sanctions” section in “Tax Law and Compensation Planning” (page 10), “Setting Reasonable Compensation” (page 15), and “The Compensation Consultant Option” (page 16).

Establishing a solid compensation policy often requires balancing base pay and cash incentives with benefits such as healthcare, vacation, sick leave, paid time off, and adjustments to the work environment. However, based on my consulting experiences, base pay (cash) has become king with many church employees today. Given the rapidly increasing costs of healthcare and other benefits that oftentimes have been passed on to them, employees end up with less cash in their wallets. More base pay counteracts this dynamic.

An effective and legally sound compensation policy should pass the following quality test:

Is the overall program equitable to all concerned (ethnicity, gender, age, etc.)?
Can the church readily defend its compensation policy and procedures from a legal and regulatory perspective?
Is the overall plan fiscally sensitive and reflective of the availability of church financial resources?
Is the overall plan legally compliant with all federal, state, and local employment benefits and retirement laws and regulations?
Can the organization effectively communicate the philosophy, policy, and overall plan to employees? Are communications clear and simple?
Are the various compensation and benefits plans the church offers fair, competitive, and in line with the church’s culture and with the compensation philosophy and policies published by the church?

Understand current costs

Next, you want to understand the current realities affecting your church’s compensation-setting strategy. This information helps begin to establish a baseline for both what you want to include and what you can afford to include.

Start by reviewing and pricing the following variables:

Direct cash compensation: wages/base salary; bonus/incentives; cash donations/love offerings, other cash payments;
Paid time off: vacation, sick leave, personal leave, bereavement leave, other leave with pay;
Health benefits: employee/spouse/family medical, dental, vision, prescription drug plan, annual physicals, disability insurance (short- and long-term);
Life insurance, accidental death and dismemberment (AD&D);
Flexible Spending Accounts (FSAs);
Social Security—employer match;
Workers’ compensation contribution;
Retirement/savings plans: 401(k), 403(b), defined benefit/pension plans, supplemental executive retirement plans (SERPs);
Automobile allowance/automobile provided for personal use;
Health/dinner club membership;
Interest-free or below-market loans;
Deferred compensation plans;
Supplemental executive health/life/disability insurance;
Housing: annual parsonage allowance or housing allowance;
Moving/relocation allowances;
Financial, tax, and estate planning;
Legal services;
Counseling services;
Educational assistance/tuition reimbursement and related expenses;
Cell phone, email, and personal internet service reimbursement;
Other compensation-related items.

Notable Compensation Trends

It’s important to establish some broad understandings regarding compensation and benefits, both in terms of statistics and trends.

For instance, regarding the remainder of 2018 and the early part of 2019, ChurchSalary.com and other sources of information—including my own work with churches—reveal the following big-picture quantitative view:

• Average annual pay increases will continue to trend between 2.8 and 3.2 percent for the rest of 2018. How base salary increases are allocated by an organization will vary by the individual employee, the organization’s resources, and so on.

• A number of states and cities have recently enacted or are discussing potential increases to minimum wages. Separately, executive compensation may require restructuring with the changes enacted through the Tax Cuts and Jobs Act of 2017, affecting tax deductions for performance-related compensation in public companies, potential excise taxes on executive compensation in not-for-profits, and related impacts on deferred compensation plans.

CAUTION Whether minimum wage or high-level executive pay, these issues may require churches to significantly restructure numbers for their compensation plans.

• The possible modifications to the Affordable Care Act (ACA) will continue to shake up the health insurance marketplace. Furthermore, the uncertainty and high cost of health care, coupled with generational differences and preferences regarding pay and employee benefits, are causing organizations to rethink what they provide, how much they provide, and how it is provided.

In addition, salary data sources tell us more about these current qualitative compensation-related trends:

• More organizations are using variable and incentive compensation plans to reward employees who attain certain goals or achieve certain metrics.

• Many organizations are paying more attention to nontraditional benefits and quality-of-work-life rewards that they can provide to employees. These include:

Cash awards, sports tickets, and/or entertainment certificates to recognize outstanding achievements and contributions;
Performance recognition, thank-you notes, get-well cards, and birthday celebrations;
Prepaid legal assistance and concierge services;
Time off to participate and volunteer in community and charitable causes;
Flexible work schedules, job-sharing, part-time employment, and telecommuting;
Bonus days off, fun days, and retreats;
Educational assistance, career development, and training;
Transportation allowances and parking passes;
Massage therapy, health club memberships, and workplace wellness initiatives;
Discounted childcare programs; and
Retirement planning and financial management.

• Greater momentum toward organizations evaluating and changing their culture and compensation philosophy and policy, with a focus on designing, developing, and sustaining a compensation plan to attract talented people, retain key employees, and maintain and engage a motivated workforce.

Together, what these qualitative and quantitative trends currently reveal is that many organizations are rethinking their total compensation strategies and systems. There is a real emphasis for understanding average pay levels and increases, but on a deeper level, a sense that churches and other nonprofit organizations need their total compensation offerings to reflect their culture and keep them competitive with other employers.

To do so, they’re looking at issues like pay fairness and equity, rewards and recognition for key performance indicators and goal achievement, use of variable pay programs to reward for job performance and workplace contributions, work-life rewards, flexible work scheduling, and educational and career training and development.

Understand the big picture

After analyzing your culture, creating your compensation philosophy and policy, and understanding current costs, it’s time to identify valid compensation survey sources that can be used for comparing jobs and compensation with positions within your church. This data will be used to “benchmark” your church’s own salary ranges and compensation packages for each employment position (which we will explore later in this article, along with the accompanying sidebars).

Key point. If your church underpays employees, those employees may eventually look for another place to work—one they perceive will compensate them more fairly and reasonably. This situation can get expensive for your church because the resulting turnover drains time and resources searching for replacements and training them. According to the Saratoga Institute, the cost of finding a new hire can amount to one to three times the former employee’s compensation. On the other hand, if your church overpays employees, the church’s budget suffers. It can also lead to legal issues, including “intermediate sanctions.”

Compensation surveys typically contain data about wages, incentives, variable pay, and often healthcare and benefits information, such as paid time off, sick leave, flexible work schedules, and other operational and administrative types of information.

Surveys typically compare jobs and employee wages and benefits by church, company, or organization size, according to job descriptions and position levels (entry, intermediate, and senior), and wages and total cash compensation paid in different geographic locations. They also contain valuable information that can be used for building compensation structures, to determine the organization’s competitive position in the local community, and to determine whether current church employees are receiving fair, reasonable, and competitive wages. Salary survey data can also be used by church leadership to plan for growth and for recruiting new, high-performing talent.

After purchasing a survey, a church will need to put much effort into collecting its own data for making proper comparisons and determining benchmarks. Interpreting and applying survey data can be a significant problem for small staffs with little experience in reading and interpreting survey data.

Here are the benefits of purchasing and utilizing a good compensation survey:

The assortment of data can be useful to your church leadership in discerning fair, equitable, and reasonable compensation packages for church employees.
Data for jobs/positions found with similarly situated employers include same size, location or region, revenues/budget size, and education and experience. Such compensation data can aid in benchmarking and in establishing a compensation plan specific for the positions held in your church.
Periodic reviews of your church’s current compensation plans can be helped by benchmarking jobs and comparing the latest survey information to your church’s jobs and compensation structure.
Standard, proven methods of data gathering and statistical analysis are used to determine how much other churches, nonprofits, or for-profits pay for a specific job. A number of organizations conduct salary surveys, including human resource and compensation survey businesses, compensation consulting firms, industry associations, educational institutions, state and federal governments, and custom-generated surveys.
Respondents’ personal information is protected—information isn’t affiliated with a name—and raw data on any one job/position isn’t shared in order to protect the church from any potential legal entanglements.

However, before relying on salary surveys, church leaders need to understand the strengths as well as potential weaknesses of the surveys they consider using. Here are some cautions and concerns to note:

Consider the time it will take staff to research and evaluate valid and reliable surveys that can be used by your church.
If participating, a lot of time and effort is needed from a trained staff member to fill out the survey correctly.
After purchasing a survey, a church will need to put much effort into collecting its own data for making proper comparisons and determining benchmarks. There is also the problem of properly interpreting and applying survey data—which can be a significant problem for small staffs with little experience in reading and interpreting survey data.
Compensation survey report data is often collected for a specific time frame and may become dated quickly. Therefore, it is important to choose a compensation survey that’s relatively new so as to ensure its relevancy. (Because of the time-sensitive information, surveys are often identified by the month, quarter, or year in which the data was collected.)
Don’t immediately trust salary survey information—especially if you stumbled upon it during an online search. Surveys should be developed by a recognized professional HR resource or a compensation resource known for accurate and valid salary and benefits data. If that’s not the case, don’t trust it.
Participating in a salary survey means an organization provides its confidential wage data to an entity that compiles and analyzes the data. However, sometimes it is not always clear who the other participating organizations are who are providing wage and salary information as well. Without this knowledge, a lot of time and effort could be wasted by participating in a survey that is not relevant to your church’s needs.

To ensure valid and accurate results, use at least two or more compensation survey data sources when comparing your jobs and setting your compensation structure. ChurchSalary.com, published by Christianity Today, is one viable option because it combines data collected for 18 different positions from churches nationwide and also incorporates information related to cost of living as well as comparisons with comparable roles from the for-profit and non-profit sectors.

Other potential survey sources include:

US Department of Labor’s Bureau of Labor Statistics;
State Occupational Employment and Wage Estimates;
Local chambers of commerce;
Society for Human Resources Management (SHRM);
WorldatWork;
Local association surveys;
Local area job placement firms;
Temporary employment agency job data; and
National and regional for-profit and not-for-profit surveys published by research or consulting firms.

Use survey data

Some of the data analytics and information found on ChurchSalary.com are listed below. Consider these when using survey data to assess and set church staff compensation.

• Church annual income:

$50,000 or under
$50,001-$100,000
$100,001-$250,000
$250,001-$500,000
$500,001-$750,000
$750,001-$1,000,000
$1,000,001-$2,000,000
$2,000,001-$3,000,000
$3,000,001-$5,000,000
$5,000,001 or more

• Worship attendance:

50 or less
51-100
101-200
201-300
301-500
501-750
751-1,000
1,001-2,000
2,001-3,000
3,001 or more

• Education attained and years employed/experience;

• Geographic location;

• Church settings:

Metropolitan city
Suburb of large city
Small town or rural city
Farming area
Region

• Gender: male and female (note possible pay inequalities here)

Review job descriptions

Next, a thorough review of job descriptions—through what is called a job analysis—will help further establish your church’s baseline. A job description describes the essential functions of a job, minimum educational and experience requirements, as well as the frequency and importance of all tasks and responsibilities associated with a particular job. The job analysis gathers, documents, and analyzes this information. From there, all job descriptions should be updated to accurately reflect the work involved for each role.

This step will ensure that job descriptions accurately reflect the work done by each person and compensation is appropriately set. This will also help compare the data obtained from salary surveys to the roles your church employs. In other words, it’s important to compare apples to apples as much as possible. (How to use salary surveys to compare your own compensation packages with other churches is handled in the next section.)

Set benchmarks and ranges

Using the salary data you’ve gathered, start matching your job descriptions to descriptions in the surveys used, rather than the job titles. The reason for doing this is that not all surveys are structured the same and will use different names for the same jobs. For example, an administrative assistant in one survey could be described as a high-level secretarial position, but in another survey, an administrative assistant could be described as an entry-level professional position with a degree that performs high-level administrative work.

Next, look for key data points regarding salary plus benefits data for each role so that benchmarks can be set.

Below are compensation components you might use for comparison and benchmarking.

• Cash compensation

Base pay/salary
Bonus/incentive
Cash gifts/love offerings
Housing/parsonage allowance—allowable expenses
Other cash (overtime) and cash equivalents (entertainment/professional sports tickets, cash cards to restaurants or stores, cash value gift certificates)

• Cost of benefits

Health insurance
Life insurance, AD&D
Disability insurance
Paid time off (PTO)
Self-employment tax
Savings/retirement
Education assistance/tuition reimbursement
Automobile allowance/cost reimbursement
Other: cell phone, computer, school fees for children
Meals
Social or health clubs

• Other compensation

Equity allowance
Home loans/home sales to ministers
Salary reduction plans
Relocation assistance
Payment for intellectual property or works made for hire
Retirement
Severance payments

Use market data points

With survey data in hand, it’s time to create a market composite for each of your benchmark positions and then develop a strategic, market-based compensation structure. One recommended practice is to combine similar data points from several surveys either by simple average, employee-weighted (or organization-weighted) data in order to develop a composite market data set for your church. Most surveys report 25th, average, 50th, and 75th percentile data points for base salary, bonus targets, actual bonus payouts, and total cash compensation.

Averaging the individual 25th, average, 50th, and 75th percentile data points from each survey creates a market composite value. HR staff or administrative/operational professionals should use judgment in reviewing this data to determine the best approach for using it in developing your church’s compensation plan and structure. There is no right answer, but with consistency, the results will most often be internally accurate.

TIP Review your current pay rates against the market data points found in reliable survey sources. The game plan should be to review each of your benchmark’s current employee average pay rates against the 25th, average, 50th, and 75th percentile data points found in many surveys. Be sure your benchmark job descriptions match accurately to the duties and responsibilities found in the survey descriptions.

The composite market data points not only provide the tools necessary to create the pay structures but also allow comparison between the market and a church’s compensation philosophy.

By creating pay grades, you are basically using market data to create your internal strategy for grouping your positions together.

Reviewing the market data can confirm that your church has selected an appropriate compensation philosophy for its talent management needs, strategic plan goals, and fiscal realities. Reviewing with senior leadership the high-level composite market data against the compensation philosophy also affords the opportunity to obtain further buy-in and make any necessary modification to the compensation philosophy.

Develop your pay structure

You and your church human resources personnel, or administrative/operational personnel, can use the composite market data to help you review and compare that data with what you pay for each of your church’s jobs. Based on the results of this exercise, an actual pay structure can be developed for your church by taking this information to construct pay grade, pay range, and job classification structure (i.e., a structure that clearly defines each job according to a carefully crafted job description).

Create your pay grade

By creating pay grades, you are basically using market data to create your internal strategy for grouping your positions together based on the results of similar positions the salary survey data collected. You should note (1) the range of pay found in all salary surveys used; (2) how the jobs that have been grouped together fit from an internal perspective; and (3) all of the information that may be relevant when establishing a salary range for your pay grade. Often, employers want to consider their midpoint of a salary range to be the 50th percentile, the median or mean of the market, if they want their pay grades and associated pay ranges to reflect the market.

To complete the process, employers can group positions having similar market salary ranges and internal positioning together into the same pay grade.

Develop salary ranges

One of the main purposes of gathering and using the external market survey data you have collected is to use this information to develop a competitive internal pay structure for your church through the creation of a strategic pay grade and salary range structure. As mentioned above, by creating pay grades, you are basically using market data to create an internal strategy for grouping your positions together based on the results of the salary survey data collected. As a complement to creating pay grades, salary ranges create a systematic approach to pay employees, help control pay expenses, and help ensure pay equity among jobs and employees. With all the media attention surrounding pay inequality, it has become increasingly important that employers have rational explanations for why they have chosen to pay their employees a certain rate. Salary ranges help an employer do this.

The purpose of this section is to provide a basic formula for creating compensation grades for your church. This formula is intended for general use and should be tailored to meet your specific needs and goals. If you and your staff do not have experience and knowledge of compensation design principles, seek guidance from a compensation expert.

Salary ranges are calculated for each job grade based on findings from your market analysis study and are simply a spread of plus and minus of the target/market pay point or range midpoint. Range maximums set the ceiling for a particular pay grade. Range minimums set the floor. The midpoint corresponds to where the pay line crosses each grade based on the market analysis/study information derived from compensation survey data.

For each pay grade, your church will need to establish a midpoint, a minimum, and a maximum pay range. There really is no hard and fast rule on creating salary ranges. In this example, we will use the midpoint as the base for developing the salary range. Other methods can also be used but will not be covered in this example.

As discussed above, an easy way to come up with a proposed midpoint is to average the market data between the different positions grouped in a grade.

Once this is done, a traditional salary range spread is commonly 40 percent to 50 percent. It is also common that top salary grades (i.e., for church leadership) have a wider range (sometimes in the range of 60 or 70 percent).

To flesh out this example, let’s take a look at the formula for a 40-percent range spread using the midpoint of $40,000 as the base:

This formula can be used to establish a salary range for any job based on the midpoint of available salary survey market data.

Evaluate and decide

After calculating salary ranges, you can begin to take a look at what your church is paying your employees in comparison to the ranges it has created for positions in your church. Based on this review, the church may need to make some decisions to ensure that it is paying its employees fairly and equitably.

Concluding thoughts

The art of developing and executing a total compensation strategy and program for your church involves many pieces: assessing culture; shaping policy; understanding costs and the big picture surrounding them; reviewing job descriptions; setting benchmarks and ranges; finding and using survey data; and then setting pay structures, grades, and ranges.

Collaboration among your church’s leaders is a must because putting these pieces together may not always be easy. But it is worthwhile. By building a compensation strategy, your church will be on a path toward executing a fair, reasonable, and equitable approach to compensating its employees. This will build a highly positive work environment for your church. It also will help ensure it operates in a legally compliant manner.

Bob Cartwright is president and CEO at Intelligent Compensation—a compensation, performance, talent management, and human resources consulting firm. Cartwright is a senior professional in human resources and holds the certifications of SPHR and SHRM-SCP.

Example: Data Trends for the Senior Pastor Position

ChurchSalary.com offers detailed data for 18 different positions. This type of data will help you make comparisons and then set benchmarks for each similar position you have at your church.

To give you a feel for what’s available on this site, here is a quick (and very condensed) sampling of data for the senior pastor position.

A senior pastor is defined as the lead of a church where there are multiple paid pastoral ministry positions.

97 percent of senior pastors surveyed work full-time and 3 percent work part-time.
99 percent are ordained.
90 percent are employed by the church, and 10 percent are self-employed.
Compensation for senior pastors trends higher with bigger church budget/income and worship attendance.
Total compensation for senior pastors in metropolitan areas and large city suburbs typically runs higher than for senior pastors serving in small towns and farming areas. This observation also correlates back to church budget/income and worship attendance.
The total compensation for senior pastors trends higher according to education: senior pastors with a doctorate earn, on average, 18.6 percent more than those with a master’s; senior pastors with a master’s earn, on average, 19.1 percent more than those with a bachelor’s; senior pastors with a bachelor’s earn, on average, 4.1 percent more than those with less than a bachelor’s.
Female senior pastors earn more median total compensation dollars than their male counterparts (a 10.13 percent difference), and are nearly equal in average total compensation dollars paid. When it comes to average salary and salary plus benefits, male and female pastors basically are paid the same (a .55 percent difference).

Note: The survey sample size between males and females varied greatly. The female survey population is approximately 340.71 percent below that of the male population. So caution should be used when making comparisons and benchmarks.

Reviewing Your Employment and Compensation Practices

If you’re seriously considering reviewing, updating, and retooling your total compensation, benefits, and rewards programs (i.e. pay, health benefits, paid time off, and many of the other potential items listed as compensation components) there is no better time than the present. It is well worth the effort to spend additional time and resources to objectively evaluate your policies, practices, procedures, and strategies.

Results from this review can provide decision-makers the information necessary to decide which policies, procedures, and areas of the organization need improvements.

And once that process is complete, your church should make it an annual or every-other-year task. Doing so will help ensure you remain legally compliant and strategically current and competitive.

Reviews can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets, and staff. There are several types of reviews and each is designed to accomplish different objectives. Here are the most common types:

Compliance. Focuses on how well the organization is complying with current federal, state, and local laws and regulations. Also focuses on how well the organization is actually following its own workplace, human resource, compensation, benefits, and total rewards policies and procedures in order to identify gaps.

Strategic. Focuses on strengths and weaknesses of systems and processes to determine whether they align with the organization’s strategic plan.

Best workplace and employment practices. Helps the organization maintain or improve its strategies as an employer by comparing its practices with other organizations identified as having exceptional policies and practices.

Function-specific. Focuses on one area (e.g., compensation, performance management, healthcare benefits).

To help you understand why a review is important, I offer answers to two common questions churches ask:

Question: Why should church leadership conduct a policy, procedure, and total compensation review?

Answer: To ensure federal, state, and local regulatory, tax, and legal compliance; internal policy and procedure compliance; and to ensure it passes the smell test for fair, equitable, nondiscriminatory, reasonable, and just-pay and benefits practices. If there are compliance issues, they need to be addressed and a corrective action plan should be put into place to rectify any issues. Better to find internal issues before a regulatory agency or media organization beats you to it.

Question: What might a review reveal?

Answer: Pay inequality/discriminatory practices; noncompliance with federal, state, and local regulatory, tax, and legal requirements; noncompliance with church HR policy and procedures; and so on.

With those two questions answered, your own answers to the following questions might further clarify why your church should carefully consider the value of a review.

Do you have clearly defined employee classifications (i.e., full-time, part-time, temporary, short-term, exempt, nonexempt, regular employee, independent contractor)?
Are you paying your exempt and nonexempt employees in compliance with federal and state wage and hour laws?
Do you have clearly defined paid-time-off policies (vacation, sick, holiday, other)?
If you offer group health benefits, do you have summary plan descriptions for the required plans?
Are benefit plans clearly communicated to eligible employees?
Have you designated a portion of an eligible minister’s compensation as a housing allowance?
Are you aware that although a properly designated housing allowance is not subject to federal income taxes, it is subject to be included in reasonable compensation as part of total compensation paid?
Are you aware of the possibility that unreasonably high compensation to any person could result in a loss of your church’s tax-exempt status?
Are you aware that employees could be subject to an excise tax equal to 25 percent to 200 percent of the amount of excess benefit (the amount by which actual compensation exceeds the fair market value of services rendered)?
Are you aware that decision-makers could be liable for excessive compensation paid to church staff?
Are you aware that pay inequality based on gender, race, age, etc., is a discriminatory practice and subject to US Department of Labor investigation?
Do plans subject to IRS Section 125 (cafeteria plans) meet the design, notification, nondiscrimination, and recordkeeping requirements?
Do benefit and wellness plans comply with the portability and privacy requirements of the Health Insurance Portability and Accountability Act?

Image: Getty Images

Are You Prepared to Accept Bitcoin Donations?

Virtual currency can be given to your church without donors paying taxes on gains realized.

Michael E. Batts, CPA

Bio

Virtual currency (sometimes called “cryptocurrency”) is a big new thing, and lots of people are getting into it. And that makes virtual currency very relevant for churches and nonprofit organizations.

But what is it?

Wikipedia defines “cryptocurrency” as a “digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in the form of a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.”

Bitcoin, created in 2009, was the first significant virtual currency. In addition to Bitcoin, a few of the more highly recognized and used virtual currencies are Bitcoin Cash, Ethereum, and Litecoin.

Handling Large Gifts of Virtual Currency

CPAs Mike Batts and Michele Wales explain the rules churches must understand for gifts of virtual currency valued at more than $5,000.

Virtual currencies have experienced major swings in value. Church leaders should be cautious, given the volatility. Whether virtual currency values will increase dramatically or drop like a rock is anyone’s guess.

Virtual currencies have generally increased dramatically in value since their inception. For example, Bitcoin sold for $266.15 per unit on January 11, 2015. In January of 2021, it sold for nearly $42,000 per unit, and in the fall of 2021, it was selling for more than $50,000 per unit. But by May of 2022, values plummeted by half and traded closer to $25,000 per unit.

Why is cryptocurrency relevant to the Church and other nonprofits?

The main reason virtual currencies are relevant for churches and other nonprofits is that everyday people have invested in them, and at least for now, many investors have experienced significant gains in the value of their holdings. Some investors will want to donate a portion of their appreciated virtual currency holdings to churches without having to sell them first and pay taxes on the gains realized.

The Internal Revenue Service (IRS) considers virtual currencies to be noncash property. So, if a taxpayer buys units of 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.

But 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 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 held 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!

Charitable recipients should acknowledge a gift of virtual currency in the same manner as any other noncash gift. The acknowledgment to the donor, in addition to containing other required information, should describe the gift (e.g., 3 Bitcoin units), the date of the gift—but not the value of the gift—and a statement that no goods or services were provided in exchange for the contribution (assuming that is true). If your church provides goods or services in exchange for the contribution, you need to comply with the special rules for quid pro quo contributions.

Since the IRS considers virtual currency to be noncash property, donors will need to work with their tax advisers to ensure compliance with the deduction requirements. The requirements, which vary based on the value of the gift, could include filing Form 8283 with their tax return, asking the donee church to sign Form 8283 acknowledging receipt of the gift, and potentially obtaining an appraisal of the value of the gift.

Note that when a church signs a donor’s Form 8283 acknowledging receipt of a noncash gift, the church should still provide the donor with a separate acknowledgment containing the information described above.

Also, if your church is asked to sign a Form 8283 in connection with a gift of virtual currency, and you convert the virtual currency to dollars within three years of receiving it (most organizations will do so immediately), you will be required to file a Form 8282 within 125 days of converting it to dollars.

Prepping for virtual currency donations

The first step for churches to accept virtual currency donations is to open an account (a virtual “wallet”) to accept contributions. Church staff or consultants that are skilled in both technology and finance/accounting should set up the account together because it will involve a number of steps and security protocols. Then test the account to make sure it works as intended.

Research will be needed to select a company that is both safe and the best fit for your church, taking into consideration the types of virtual currencies it accepts. One well-known company is Coinbase (not an endorsement), which offers accounts that accept Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and others. An alternative would be to work with a community foundation, donor advised fund sponsoring organization, or similar organization to accept contributions of virtual currencies from donors and transfer the funds (once converted to dollars) to the church.

When your account is set up, let your donors know you are open and ready to accept contributions of virtual currencies.

This article is adapted from the article “Granny Is Still Investing in Bitcoin,” which originally appeared in BMWL’s Nonprofit Special Alert. Used with permission.

Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

The Right Way to Handle Wage Classifications

Properly applying the Fair Labor Standards Act to church employees.

Elaine L. Sommerville, CPA

Bio

Last Reviewed: November 18, 2024

Many church leaders propose that the Fair Labor Standards Act (FLSA) does not apply to churches. That may have once been true, but the church of today is not the church of yesterday. Advanced activities easily make the law applicable to most churches, either on an organizational level (meaning the FLSA applies to the church operations as a whole) or on an individual level (based on an employee’s duties).

Furthermore, every state maintains its own version of the FLSA, either layering additional rules on top of federal rules or applying similar rules where the federal rules don’t apply. The law most favorable to an employee, whether at the state or federal level, always applies.

Key point. The FLSA establishes a minimum wage of $7.25 an hour, maintains a 40-hour work week, and it also sets a minimum salary test for exempt positions to become eligible for overtime at $684 per week (or $35,568 per year). The Wage and Hour Division of the US Department of Labor (DOL) is responsible for enforcing this law.

Under the FLSA and DOL rules, there are three primary classifications for church employees:

Employees meeting the “ministerial exception”
Exempt employees
Nonexempt employees

Vital information about each classification is offered in this article.

The ministerial exception

Established more through judicial application than through any statute, employment law embraces a concept known as the “ministerial exception.” The concept revolves around the idea that the government does not have authority to intervene in the relationship between a church and its ministers. As ruled in McClure v. Salvation Army, 460 F.2d 553 (5th Cir. 1972), matters between a church and its ministers, including salary, are of ecclesiastical concern only, and any governmental intervention violates the First Amendment protections guaranteeing separation of church and state.

Who qualifies as a “minister” for this exception is different from who qualifies as a “minister” for other payroll tax rules enforced by the Internal Revenue Service. According to employment law, a minister is an employee who performs essential religious duties as a required element of the employee’s job.

Unlike the concept of “minister” for the Internal Revenue Code, the employee is not required to have ministerial credentials. Without this requirement, the group of employees eligible for the ministerial exception is wider for FLSA/DOL classification purposes.

Key point. Job descriptions for all employees are important, but especially for those whose work qualifies for the ministerial exception. Employee classifications, and the wage implications related to them, may be won or lost based on job descriptions.

A position qualifying an employee for the ministerial exception may include:

a requirement of previous religious training or ongoing religious training, such as continuing education requirements;
a title reflecting spiritual or religious duties or a spiritual position;
duties supporting and/or conveying the core beliefs of the church;
duties of conveying the message and teachings of the church;
selecting or creating the religious content for a program; and/or
leading others to grow or mature in their faith.

EXAMPLE Suzy is the director of children’s ministry at First Church. She selects the curriculum and leads all the children’s ministry workers in learning the curriculum and preparing for their teaching duties. She also leads children’s church each Sunday morning and Wednesday evening. Suzy is not a licensed or ordained minister and does not qualify to be treated as a minister for federal tax purposes. A review of Suzy’s duties and position indicates she performs essential religious duties and qualifies for the ministerial exception. Suzy is not subject to the FLSA wage and hour rules.

Exempt employees

After reviewing the duties of employees and identifying those who qualify for the ministerial exception, the next step is to categorize the remaining employees either as exempt or nonexempt. Start by determining which employees are exempt before evaluating which ones are nonexempt. There are two tests that help you decide:

1. Salary test. An exempt employee’s compensation must be at least $684 per week (or $35,568 per year) and paid on a salaried basis. This is a minimum salary amount. It is not prorated for employees working part time. An employee who does not receive the minimum salary amount cannot be an exempt employee. A “salaried basis” means the salary is the same rate if paid every week, regardless of the number of hours worked. The employer may not dock the employee’s pay in less than one-day increments for disciplinary reasons. The employer may track paid time off in any time increment, but in most instances, an employee’s wages may not be docked in less than one-day increments.

WORK WEEK DEFINED

A work week is defined by the FLSA as any 7-day period selected by the employer. For federal purposes, a nonexempt employee who actually works more than 40 hours during this 7-day period must be paid overtime for all hours worked beyond 40 hours at the rate of time and one-half the employee’s regular pay rate. Stated another way, hours paid for nonwork time, such as paid vacation time, do not count toward the 40 hours worked to determine overtime hours.

CAUTION Overtime is paid in increments of 6 minutes per federal statute. Overtime is also due to an employee whether or not the overtime has been authorized by the appropriate supervisor. Churches should be aware of potential overtime causes in order to appropriately budget for the additional payroll costs.

—Elaine Sommerville

EXAMPLE George is a church business administrator. His duties include extensive authority over the business administration of the church, and he directly supervises 10 employees. George’s compensation is $600 per week. At his compensation rate, George cannot be classified as an exempt employee. George is a nonexempt employee and is subject to the FLSA wage and hour rules. Even though George’s duties may meet one of the duties’ tests for exempt employees (see below), his duties are never evaluated because he receives less than the $684 per week minimum to qualify as an exempt employee.

Key point. “Exempt employee” and “salaried employee” are not synonymous terms. The existence of an equalized and consistent pay arrangement does not determine if an employee is an exempt employee or a nonexempt employee. A salaried employee is paid a consistent amount each pay period, but the employee still may be classified as a nonexempt employee if the weekly pay is under $684 per week.

TIP The salary test is more complicated than can be covered in this article. For more details, go see this PDF on the DOL website.

2. Duties test. If an employee passes the salary test, then the employee is evaluated based on his or her duties. To be considered exempt, an employee’s duties must be described in one of four major classifications set by the DOL. Employees become classified as exempt when at least 80 percent of their time is spent on one of these classification’s duties and responsibilities. The four classifications are:

Executive exemption. Manages the organization, or a distinct department, supervising at least two full-time employees (these individuals cannot be volunteers) and possessing the authority to hire and fire employees.
Administrative exemption. Office work or nonmanual labor relating to the management of the organization, exercising significant discretion and independent judgement on matters of significance. These employees may have significant leadership roles, but do not have staff reporting to them to meet the executive exemption. Leadership roles also may be fulfilled by administering an area where volunteer labor is a significant factor in carrying out the programs. Employees should have significant abilities to operate in a manner of authority over an area or a program.
Professional exemption. Employees with a high level of training and a special skill set. Examples include attorneys, teachers (but not daycare workers), engineers, and accountants/CPAs.
Computer professional. Includes systems analysts, programmers, and software engineers. This group does not include network administrators or other general IT employees.

Key point. Administrative assistants rarely have the discretion and the authority in the church to meet this exemption qualification. As such, most administrative assistants do not qualify as exempt employees. This also includes the senior pastor’s assistant.

Nonexempt employees

With both the “ministerial exception” and exempt classifications addressed, the final step is to classify all remaining church employees as nonexempt employees. Nonexempt employees usually constitute the majority of a church’s workforce. This group is subject to minimum wage requirements and overtime pay for all hours worked exceeding 40 hours in the work week.

CAUTION Some states reduce the required number of hours an employee needs to work before receiving overtime pay. Some states may even apply overtime based on the number of hours an employee works per day. These examples underscore why churches must become familiar with state laws. Remember, the law most favorable to an employee applies.

TIP For a detailed explanation of what constitutes exempt and nonexempt employees, go to flsa.com/coverage.html.

Elaine Sommerville is a CPA and editorial advisor for Church Law & Tax. This article is adapted from her book Church Compensation, Second Edition: From Strategic Plan to Compliance.

Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.

Image: James Sutton / Unsplash

Q&A: How Should Churches Respond to Threatening Messages?

What steps can be taken when a church receives various kinds of threats.

Frank Sommerville, Attorney, CPA

Bio

Churches sometimes receive a communication that can be deemed “hate mail”: a letter delivered to the church, a note placed there, an email, a voicemail left on the church’s phone. It could even be sent through a social media platform. We spoke with attorney Frank Sommerville about his experience with these situations and how churches should respond when they occur.

What’s a useful, working approach for churches in terms of understanding these messages? How can churches determine when messages need to be taken to local authorities (and when they can be dismissed)?

There is no one response. It depends on who sent it, whether it’s anonymous, whether or not it’s specific, what the threat is: It depends on lots of variables.

If taken to local authorities, would the police do anything with the threat?

Not necessarily. It depends, again, on what kind of threat: how specific it is, whether it’s from somebody who’s known or unknown. For the most part, anonymous ones that are just left at the church, or even through the mail, are a lot less credible. The more specific—the more concrete the threat is—the more you need to take it seriously. That’s about the only pattern you can ascertain from that.

The more specific and concrete the threat is, the more you need to take it seriously.

Sometimes it’s a pastoral stalker—sometimes we’ll get those. The general consensus on stalkers is you want to keep them engaged, because they’ll tell you what they’re going to do if you just keep them engaged. Exchange emails or texts with them, so you know where they’re at and what they’re doing. You want them communicating—they’re not going to communicate with the target because somebody else (probably a police officer) is intervening and playing the target for that person. Usually they’re associated with someone in the church. They may not be a member, but they may be a family member of a family that’s in the church. Or they may be a member, but they may be inactive.

You need to take the threat seriously, every time.

If you get an anonymous message and discard it, and then something happens, is that treated as a foreseeable event? Could the church be held liable?

Again, it’s specifics. If I sent you an anonymous email that said, “On Thursday morning, when you’re having a staff meeting here, I’m going to kill you,” that’s specific enough. And if your organization did not take any precautions to make sure that did not happen on Thursday morning, it could be liable for not taking those. But if you got an email that simply said, “I’m going to kill you,” there’s nothing your organization could be responsible for because it’s not foreseeable when or if that’s going to happen.

But even so, you said to take these threats seriously every time. Does that mean contacting law enforcement immediately?

If it’s a threat of violence, you contact law enforcement immediately.

What about messages that may not explicitly state violence, but that contain the implied possibility—e.g., “I’m going to take care of you”?

Those are harder to take seriously. Law enforcement is going to ask, “Who do you think sent it, and what do you think they mean by that?” You’re going to get two hours of grilling if you send that to law enforcement to help identify who, potentially, that threat came from. If it was via email, they’ll want to get access to your computer so they can trace your IP address back to the address where it was sent from. There are lots of tools out there, but I think if it comes out of the blue with not a clue, there’s not a whole lot law enforcement can do, either. Frequently, you just trash something like that.

In “Responding to Anonymous Allegations ,” attorney Richard Hammar provides insight as to how church leaders should respond to anonymous allegations.

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

Image: Getty

Creating a Crisis Communication Plan for Your Church

Five questions every church needs to ask when preparing a crisis communication plan

Jamie D. Aten

Last Reviewed: September 10, 2024

Several years ago, I saw firsthand how important it is for church leaders to be ready to communicate in a crisis.

I was visiting a church when a bad storm with strong winds knocked out the power during the service. At first, the pastor tried to awkwardly keep preaching as the generator struggled to start.

After a few minutes, he quickly ended his message and walked off the stage. Another pastor, obviously caught off guard, walked up and abruptly ended the service.

No one addressed the blackout, and no one provided instructions on what to do next. Some people were scared and started to panic. Others hopped into their cars and drove off, only to return moments later because of the dangerous weather outside. Those who did manage to keep driving eventually returned as well, because of a downed tree in the road.

It’s a small miracle no one got hurt.

No matter how much time you spend planning and perfecting your church’s disaster response plan, that plan won’t do you much good if you can’t communicate it to your church during the crisis.

Crisis communication is essential

Crisis communication is an essential element of disaster ministry, one that requires planning and training so you’re ready to go when crisis hits.

To begin creating an effective crisis communication plan for your church, your leadership team will need to walk through the following questions.

Who will be the point person?

Identify who will take ownership of the crisis communication plan and be the “face” that people know they can look to for information when a disaster hits.

You will also want to identify a few back-ups—when disaster strikes, it’s likely that members of your own congregation will be impacted as well.

There’s no way to predict who that will be, so it’s important to identify and train at least a few people in case one or more of the appointed leaders are themselves impacted by the event and unable to fulfill their duties.

Who will need to be contacted?

You will need to gather contact information for not just your leaders and congregation, but also local emergency services (if you don’t already have that information on file).

Doing your research now will save you valuable time and energy so that when disaster strikes, you are ready to point people to the services they need.

These services include local emergency management, shelters, food banks, the American Red Cross, your local Community Emergency Response Team (CERT), and local Voluntary Organizations Active in Disaster (VOAD).

Identify the vulnerable members of your congregation, too. These are the people who have distinctive needs or will require extra help in the case of an emergency: e.g., the elderly, children, people with serious or chronic medical conditions, differently abled people, single parents with small children, immigrants and refugees.

These are the people you want to be sure are contacted in the case of an event.

Make sure multiple people know where information is located and how to access it.

Keep secure electronic copies of your congregation members’ information. You might also consider a secure cloud storage system; if you evacuate to a location with internet access, or another church leader has access outside of the emergency zone, the information can be accessed remotely. If you rely on digital copies alone, however, you could end up stuck if power or internet service goes down. Store physical copies somewhere secure and safe from potential damage.

Update these lists on a regular basis, and make sure multiple people know where the information is located and how to access it—but also make sure that confidential information is protected and can only be accessed by authorized users.

What will be communicated?

You can’t know exactly what disaster or crisis you’re going to face, but you can prepare messages ahead of time that can be adapted for possible scenarios.

When disaster hits, it will be much more difficult to think clearly and comprehensively about what people need to know.

By preparing basic information now, you can add relevant specifics when the time comes and get important information to your people much more quickly than if you have to start from scratch.

Here are a few basic guidelines as you script different types of messages:

Craft these messages around the information developed during the risk assessment process, which is ideally your first step into disaster preparedness.
Share what you do or don’t know at the time of the communication.
Provide information about the seriousness of a potential threat or damage.
Stick to the facts. Don’t be tempted to share hearsay, rumors, or what you cannot verify.
Include information about possible resources for assistance.
Discuss when and where services will or won’t take place because of the crisis.
Share what the church leadership and congregation is doing to address the crisis.
Note how and when church leadership will remain in communication.

How will people be contacted?

There’s no need to reinvent the wheel on this one. Think about the ways your church already communicates effectively, and pivot those systems to deliver crisis information.

How do you communicate with your church today? Plan to use those systems that are already in place (e.g., mass texts or calls, mass emails, social media, website, cloud documents). People already know to look there for information and will do so instinctively.

However, you also need to plan for what you will do if technology goes down. Often during extreme weather events, cell phone towers go out or get overloaded. You may not have access to your email accounts or website.

How will we prepare people now?

The church leadership team should prepare their own personal individual and family communication plan and how they will communicate with one another in the midst of a crisis. Not only will this improve your church leadership’s crisis communication capabilities, but it also models the importance of crisis communication planning to others.

Lastly, be sure to encourage your church attendees to also develop their own emergency communication plans (Ready.gov is a great resource you can point them to).

Once you have answered all these questions as a leadership team, it’s time to communicate your strategy to your congregation so they know what to expect if an event occurs.

Jamie D. Aten is a disaster psychologist and the founder and executive director of the Humanitarian Disaster Institute at Wheaton College in Illinois. His latest books include the Disaster Ministry Handbook and Spiritually Oriented Psychotherapy for Trauma . You can follow Jamie on Twitter at @drjamieaten or visit his website jamieaten.com.

3 Tips for an Effective Communication Strategy

Start making a plan today.

Caitlin Edwards

In the last few weeks, members of our church have given testimonies about how they found our church, why they came to visit, and the reasons they decided to stay. It’s been fun and encouraging to listen to people talk about the church I love—and to hear parts of my own story in what they have to share.

According to a Faithlife blog post, the main five ways people find churches are:

Church websites
Community events
Word-of-mouth
Social media
Location
I’ve heard these five ways repeated over and over in the testimonies given at our church, and you’ve likely heard them as reasons for someone checking out your own church, as well.
The encouraging thing about this list is that your church has some control over these factors. While it might not be easy to move your church building to a new location, you can work on your website and social media accounts, host or attend community events, and equip your members with ways to spread the news about your church.
The downside to this list is that four out of the five ways to find a church deal with communication. And if you’ve been in ministry for any amount of time, you know how difficult communication can be.
So how can your church office create an effective communication strategy? Here are three quick tips to get you started.
Create a plan. Sometimes our strengths can also become our weaknesses. You’ve seen the youth pastor who goes to a conference and comes back full of ideas and energy—and then a month later, nothing has changed. Don’t let that happen. Before you start implementing any new communication ideas, it’s important to sit down, do the “boring” work, and come up with a good plan. A good plan includes deciding the tasks that are most important, assigning work to the right people, deciding on dates for the items that need to be done, and creating some form of accountability around your project.
Consider your audience. Who are the people who go to your church, and who are the people you are trying to invite? Make sure you write all your communications to these specific people. If you know younger audiences are following you on social media, then be sure to focus on young adult and family events on your social media accounts. If you have an event coming up for those who are 50 or older, make sure to communicate that event in ways that audience will be most likely to see the information.
Build trust with your community. In the end, the goal is that your church community will see your communication and will want to take action and join in your events. People are most likely to come to your church if they feel like it’s a community they can trust, so be sure to create a feeling of trust in your communication style. Use a warm, approachable style so your writing sounds more like a conversation and less like a memo. But most importantly, only share what you should be sharing. If you want to share testimonials or prayer requests, be sure you are doing it in a way that is helpful, not harmful, to your members.

Start your church communications plan today.

Image: iStockphoto

Q&A: What Qualifies as a Church Business Lunch?

Reimbursed business expenses must be considered “ordinary and necessary.”

Frank Sommerville, Attorney, CPA

Bio

Q: A group of local pastors meet once a week for Bible study, and afterward some of them go out for lunch together. Assuming the conversation isn’t entirely business related, would that meal be considered a business expense and reimbursable under an accountable expense reimbursement plan? Or should our pastor be paying for those lunches with his personal credit card?

The lunch likely does not qualify as a business expense because it is not necessary for conducting church business.

All reimbursed business expenses must be “ordinary and necessary” to qualify as church business.

“Ordinary” means that the expense is the type of expense ordinarily incurred by churches conducting their business. This requirement is met.

“Necessary” means that it is necessary to incur the expense in order to conduct the church’s business.

If the lunch was required as part of the Bible study, then it would meet the necessary component. Assuming that the lunch is a voluntary social occasion, then the lunch is not necessary for the pastor to attend and, therefore, personal. And if it is personal, it cannot be reimbursed under an accountable expense reimbursement plan.

Also note that business-related expenses, if justified, still can’t be reimbursed under an accountable expense reimbursement plan without proper documentation.

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

Image: DNY59 | Getty Images

Encouraging Estate Gifts in Your Church

Ways to effectively—and legally—promote this form of giving.

Bob Smietana

Americans gave more than $30 billion dollars in bequests made through wills and estate plans in 2016, according to a 2017 Giving USA report. But few churches talk to their members about how they can make such gifts to their churches after they die. For example, a 2013 study of Southern Baptist pastors found that 86 percent provided no information to church members about estate planning.

“Many pastors are apprehensive even when speaking about tithing,” says John Kea, executive vice president and general counsel for the Nashville-based Southern Baptist Foundation. “Few know where to start when talking about estate planning.”

And few churches have the infrastructure in place to help church members who want to make a bequest, Kea said.

Yet many church members may be open to remember a church in their estate, said Steve Allison, a financial services representative for Covenant Trust Company—a financial management and legacy planning resource to individuals, charitable organizations, and ministries, both inside and outside the Evangelical Covenant Church. Through workshops Allison gives to church groups on estate planning, he reminds churchgoers that they have often benefited from Christians who came before them.

“We are all beneficiaries of somebody else’s generosity,” Allison said. “Each of us has the opportunity to do the same for the next generation.”

Financial planners say that churches can play a key role in encouraging their people to be generous at the end of their lives. Everyone needs some kind of plan to disburse their assets when they die. And making a charitable gift can be part of that plan.

Still, there are risks. Churches and pastors often have great influence in the lives of church members. If they press too hard for churchgoers to make a bequest, or even appear to suggest such an act, there could be a risk of having a court find the presence of “undue influence,” which could jeopardize the gift altogether.

Note. Undue influence is more than persuasion or suggestion. It connotes total dominion and control over the mind of another. As one court noted, “undue influence is that influence which, by force, coercion or over-persuasion destroys the free agency” of another. For more on this topic, with help for determing whether something is undue influence, see the “Undue Influence” section in the Legal Library.

What churches can—and cannot—do

Pastors are free to mention estate planning from the pulpit, said Candie Deming, an attorney with Baltimore-based Whiteford, Taylor & Preston LLP.

Churches can also put information about estate planning and bequests on their websites.

They can host educational workshops on estate planning.

But they have to be careful not to ask an individual church member to make a bequest to the church. That’s because pastors are considered by courts to have a “confidential relationship” with a church member.

Note that Findlaw defines a “confidential relationship” (or “fiduciary relation”) as a “relationship in which one party places special trust, confidence, and reliance in and is influenced by another who has a fiduciary duty to act for the benefit of the party.”

In such a relationship, Deming explained, the parties are not on equal terms. One party is afforded great respect, authority, and trust due to that person’s position or title—such as pastor. Suggestions or comments by the respected person could be heard as mandates that influence the other to act in a way the person might not otherwise act.

This means pastors, by the very nature of their roles, possess authority in their congregations that can be misused, whether intentionally or not. That can create legal problems.

“Ministers have to be doubly careful about stepping over the line,” Deming warned. “If they say, even in a teasing way, ‘You should leave all your assets to the church,’ that could be interpreted as a mandate.”

Ministers also often see people when they are at their most vulnerable—when they’ve been sick or are in a moment of crisis. Ministers also visit people when they are homebound or otherwise impaired. That’s not the time to talk about bequests, even if the church member brings it up, Deming stressed.

“Pastors should never raise this issue in one of those instances,” she said. “And if someone brings it up, the pastor should be quick to say, ‘You should talk to your attorney.'”

Pastors should avoid any hint that they are using their influence to coerce someone to give, especially when it involves a bequest or other gift in a person’s will.

“The disposition of a person’s assets has to be the result of their own free will,” said attorney Mary Ellen Willman, a partner with Whiteford, Taylor & Preston. “If the person making out their will no longer has free will—that is undue influence.”

Accusations of undue influence can land a church or other ministry in court. Consider this case analysis by Richard Hammar:

A 96-year-old woman died, leaving the bulk of her estate to [a church in Oklahoma] she had attended for many years.

For many years, the woman suffered from alcoholism and during the 1970s her health and living conditions deteriorated. From 1980 to 1983 the pastor of a local Baptist church became closely acquainted with her and visited in her home several times. By 1984 all of the woman’s friends were members of this church. The pastor arranged for several of them to regularly assist the woman by cleaning her home. Through this process the woman became very dependent upon the pastor … .

Although in 1983 the woman attended several sessions of an estate planning seminar at her church, she failed to make the last session where a “will information guide” was distributed. In 1984, when the woman was 89 years of age, the pastor brought her a copy of the “will information guide” and spent several hours assisting her in cataloging her assets. The pastor later asked a church member who was an attorney to contact the woman and discuss her will’s preparation … .

After the will was drafted, it was sent to the pastor who delivered it personally to the woman and discussed its terms with her … .

She reviewed her will and signed it … .

Seven years after the will was signed the woman died. Her nephew [the decedent’s sole heir] claimed that the gift to the church should not be honored since it was based on “undue influence.” …

A trial court agreed with the nephew that the pastor’s actions amounted to undue influence since he had overcome the woman’s “free agency.” A state appeals court concluded that since the pastor received nothing under the will he was incapable of unduly influencing the deceased. The nephew appealed this ruling to the [Oklahoma Supreme Court]. The supreme court reversed the appeals court’s decision and reinstated the trial court’s order that invalidated the gift to the church.

Keep your distance

Churches can get into trouble if they get too involved in the process of procuring a gift or bequest. That’s especially true if they recommend that church members work with a specific lawyer or a financial planner with ties to the church.

“There have been cases where the attorney who drafted the will was a member of the church that received the gift,” attorney Willman said. “That’s obviously not a good idea.”

Churches and pastors also should avoid having any involvement in drafting a will or a bequest for church members. Again, that includes recommending a specific lawyer or advisor for a church member to work with.

“The church doesn’t want to even give the appearance of procuring the documents that leave the church money,” attorney Deming stressed.

What about unhappy family members?

Deming said that a church should not refuse a bequest simply because the donor’s family is unhappy about it.

Pastors and church board members have a fiduciary obligation to watch out for the church’s best interest, she said. If there’s controversy over a gift, church leaders must make sure no one from the church played an improper role at any point. If that happened, then a church should back away and decline the gift. But if a church acted properly, then the church shouldn’t automatically refuse a gift, even if the donor’s family is unhappy.

“I don’t think a church should just immediately say no,” Deming said. “If [the gift] was given in good conscience—and [the church] believes this person gave it to the church freely and out of love—the church should not automatically back away just to keep the peace.”

It’s up to the potential giver

Whenever Allison from Covenant Trust Company speaks to a church group about leaving money to a church, he starts by telling them that every step of the estate planning process is voluntary.

“I will flat out say to people—it is not my job to convince you to leave a gift to a ministry,” he said. “If that is something you want to do, it is my job to be a resource for you and walk you through the process.”

If people have supported a church throughout their lives, then they may want to remember that church in their wills. That’s where an outside expert, like a financial planner or attorney, can help.

If a pastor knows that someone wants to remember a church in their will, the best thing to do is to recommend that they do so in consultation with an independent, outside advisor.

But the decision is always up to the church member, Allison stressed.

“This has got to be something you want to do,” he said. “Not an idea that you were coerced into doing.”

Four tips for helping church members with estate planning

1. Nurture a culture of generosity

A bequest to a church doesn’t usually come out of the blue, said John Kea, executive vice president and general counsel for the Nashville-based Southern Baptist Foundation. It usually comes from someone who has made generosity a habit. Churches can help their people establish that habit during their lifetimes—and then to remember the church in their wills when they pass on.

2. Talk about possibilities, not obligations

“I’ve never asked people for money,” said Chris Andersen, president of the Minneapolis-based InFaith Community Foundation. “I tell stories. And I tell people what is possible.” Rather than asking for money, he suggests that churches tell their members about plans for the future and how their generosity can fund ministry. He stressed that giving shouldn’t be an obligation but a joyful response to what God has done in our lives and what God is doing in the world. Pastors need to be experts at sharing that kind of vision, he added, and creating systems that make it easy for people to give.

3. Look out for the best interests of church members

When a church member decides they want to make a gift, it’s time for a church to step back, said Preston Branaugh, an estate-planning attorney in Arvada, Colorado. The church should remind the member to consult his or her own lawyer and financial advisor. And the pastor or church members should not be present when wills or other documents are signed by the member.

4. Explore pertinent questions

Branaugh encourages church leaders to ask themselves questions like these:

Is the donor susceptible to undue influences because of a medical condition or other impairments?
Would it appear to a third party that there was an opportunity for the church to have undue influence? Are church leaders relentlessly calling on the person, pushing for a bequest?
Did the church participate in the execution of the document?
Is the donor making a distribution that seems out of character with previous giving habits or with previous estate planning?

Image: getty/kanawaTH

When Expenses Eclipse Your Church’s Budget

Does your church have a plan for responding to when expenses eclipse the budget? Use this resource to guide those conversations.

Michael E. Batts, CPA

Bio

For churches that view the operating budget as an expense control mechanism, the matter of how to deal with expenditures in excess of budgeted amounts is an important element of policy that is poorly developed in many churches.

For example, a church operating budget will typically include line items for each of the church’s main areas of ministry operations. Line items will exist for worship activities, educational activities, children and youth ministries, missions, and so on.

Set boundaries, establish authority

Suppose a church develops and approves an operating budget for the year reflecting total expenses of $1.5 million, of which $200,000 relates to educational activities. Also suppose that, due to unexpected developments, it appears the church’s expenses for its educational activities will exceed the amount budgeted by $50,000 for the year.

Many churches do not have good answers to these questions. For churches that view the operating budget as an expense control mechanism, it is essential to have an appropriate budget policy that clearly addresses such matters and leaves little room for misunderstanding.

Excerpted from Church Finance .

Question 1:

Is it acceptable for the church’s staff leadership to make the additional expenditures for the educational ministries, so long as total expenses do not exceed the total amount of expenses budgeted for the church of $1.5 million?

Question 2:

Even if church staff leaders are permitted to reallocate budget line items so long as the total amount spent remains within the amount of total expenses authorized by the budget, who on the church staff leadership has the authority to make such a reallocation decision? Or should church staff leaders be required to obtain specific authorization to incur expenses that exceed the amount budgeted for the educational ministries?

Question 3:

If authorization is required in order to exceed expenses for an individual line item or for the budget as a whole, who must provide that authorization? If the congregation approved the annual budget, must the congregation be involved in an authorization for such a variance? Or, may such approval be granted by the governing body of the church or by some other group? Would the answer to these questions change, depending on the amount by which actual expenditures are expected to exceed budgeted amounts?

Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

Image: Marvin Meyer / Unsplash

Should Your Church Raise Money Through Crowdfunding Sites?

A fundraising expert offers insights on this increasingly popular online tool.

Interview with NextAfter’s Brady Josephson by Bob Smietana

Brady Josephson spends a lot of time thinking about fundraising. A self-described “charity nerd” who teaches fundraising at North Park University in Chicago, he is managing director of NextAfter Institute, where he provides training to help organizations raise more money online.

ChurchLawAndTax.com talked to Josephson about how crowdfunding can work for churches.

What are some of the pros and cons of crowdfunding?

First off, let’s define crowdfunding. It’s really just raising money in smaller amounts from a variety of donors using an online tool. The biggest difference with crowdfunding is that it is often done on an online platform like GoFundMe.com, CrowdRise.com, or FundRazr.com. This style of fundraising often has a funding goal with a thermometer and a timeline or countdown. These tools often try to tap into the social networks with easy-to-share functionality.

One of the pros of this strategy is that churches don’t have to invest in the technology or worry about the functionality. This is increasingly important for online donations: giving donors a good online experience. These appeals are also pretty easy to set up and get started. The idea of having a tangible goal and timeline helps. So does making the appeal public, accessible, and shareable.

One of the cons: It’s still just a webpage; it’s up to you to market the campaign and communicate the value and impact of the project to get donations. There is often a false assumption that just by being on one of these sites your campaign will be seen by others and supported. It’s still up to you to promote the appeal.

Another con, but an overblown one, is the cost. Most crowdfunding sites charge 3 percent to 7 percent to process donations, which sounds expensive. But processing an online donation on your own site also has a cost. So you are paying a little bit more for all the technology and no hassle.

What could be more worrisome is the lack of data or information. Sometimes you won’t get any donor information. So you won’t know who to thank or how to follow up.

If you’re at a smaller church and want to get into online fundraising but don’t have a lot of time, trying a crowdfunding appeal can be a great approach. You test online giving without much time or risk and raise a few bucks along the way.

When does crowdfunding work best? What kinds of causes or appeals seem to work?

Like all fundraising, the closer the donor feels to the end impact or outcome the better. Being very specific with the problem and solution and how a $25 or $250 donation will help is very important.

Smaller amounts are also generally best. Your project may be $100,000, but that doesn’t mean you should just put up that big number and pray for donations. And remember that the average online donation is around $70. So if you want to raise $50,000, you’re looking at 715 or so donors. That’s a pretty big number. Be careful with how audacious your goal is.

Can crowdfunding detract from other kinds of fundraising? Does it encourage people to give to projects that are a crisis or tug on heartstrings, but not ongoing needs?

There is some concern that crowdfunding donors are less likely to remain donors and give again. That could be partly because the charity doesn’t get their information so it can’t follow up. Or it could be because the donor gets hooked on the tangible project—rather than the mission of the organization. The end and ultimate goal for organizations is repeatable or sustainable support.

If you reach your goal once, great, but you’ll still have needs and projects. So, longer term, I think organizations need to be thinking not about one project but how they can build and grow support over time. And I have more concerns about crowdfunding’s ability to do that over and over again.

I do think all fundraising, for the most part, needs to pull on the heartstrings—even for ongoing support. But when I am advising a small organization or church, I always start with monthly giving as the focus before something like crowdfunding.

Are there risks to using a crowdfunding site?

Yes, but I think it’s overblown. Most large crowdfunding sites have much better security than most nonprofits. You’d be shocked to know how insecure many nonprofit sites are. Using a small or lesser-known crowdfunding site could bring up some worries, but the big players are all quite good and secure.

How should a church decide whether or not to try crowdfunding?

If you don’t do any online fundraising right now and want to see if it can work, then it can be a good fit. If you have a person or group in your church or organization that wants to fundraise for a project, then crowdfunding is perfect for this need. And if you have no time, money, or expertise in online fundraising, then crowdfunding sites can be a good and easy way for you to collect donations.

I love crowdfunding because it democratizes giving and fundraising. So it should be embraced and not feared. But the big win in the long run for nonprofit organizations is ongoing support and a deeper relationship with your organization.

For a better understanding of the potential legal and tax issues connected to crowdfunding, see “The Pros and Cons of Crowdfunding”

3 Areas to Consider in Evaluating Your Church’s Emergency Preparedness

Make sure you have plans in place for various categories of emergencies.

The Editors

What would happen to your ministry if one of your key church leaders dies? Or who would be prepared to step in if one of the pastoral staff gets into a serious car accident and becomes disabled? Are you ready to deal with these occurrences?

Emergency preparation is geared toward anticipating issues that could occur and having plans and people in place to respond to them. The goal is to be able to adequately respond to a situation that does occur, despite carrying out your best prevention practices. There are three areas that a church should concern itself with when thinking about emergencies.

Internal Emergencies. These are threats that specifically affect your church or church members directly. These include accidents, medical emergencies, fires, thefts, arrests, deaths, or natural perils. Upon having an internal emergency, an immediate, planned response gives the best opportunity to be a part of the solution instead of adding to the problem.

Local or Regional Emergencies. These are dangers that occur in your church’s local surroundings, though the church may not be directly impacted. These emergencies include floods, chemical spills, tornados, or anything involving mass injuries or deaths. As a caring congregation, you will want to respond effectively.

National Emergencies. These events may impact thousands. Examples include hurricanes, earthquakes, wildfires, and events like September 11, 2001. You may choose to offer aid, but you will want to do this safely, and without overexposing your ministry to liabilities.

You may go years without being involved in tragedies or incidents that affect your congregation. But churches that have emergency plans in place have a much better chance of minimizing damages—and they are faster to recover when danger strikes.

Image: Ryoji Iwata / Unsplash

How to Create a Church Culture of Accountability in the #MeToo Era

Four strategies for responding to abuse victims and survivors.

Ruth Moon

Former gymnast Rachael Denhollander—whose testimony against USA Gymnastics team doctor Larry Nassar drew widespread media attention—told Christianity Today that “church is one of the least safe places to acknowledge abuse” because victims often receive damaging advice from church staff who know little about the topic.

The #ChurchToo movement (accompanying the #MeToo movement) reveals that churches are as susceptible to issues of sexual misconduct and abuses of power as secular institutions. Often, one or more individuals are to blame for abuses, but calls for reform are directed at churches and their leadership.

Denhollander’s quote about acknowledging abuse is directed at institutional practices and mindsets that often make reporting and responding to abuse a fraught prospect for victims. And, while churches should not preemptively admit culpability before accusations are investigated, they often find themselves apologizing to victims and communities for inadequate and insensitive responses that create burdens and barriers for victims.

What can churches do to change this reputation? How can churches create a culture that honors due process alongside one that honors victims’ and survivors’ stories, experiences, and expectations?

How can churches create a church culture of accountability and victim care? Experts suggest four tips.

1. Look out for people, not institutions

In recent months, several prominent church leaders have been accused of sexual misconduct. Willow Creek Community Church cofounder Bill Hybels retired six months early after he was accused of a pattern of sexual harassment and misconduct.

Andy Savage, teaching pastor at Highpoint Church in Memphis, Tennessee, resigned after confessing to “a sexual incident” 20 years earlier in which he assaulted a 17-year-old congregant.

Frank Page, president and CEO of the Southern Baptist Convention’s Executive Committee, resigned over a “morally inappropriate relationship.”

Paige Patterson, one of the most “powerful and influential figures in the Southern Baptist Convention,” according to Christianity Today, was fired in May as president of Southwestern Baptist Theological Seminary (SWBTS). The school’s board said Patterson lied about a rape allegation that surfaced when he previously led Southeastern Baptist Theological Seminary, and had attempted to discredit the victim of a more recent rape incident at SWBTS.

This newfound focus on abuse of power is heartening, said Boz Tchividjian, a lawyer and founder of Godly Response to Abuse in the Christian Environment (GRACE), an organization that investigates allegations of abuse in Christian organizations. “What we’re seeing is victims who, for the first time in their entire lives, are being empowered to step out of silence into the light,” he said. “That’s a positive step forward.”

However, institutional responses—especially those related to these recent situations—show there is still a long way to go. Tchividjian points to Savage as an example: Savage minimized the abuse he committed by calling it a “sexual incident” and then implied that the victim needed healing—and then he got a standing ovation from his congregation.

This leads to the first lesson churches need to learn: Protect the victim, not the institution. Diane Langberg, a psychologist who works with trauma survivors and teaches at Biblical Theological Seminary in Pennsylvania, agrees with Tchividjian that churches can reinforce abuse by doubting abuse victims and protecting abusers. This has the effect of turning the church into an abuser.

“It’s not only individuals who abuse—systems can be abusers,” Langberg said. “Often the church circles the wagons to protect the church, not the victim, saying, ‘We have to protect the name of God,’ as if he can’t do that himself. They circle the wagons and keep the victim out. The system becomes the next victimizer in the name of God.”

She warned that doing so “multiplies the damage that has already been done. What we are doing is hiding ungodly behavior for the sake of God. That should hurt our brains and our hearts.”

Not only does this response hurt the abuse victim, but it lowers the chances that other abuse victims and survivors will look to the church for help, said Tchividjian. Often, he said, leaders faced with accusations or revelations of abuse feel they must defend church leaders or the church itself because so many others depend on the organization’s survival. Instead, churches should seek to live out the gospel by supporting those who disclose abuse and standing with them.

“When abuse arises, we live out the direct opposite of the gospel,” Tchividjian said. “As an institution, as institutional leaders, we sacrifice the individual—the victim—in order to save ourselves.”

Tchividjian stressed that the “institution doesn’t belong to any leader or person—it belongs to God. We have to have faith that God can protect the church. We just need to be simple and truthful and do the right thing.”

2. Talk about abuse, even if you don’t think it’s happening

A common response abuse victims have is to doubt that the abuse is real, to think that very real abuse is “all in their head.” They may even receive that message explicitly or implicitly from those around them. So when pastors don’t discuss the topic or preach about it, it reinforces that message and makes victims unlikely to confide in church leaders.

And many pastors don’t bring up the topic often. A 2014 LifeWay Research survey found that only 6 percent of the pastors surveyed discussed abuse with their congregants in group contexts at least once a month. A substantial portion (42%) said they rarely or never do so.

“When someone is experiencing abuse, one of the tools abusers use is fear and shame—they cause the victim to believe that it’s their fault or that they deserve the abuse,” said Ashley Easter, a writer and abuse-victim advocate. To combat this, people around the abuse victim or survivor should discuss the topic regularly in ways affirming that abuse is not the victim’s fault. Otherwise, Easter said, “they are laying the foundation that the victim is in the wrong. It’s not true, but if they are not in an environment that’s saying actively that it’s not the victim’s fault, the victim won’t speak up.”

Many Bible stories offer lessons about abuse, Easter pointed out. “The lessons are there. If we could delve into what the Bible says about abuse, how it hurts lives and the trauma that ensues, it would make people feel safer about coming to church and disclosing abuse,” she said. “Jesus is an abuse survivor—he was abused on the cross. If that message was preached loud and clear, it would go a long way to making the church safe for survivors.”

When churches do discuss abuse, it tends to be in the context of national or international news stories like those that have occurred in recent months, said Jennifer Roach, who is a counselor and pastor at Advent Anglican Church in Kirkland, Washington. Instead, abuse should be a regular part of church conversation, and that conversation should be curated with abuse victims and survivors in mind, she said.

“Have a message for victims: The cross applies not just to sin you’ve committed, but to sin committed against you,” she said. “You can talk about it freely and you won’t be punished or shushed or told you’re ruining someone’s reputation.”

3. Protect the vulnerable

According to Tchividjian, churches tend to side with powerful individuals against the abuse victim—intentionally or not—when they close ranks to protect the church. Easter agreed, saying that when abuse victims do speak up and seek advice from pastoral staff, they are often told to stay in abusive marriages and other relationships.

Church staff sometimes try to handle the accusation and investigation in-house instead of bringing in police and other authorities, resulting in victims who feel silenced and are unlikely to bring their cases to church leaders for help. Unfortunately, church leaders, like many people, tend to assume they can tell whether a person accused of a crime is really responsible.

“Research shows over and over again that we can’t tell who’s lying. We all like to think we can, but we’re inevitably wrong,” Langberg said. “There’s a lack of humility to think we would know. We say, ‘I trust so-and-so because I know him.’”

The result of churches hushing up accusations is that victims don’t feel they will be heard if they speak.

“Ultimately, the victim isn’t receiving the care they need, so it doesn’t feel safe due to the church’s historical response,” Easter said. “There are good churches that have a great handle on this, but it’s all too common for [churches] to shame survivors, not take things seriously, and not go through the proper channels to get justice for the victims.”

Churches should take steps immediately to involve authorities outside the church. In many states, churches are required to report abuse. In addition to the legal obligation, involving authorities signals transparency and openness, which are essential messages to send to abuse victims and survivors. Even when a church might not be legally obligated to involve law enforcement—for instance, if an abuse is alleged to have occurred in the past and is beyond the legal statute of limitations—involving law enforcement can send an important message, said Roach.

While few people lie about being abused, churches should avoid passing judgment on a situation immediately. However, churches should always make such situations public by announcing the allegations, involving authorities like police and investigators like those at GRACE, and inviting victims to come forward, said Langberg.

Church leaders’ first response to abuse claims and revelations is particularly important, said Tchividjian, because it sets a tone of trust or distrust in the victim’s story.

“We’re beginning to recognize how prevalent abuse is, and people are beginning to step forward, which are positive signs,” he said. “But we have a long way to go in responding to those disclosures in a way that doesn’t minimize and dehumanize those who have stepped forward—and that doesn’t convey support for and circle the wagons around the leader who has been accused of misconduct.”

4. Admit what you don’t know and acknowledge that abuse happens

According to a LifeWay Research survey, 76 percent of churches have a referral list for professional counselors, 64 percent have money available to assist abuse victims, and about half can refer victims to legal help or to a church member who has experienced domestic violence. However, pastors are also likely to underestimate the likelihood of abuse occurring among church members: Nearly half of the pastors surveyed said they did not know whether anyone in their church had been a domestic violence victim in the past three years.

In reality, it is statistically likely that most churches—even small ones—have members who are abuse victims or survivors. Statistics show that one in four women and one in seven men in the US have been physically abused by an intimate partner. But because churches rarely discuss abuse, many abuse victims stay silent because they feel isolated and out of place, said Easter.

“Rarely do you hear sermons or messages or teachings on abuse,” she said. “When you don’t bring this conversation to the surface, it’s scary for someone who is a survivor to speak up about their experiences.”

When the topic of abuse does come up, it tends to be as something that happens “out there,” leaving abuse victims feeling isolated, Langberg said.

“The church has fooled itself about many things, saying, ‘They’re out there, not in here,’” said Langberg. “I have literally heard pastors say that domestic abuse is not in Christian homes, and I’m thinking, Okay—all these women all these years who have shown me their bruises don’t exist?”

Finally, Langberg noted, it’s all right for church leaders to admit it when they don’t know much about abuse. Acknowledging this can even send an important, positive message to abuse victims and survivors.

“The church needs to be humble enough to say, ‘We don’t do a good job about this, and we don’t know what to do, so we need to learn.’ Hearing that as a victim would be a gift,” she said. “Then, you need to do the learning.”

Ruth Moon is a doctoral candidate in communication at the University of Washington and editor of Response at Seattle Pacific University. This article is adapted and updated from an article that first appeared on ChurchLawAndtax.com.

For additional reading, see these articles and downloadable resources:

“Creating Sexual Harassment Policies for Church Workplaces”
“Sexual Misconduct and Church Liability”
“Church Sued for Supervisor’s Sexual Harassment”
Sex Offenders in the Church
Understanding Labor Laws(see especially the “Protect Your Ministry” chapter)
Reducing the Risk(DVD or online streaming, see especially Video #8: “Responding to an Allegation”)

Image: EyeEm | Getty

Q&A: Did Tax Reform Affect Reimbursements of Entertainment Expenses?

An accountable reimbursement plan enables pastors and staff members to receive reimbursements without facing tax consequences.

Frank Sommerville, Attorney, CPA

Bio

Q: In the church, we often will take someone out for coffee or lunch—for pastoral- or church-related discussions. Is this no longer allowed with the business expense rules that resulted from the Tax Cuts and Jobs Act?

Tax reform should affect the way churches approach the reimbursement of entertainment expenses to pastors and staff members. If a church does not use an accountable reimbursement plan, the act prevents pastors or staff members from itemizing business expenses as deductions on schedule A.

Furthermore, pastors or staff members will have those reimbursements reported as compensation on their Form W-2 or 1040—and the amounts can be taken into account in computing automatic excess benefits (and any potential penalties, if they are triggered).

That’s why, as I have advocated for more than 30 years, churches should adopt an accountable reimbursement plan. Such a plan enables pastors and staff members to receive reimbursements without facing any tax consequences. But specific rules must be followed.

Only qualifying business expenses may be reimbursed under an accountable expense reimbursement plan. Entertainment expenses are a subset of business expenses. To qualify as a business expense, the expense must be the type of expense ordinarily incurred by churches when conducting their business. The expense must also be necessary to conduct the church’s business. Once these requirements are met, then the church must look at whether the expense qualifies as entertainment while conducting church business.

Entertainment expenses must meet the “directly related test” or “associated test.” “Directly related test” means that the entertainment expense was incurred at a business meeting where the primary purpose was to conduct church business, or the participants actually conducted church business during the entertainment. The “associated test” means the entertainment occurred immediately before or after a business meeting where substantive church business was discussed.

If a pastor takes a member out for coffee or lunch, as your question indicates, the expense is reimbursable under an accountable expense reimbursement plan if (1) the expense is ordinarily incurred to conduct church business and is a reasonable amount, (2) the expense is necessary to conduct church business, and (3) the primary purpose is to discuss church business or the expense was incurred after a more formal church meeting where church business was discussed. Pastoral- or church-related discussions are part of conducting church business.

From there, the pastor or staff member needs to meet the documentation requirements of an accountable reimbursement plan. This includes submitting expense reports containing receipts and details about the transactions within 60 days of when expenses are incurred. Without the documentation, however, the expense cannot be reimbursed under an accountable expense reimbursement plan.

I must again stress that tax reform no longer allows business expense deductions for schedule A. It again demonstrates why churches should incorporate an accountable reimbursement plan if they do not currently use one.

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

Image: AndreyPopov | Getty

The Pros and Cons of Crowdfunding

With promising technology comes legal and tax considerations.

Bob Smietana

It was an ordinary Sunday afternoon in the fall of 2017. Worship was just letting out at Burnette Chapel Church of Christ near Nashville when a gunman opened fire, first in the parking lot and then in the sanctuary. By the time the shooting ended, one church member was dead and seven others were wounded, including the minister and his wife.

Over the next few days, friends of the church sprang into action. They set up crowdfunding appeals to pay for funeral expenses, hospital bills, and other needs. All told, more than $37,000 was raised for victims on GoFundMe.com.

Appeals like this have become commonplace. When tragedy strikes—a fatal car wreck, a cancer diagnosis, a job loss, a natural disaster—Americans turn to crowdfunding as a way to help. About one in four Americans (22 percent) have donated to a crowdfunding site, according to a 2016 Pew Research report.

Crowdfunding has become a billion-dollar industry, built on the kindness of strangers, as Time magazine noted recently. And it’s likely to grow, said Dennis Wadley, a pastor and founder of Buck4Good.com, a crowdfunding site for churches and Christian nonprofits.

“Churches are going to have to start thinking about this [option],” Wadley said.

Know what you’re getting into

Creating a crowdfunding policy is a good first step for churches, said Ted Batson, tax counsel and partner at the accounting firm CapinCrouse. That way, a church can think through all the issues involved with crowdfunding ahead of time—rather than trying to respond in a crisis.

Among the issues to carefully consider:

What are the pros and cons of a church-sponsored crowdfunding campaign?
Can church members set up a crowdfunding appeal for a church project?
Can people outside the church set up appeals for the church?
Will appeals be allowed for specific people or just for church projects?
What crowdfunding site will the church use if it sets up an appeal?
Will the donations be tax-deductible?

Answering those questions takes time, said Batson, also an advisor at large for Church Law & Tax. It’s better to think ahead, he stressed. Otherwise, someone could set up a crowdfunding appeal in the church’s name, leaving a church scrambling to catch up or even doing damage control.

Programs and projects vs. individuals

Church crowdfunding is simpler when a church project—or ongoing support for a charitable program—is involved.

Case in point: Several years ago, a nonprofit in Kenya that cares for children with disabilities ran short of funds. The parents of the program’s founder previously attended church with Wadley and asked him for help. The church set up a crowdfunding appeal and eventually raised more than $23,000. The funds came in the nick of time.

“They were down to the last $200,” Wadley said.

Things are trickier, Batson said, when a crowdfunding appeal benefits a specific person. According to Pew Research, about two-thirds of crowdfunding donors have given to an appeal to help a person in need.

When churches help individuals in need through benevolence funds, Batson said, they generally raise those funds for benevolence in general—not for specific people.

The main concern is that contributions for a specific individual are not tax-deductible, Batson explained. Instead, they are considered personal gifts. Those are legal, but not part of a church’s charitable purpose.

If an appeal is for an individual—and a church’s employer identification number (EIN) is used for the appeal—that can cause trouble, warned Elaine Sommerville of Sommerville & Associates, a CPA who specializes in working with nonprofits and serves as a senior editorial advisor for Church Law & Tax.

A church can raise money for its benevolence fund and then decide to give funds to an individual, she said. But a church can’t set up a crowdfunding appeal—or advertise for a crowdfunding appeal—that’s designed for a specific person.

When you set up crowdfunding for a specific individual, the church isn’t in control of the how the funds are used, she clarified.

“Churches and nonprofits may not raise funds for a specific individual and cannot provide platforms for fundraising for a specific individual,” Sommerville stressed. “Therefore, a church must take special care to make sure its EIN is not used to register any account where the fundraising is for a specific person.”

Maintain control and have procedures and policies in place

There are some cases where tax-deductible donations can benefit an individual, Batson explained.

For example, church members who go on mission trips often send out appeal letters asking for financial support. Increasingly, crowdfunding sites are used for those types of trips. The church should have a policy for approving such projects—and for approving any appeals that are sent out for such projects. The church also should set up a procedure for getting information about the donors so that it can issue a receipt.

If the mission trip is approved by the church and the donations are made to the church and the church maintains discretion and control over the funds, those donations can be tax-deductible, Batson said. That’s true, even if the person who sent out the letter also benefits—by having their airfare and other expenses covered by the donations.

The key is that the church retains control over the funds and how they are used, Batson stressed.

The “needy and distressed test”

Churches can give money to individuals if they are needy or in distress, said Dave Moja, a CPA and a partner with CapinCrouse. To do this, the church needs to verify the needs—whether the benevolence funds used to meet it comes through the collection plate or through a crowdfunding site.

Moja said the Internal Revenue Service (IRS) has indicated that those who are needy and distressed are somehow “lacking the basic necessities of life, involving physical, mental or emotional wellbeing as a result of poverty or temporary distress.” With that in mind, the IRS’s “needy and distressed test” could be met by the church establishing a set of criteria by which they might objectively make distributions to financially or otherwise distressed individuals and/or families.

The best way to run a crowdfunding appeal for those in need, Moja said, is to make it clear that the church has sponsored the appeal, the church exercises control over the funds, and that the monies raised are for the church’s benevolence fund. But the church should make sure that the person they are seeking to help meets the “needy and distressed test,” he reiterated.

“I also like to make sure churches have a selection committee or board to award the funds,” he said.

Note. For additional help understanding how to apply the “needy and distressed test,” see page 11 of IRS Publication 3833, titled “Disaster Relief: Providing Assistance Through Charitable Organizations.”)

Case study: When need exceeds the benevolence budget

When Journey Church in Kenosha, Wisconsin, learned that a church member had passed away suddenly, leaving his wife and kids in financial hardship, they partnered with Blessity.org to raise funds to assist her.

The family needed several thousand dollars, said Journey Church executive pastor Bob Griffith, which would have severely stretched the church’s benevolence funds.

Journey, like many churches, has a benevolence fund that can handle small expenses—buying some groceries, paying an overdue electric bill or a month’s rent. But larger needs—a funeral or medical bills—are another story.

“We aren’t able to help with that kind of need,” Griffith said.

That’s where crowdfunding helped, said Tad Hartlaub, cofounder of Blessity.org.

“For a family facing a catastrophic event, a few thousand dollars can make a big difference,” he said.

At Blessity, churches sign up as partners with the organization. They have to submit proof of tax-exempt status, and they have to vet any appeals beforehand.

Blessity then posts a description of the need, including a specific dollar amount. Once that amount is raised, the appeal is shut off.

The funds are then sent directly to pay for bills: to a hospital or utility company, for example. The person in need never touches the money.

Churches aren’t charged a fee for using Blessity. But they are asked to give a donation to the site once the appeal is over.

Hartlaub said that using crowdfunding can supplement normal giving to his church. As an example of this, he said that he and his wife give their offerings at church on Sunday, which include giving to the church’s benevolence fund. And crowdfunding, he explained, is something extra. It’s a way to put disposable income to good use.

“It’s like an extra kicker on top of normal giving,” he said.

Keeping track of donors

Some churches may choose to avoid crowdfunding, in part, because it’s hard to keep track of donors.

“You are going to be dealing with a lot of contributions from people who may not be associated with the church,” said Batson. “They may want a receipt. And you may not have enough information to issue a receipt.”

Some crowdfunding sites allow a nonprofit to register as a charity—and then will issue receipts to donors. Other sites specialize in raising funds for nonprofits and will know how to handle receipting.

And some donors may not want a receipt at all. Moja said that the standard deduction has doubled under the new tax law passed at the end of 2017, making it less likely that people will itemize their taxes starting in 2018. So, many may not expect a receipt for gifts to a crowdfunding appeal.

Another provision of the tax bill—the annual gift tax exclusion amount—increases for 2018 to $15,000 (from $14,000 previously). So people can give to someone who is in need or to a worthwhile project without worrying about whether the gift is deductible.

“You won’t get a tax deduction but you will get a warm feeling in your heart,” said Moja.

Issues related to public scrutiny

Ashley Tuite, an attorney with the law firm Gammon & Grange P.C., said that churches should remember that crowdfunding appeals are out there for all to see.

This fundraising method works because it taps into broad social networks, she said. That’s good for raising money. But it also means that it opens a church up for greater public scrutiny.

So, a church must be careful about what it posts during a crowdfunding appeal. Poor decisions and careless mistakes could not only hurt a church’s reputation but also create various legal issues. The church could also jeopardize its intellectual property.

Churches must be careful about intellectual property, such as the church logo or other material that is posted in an appeal. Make sure the church’s intellectual property is adequately protected. Once it is published on a crowdfunding site, others may try to copy a trademark that is not registered.

And keep a lookout to make sure other people aren’t using the church’s name to promote their own appeals, Tuite stressed.

“You don’t want individuals to create a crowdfunding appeal without the approval of the church,” she said. Doing so could give the impression that the church approves of a project or has authorized it.

Batson said that the best approach for a church is to maintain control of any crowdfunding appeal that uses the church’s name.

Any appeal should be approved by church leaders, he said. And if a church finds that someone else is using the church’s name for an appeal without permission, the church should contact the crowdfunding site and ask that the church’s name be removed.

Thoroughly vet crowdfunding providers

Tuite said that churches should read all the fine print before deciding to use any crowdfunding option. That includes asking about fees—most sites take a percentage of donated funds to pay for their services.

The church also should ask if the site has time limits for appeals—and what happens to the donations if the appeal doesn’t reach its goals, Wadley said.

The church should check the site’s reputation. Look at online reviews and check with the Better Business Bureau. And look at other projects on the site to see if the church’s project fits in, Wadley recommended.

Further, look at all the services a site offers, Wadley said. Some do a better job of promoting projects. And some make it easier for churches to connect with donors than others.

Seek professional—and local—expertise

Finally, check with an attorney before starting a crowdfunding project. And work with someone well versed in local law.

In most states, churches are exempt from registering for charitable solicitations. But churches may lose their exemption in some states if contributions outside of church membership become predominant, Tuite said.

“It’s best to talk to a local attorney,” she stressed.

What Are the Best Accounting Practices for a Multisite Campus?

Navigating donations, designations, and more.

David Fletcher, Founder of XPastor.org

Bio

We are planning the launch of our first multisite campus. This includes conversations on best accounting practices. We are setting up a central accounting hub with tracking of giving and expenses by campus. Is there anything I need to be aware of as we enter this new territory?

Hooray for your new campus! These are exciting times for your church. Many multisite churches track donations by campus. This creates “cost centers” so you can create financial health reports for each campus.

What will you do with a mailed-in check that doesn’t have a campus preference? How will donors indicate if they change campuses? These issues will impact your hope to have a self-sustaining new campus. With robust software—and by checking that every donation accurately reflects the campus attended—you will have reliable financial reports. If you are not diligent, your report can be skewed when a few significant donors change to another campus.

If a person designates their gift to a campus, you have created a donor restricted fund. That money can only be used for that campus, period. Unless you want to break the law, you cannot use Campus A donor restricted funds for expenses at Campus B.

I looked at the website of a church with six sites. The executive pastor is a good friend, so I asked him: “Do you know your website has donors designating their gifts to a campus?” His first reply was: “We don’t do campus-designated giving—only that the giver identifies their campus of attendance.”

He continued, though: “Then I logged on, because the website was recently updated. I was alarmed by the language. It does indeed indicate a donor restriction. This is not our intent at all. We want to know where the giver attends, but the gift goes to a unified budget. Thanks for the email—I’ll get the team to return to the previous nomenclature!” They changed the website that day.

You will need to monitor what your teams say or publish. Preachers, pastors, and communications teams need to share this clearly: “All gifts go to the church general fund. We use your campus preference only to understand the financial health of each campus.” Normally this isn’t much of a problem, until some nice person designates $1.5 million only for use at one campus.

These are a few of the donation issues for multisite churches. None are unsolvable. Develop a careful strategy to communicate well, keep yourself out of court, and honor the intent of the donors. Finally, regularly inspect what you expect!

David Fletcher has more than 35 years of experience as a pastoral leader in churches. In 2003, he founded XPastor, a resource website for executive pastors, and XP-Seminar, an annual church leadership conference.

Image: Breno Assis / Unsplash

Q&A: Can a Retired Minister Receive a Housing Allowance?

Insights and regulations to keep in mind.

Richard R. Hammar, Attorney, CPA

Bio

Editor’s Note: The question of whether mutual funds and other private investment services can administer a 403(b) plan for ministers and designate housing allowances is addressed in the Church & Clergy Tax Guide . For more guidance with housing allowances and retirement planning, check out chapters 6 and 10 in particular.

Can a retired minister receive a housing allowance?

Treas. Reg. 1.107-1(b) says this: “The term rental allowance means an amount paid to a minister to rent or provide a home, if such amount is designated as a rental or a housing allowance pursuant to official action taken in advance of such payment by the employing church or other qualified organization.”

(Note: The tax code uses the term “rental allowance.” I use the term “housing allowance” to apply to both rental and ownership. But “rental allowance,” when used by the Internal Revenue Service, is not talking about only rent. It’s talking about ownership, as well.)

Now here’s the key in that regulation: “by the employing church or other qualified organization.” The issue here is this: Can a denominational pension board declare a housing allowance based on retirement distributions under a 403(b) plan?

For denominational pension plans, the IRS has acknowledged in Revenue Ruling 75-22 that the denominational pension plans can designate a housing allowance for retired ministers because they are—as noted in the above regulation—“other qualified organizations.” A housing allowance has to be declared by the employing church of a minister or other qualified organization. The denominational pension board is not an employing church. But it is, as the IRS concluded in that ruling back in 1975, an “other qualified organization.”

That is a very important phrase—“other qualified organization”—that is not defined in the tax code or the regulations. But in Revenue Ruling 75-22, the IRS said “denominational pension plans or other qualified organizations.” That’s why your denominational pension plan, if you’re enrolled in one, can designate a portion—or all of your retirement benefits—as a housing allowance.

The IRS ruling does say, however, that this assumes the minister has severed his or her relation with the local church. This is a very important component.

Now what about secular 401(k) or 403(b) plans, or 403(b) plans by a local church? That’s another issue. Are they “other qualified organizations”? There is some lack of clarity with respect to this. But the language in the regulation says “by the employing church.” If this was your employing church that developed its own 403(b) plan, rather than a denominational plan, it’s likely that’s going to qualify. (I address this in some detail in my annual Church & Clergy Tax Guide, for further reference.)

Another question: Can a denominational pension plan designate housing allowances out of distributions to the spouses of deceased clergy? This has become an issue in some denominational pension plans. And the answer is: No, you can’t, because to qualify for a housing allowance you must be a minister, and the allowance must represent compensation you earn from the performance of your ministerial duties. If a minister’s spouse becomes a credentialed minister, that doesn’t in and of itself make that person eligible for a housing allowance. That person must start accumulating funds in a pension or retirement fund or plan based on his or her own ministerial duties, not the spouse’s.

The IRS has also weighed in on the issue of the housing allowance and the expenses of assisted living arrangements, saying that in some cases you pay a lump sum fee to be enrolled in an assisted living or independent living arrangement, and that’s it. The IRS said if that’s the situation, then you can apply a housing allowance to that payment only in the year of the lump sum payment that you made. You can’t somehow amortize that over 10 or 20 years and claim a partial expense for each year (not if you paid for everything up front).

Financially, the lump sum payment is not a wise thing to do in many cases, because you lose the benefit of the housing allowance—whereas if you are thinking about a facility where you don’t pay an upfront lump sum but you instead pay annual fees to get in, the housing allowance can be applied under those circumstances to the amount you pay each year (provided that it can be connected to housing-related expenses). That does not include food, housekeeping, medical care, or any number of other things that that fee sometimes will cover.

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

Image: Jordan Whitt / Unsplash

Child Abuse Prevention and #MeToo: How to Protect Your Church

What to consider as you create plans and policies.

Caitlin Edwards

As a pastor or church administrator, you make plans and preparations for the church as part of your job. You might be great at planning a sermon series, special services like Easter, and events or mission trips. You might be successful at planning for your pastor’s retirement or outlining a church budget for the upcoming year.

But like most people, church leaders likely do not spend as much time thinking about child abuse and sexual harassment—and that probably means many may not spend as much time as they should developing prevention and response plans if a case of abuse or harassment occurred in their churches.

Child abuse and sexual harassment aren’t new tragedies, but due to recent media coverage, they are gaining newfound attention. From the USA Gymnastics scandal to the emerging #MeToo movement on social media, new cases seem to unfold each week. A #ChurchToo movement is also starting to spread, which specifically addresses sexual harassment and abuse issues in church environments.

Now is the time for churches to respond. Now is the time to create a plan for your church to help prevent child abuse and sexual harassment.

Here are three things you should consider when creating sexual harassment and child abuse prevention plans in your church.

1. What would a sexual harassment policy look like in our church?

Maybe there’s been a sexual harassment scandal in your church’s past. Maybe you have church members who have been sexually harassed in their own workplaces. Whatever your church staff or church members have dealt with, it’s important to acknowledge what has happened and work to prevent such incidents from happening again.

You can begin to craft a sexual harassment policy for your church by asking these questions:

What is sexual harassment?
How common is it?
When is an employer liable for sexual harassment?
What terms should be included in a sexual harassment policy?

You can find more about creating a sexual harassment policy in “Creating Sexual Harassment Policies for Church Workplaces.”

2. Be aware of your state’s child abuse reporting laws.

Every state has child abuse reporting laws, and they are all different from each other. It’s important to know what the laws are for your state. You need to understand what it means to be a mandatory reporter (and which volunteers in your church would qualify as one), how to properly report cases, and the consequences for not reporting a case. You can find more information about these items in “Child Abuse Reporting Laws: 21 Facts Church Leaders Should Know.”

3. Learn best practices for screening and selecting staff and volunteers.

Your staff and your volunteers are the people who will make the biggest difference when it comes to preventing sexual harassment and child abuse in your church. It’s important you have the right people leading—people who will know how and when to report a case, who will challenge policies or procedures they don’t feel are protecting your members.

Learn more about screening, selecting, and training your staff and volunteers in our newly revised Reducing the Risk training program.

Good planning can prevent a tragedy. And should a tragedy still occur, despite efforts to prevent it, the preparation can better situate a church to respond well. Thinking about sexual harassment or child abuse in your church isn’t fun or easy, but it’s better to plan in advance than to be surprised and caught off-guard should something happen.