Author: twatermann

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Confronting Suspected Domestic Abuse In Your Church

What is a church’s responsibility for protecting others?

Frank Sommerville, Attorney, CPA
Bio

Last Reviewed: February 11, 2025

Q: What is a church’s responsibility to a disruptive person in the church? I am talking about someone who lost his temper and yelled at someone during service. The leaders escorted him out of service then held him accountable with daily phone calls for a week or two. However, no one checked up on the safety of his wife and children, even when the wife told the pastor she feared her husband would become physically violent with her and/or the children.

In general, the law does not impose a duty to warn third parties about dangers. Of course, exceptions to this general rule exist. The duty to warn exists only when the harm is reasonably foreseeable and the individual or church has a duty to warn about this foreseeable danger. This is a state law issue so the details about how this law is applied may vary by state.

Duty to Warn

First, one has to determine the relationships. The relationship must create a duty to warn. If the church is not providing professional or pastoral counseling to both the husband and wife, then it does not have a legal duty to warn the wife about the husband, or vice versa. If no professional or pastoral counseling relationship exists with either spouse, then the law will not likely impose a duty to warn the spouse.

Next, the harm must be reasonably foreseeable. Unless the church counselor has specific information (“I will kill her next Thursday at 7:00 pm while she is at home.”), then the risk of harm is not likely reasonably foreseeable.

Confidentiality

One must also look at whether the church has a duty to keep certain information confidential. If a professional or pastoral counseling relationship exists, the church may have a duty to keep the threat information confidential. If a specific threat of significant bodily harm arises (i.e., reasonably foreseeable), the church must breach this confidentiality and inform the target of the threat and the authorities. If the threat of significant harm involves a child, the church also has a duty to report such threat to the authorities under child abuse reporting statutes.

Moral and spiritual obligations

Finally, we cannot address this issue without looking at the moral issues involved. Those subjected to abuse frequently look to the church for help. The church cannot turn them away. The church should keep a list of abused women’s shelters that will accept referrals from the church. if the abuse could result in serious harm, the church should encourage the spouse to report the abuse to the police and move into a women’s shelter with her children. If the abused spouse chooses to stay in the home, the church should refer her and the spouse to a church approved counselor. If the couple balks at going to a counselor, the church may encourage such assistance by offering to pay for the counseling for a limited period. The church may provide mentor couples to assist the couple in a nonprofessional capacity.

Response based on applicable authority as of October 12, 2009. Not legal advice, just legal information.
Frank Sommerville is a both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
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Empowering Generosity: Communicating Financial Needs in Churches with Positivity and Faith

Learn how churches can effectively communicate financial needs without fostering frustration or desperation. By focusing on God’s abundant provision, clear goals, and positive messages, leaders can inspire spiritual growth and generosity within their congregation.

John R. Throop
Bio

Last Reviewed: January 27, 2025

The letter from the board of an affluent, mid-sized congregation in suburban Chicago contained an urgent message: increase giving or else.

While affirming the past faithful giving of members, the letter also emphasized the impact of the economic recession. Some members recently lost jobs and struggled to maintain their regular giving levels. And others who worried about their financial futures did not increase giving. The result: the church budget faced a serious and unexpected deficit, prompting the board to consider serious cuts in mission and ministry.

“We are striving to fulfill God’s call, and also to be good stewards of your financial support to this church,” the letter read. “Now, at this critical time in this ministry, we will have to make cuts in our staffing and programs. We know you do not want to see this happen. We know that you want us to meet our budget commitments. So we are asking you to give sacrificially and give more—as much as you can, right now—so that we can keep our ministry intact.”

The church’s pastor also preached a sermon on sacrificial giving. Lay leaders made their appeal at announcement times in the service. Some members gave testimonies of how the Lord gave them the resources to give more in tough times.

The appeal worked—to some extent. But cuts still occurred, and the board resolved to prepare a “bare bones budget” for the next fiscal year.

The church leaders thought that highlighting the situation as they saw it simply ‘told it like it was.’ But many believe such an approach, often used by churches during periods of economic struggle, is fundamentally flawed, looking at stewardship as a budget-driven program based in human scarcity, rather than a spiritual growth opportunity grounded in God’s abundant provision for all needs.

Leaders and stewardship consultants say the worst message that financially struggling churches can send is one of desperation, frustration, or shame. Instead, the message must emphasize opportunity.

It’s not an easy task. Many congregations across the country, and from every denomination and tradition, have faced budget shortfalls this year.

“The ‘Fat Thinking Era’ is over,” says Jim Sheppard, principal partner and chief executive at Generis, a Christian stewardship and development firm. “Now, we are in leaner times. Now we have to think and pray more deeply about the nature of the projects, and only the best will get funded because people will give the funding to those ministries with the best return on investment.”

The challenge for churches is to craft messages showing members how their giving brings those tangible and intangible returns, using a variety of communication methods.

When communicating an end-of-year shortfall, experts advise church leaders to emphasize what God can do with generous givers, rather than what members are not doing with their personal funds.

“In healthy churches, leaders never communicate that the economy is ransacking the church budget or causing massive cuts,” Sheppard says. “Instead, they stress that God is opening many opportunities for ministry, and that God continues to bless people with resources to share.”

One church in Seattle found itself behind budget targets with two weeks left in its fiscal year several years ago. Using its blog, church leaders invited members to respond positively and faithfully. “As we both look to the future and attend to the here and now,” the pastor said in his blog, “our end goal is to finish well. Our church has been entrusted with a lot of resources—’talents’—and our call is to use these gifts well and finish strong in life, in ministry, and in this month.”

What to say

At the heart of communicating a financial need is the opportunity to promote spiritual growth in stewardship. That’s an important strategy for deepening faith commitment. It’s also a theme not often explored in congregational life. Its been estimated that 85 percent of pastors have little or no theological training in Christian stewardship, and feel uncomfortable addressing the topic. But cultivating a generous spirit in the church makes sense if church leaders believe they serve a generous God.

While stewardship usually shows up as a line-item in most church budgets under “Income,” it does not promote or prompt giving—it only accounts for it. So, church leaders often reverse the order and think that people will give to meet budgets.

If that’s the case, Sheppard says the church always will struggle to make ends meet.

Brian Kluth, an author of numerous books on stewardship, agrees.

“I think that churches have done a disservice for decades by focusing on the budget,” Kluth says. “Let’s be clear in the church: it’s not what the budget says, but what the Bible says.”

The Bible has a lot to say about money—particularly about deepening our dependence on God’s provision, and also about generosity.

“Churches often are doing nothing new or adventurous because they are concerned with adhering to the budget,” Kluth says. “Why don’t we call people instead to give to God?“

Such a message, Kluth says, challenges people to grow spiritually and to trust even more in God’s provision.

“If we teach people to give to God, they will give more—and there is greater blessing all around,” Kluth says.

When the budget is not the driving force in stewardship, it becomes a solid annual planning tool.

“As people gave more in my own church, the leaders used the surplus to tackle new ministry initiatives,” says Kluth, referencing his prior role as senior pastor of a congregation in Colorado Springs, Colorado. “The excitement was palpable. In 10 years, we increased giving by 88 percent—but expenses went up just 50 percent … Budgets don’t inspire people to give, but God’s Word does.”

Church leaders can take a two-fold communications approach to prudent fiscal management and the promotion of generosity in giving. The fiscal budget acts as a solid financial planning tool, but church leaders also can develop a “dream budget” that spells out how the church’s ministry can expand and grow with greater abundance—what it believes God has called it to do were additional resources to materialize.

How to say it

Church leaders need to consider multiple methods of communication with members about financial issues and how those approaches can reinforce the positive signals they want to send.

Churches typically use five methods to reach people with news about church finances and the challenge to give. Each method has pros and cons, and ultimately, an approach depends on how members are accustomed to receiving communication in general, not just from the church.

Every-member mailing

This approach, via mail, is the most common one churches use to make a special appeal for member giving.

Pros: Every member receives the same communication at about the same time. Some members prefer to receive communication in this way, or do not have access to email. Signatures also make the letter look official.

Cons: Some people put mail in a big stack and read it at another time, especially when the salutation reads, “Dear Member.” Mail delivery also can be less than perfect.

Public announcement

This can happen in person or in a church publication. Usually, a person other than the pastor stands during announcement time to give a financial update, as well as the ministry possibilities if giving increases. Or, a committee (or the church board’s finance committee chair) writes a newsletter article or bulletin announcement with the same message.

Pros: This approach is the least expensive and, when in person, the most direct. Members often do read through the newsletter for information about activities and events.

Cons: Not everyone who needs to hear the message will be in attendance. People also can bypass information buried within a newsletter—and it often is not sent first-class, which takes time to arrive.

Targeted communication

Some churches will directly contact those who have fallen behind in giving to encourage them and make arrangements to catch up.

Pros: The contact (usually by mail) is directed at one of the chief causes of the financial problem, and costs less than reaching everyone.

Cons: These members may feel singled out, almost like being pursued by a bill collector.

Member email

Many churches collect member email addresses and communicate regularly through email, and more are turning to this as a way to relay financial information.

Pros: People look regularly to email for current information and important messages. It also is a very low-cost method.

Cons: Email addresses change, often without advance notice. People scan emails rather than read them, so they may not get the impact of your financial message. Some emails end up in a “spam” or “junk” folder.

Blogs and websites

Churches with a younger or technology-savvy congregation base are turning to this approach more.

Pros: Articles on blogs and websites can be personal and compelling, and many can share in the conversation.

Cons: These may be read primarily only by younger audiences.

Church leaders should blend methods and technologies to saturate the message, remind members of the importance of giving to meet church financial targets, and create some positive urgency.

The most effective methods for communicating depend on the news and the congregation. However, three basic rules apply to all local churches.

First, the younger and better educated the members are, the better it is to communicate electronically and immediately. Second, the more personalized and customized the communication, the more likely people will respond because church leaders are talking directly to them. And third, positive, goal-oriented language, regardless of the communication method, inspires and informs people, and gives them a sense of God’s abiding presence and abundant provision in their lives. That will help them grow in giving now, and in the years to come.
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Right Person, Wrong Position: Navigating Staff Transitions in Church Leadership

Letting go of a church staff member who isn’t the right fit is never easy. This article offers biblical and practical advice for handling transitions with integrity, dignity, and care for both the individual and the church.

Paul Clark
Bio

Last Reviewed: May 23, 2025

Have you ever had to let a church staff member go, even though they gave everything they had—but still weren’t meeting expectations?
It’s a painful and difficult transition, and many churches struggle to navigate it in a healthy way.

Why Staff Transitions Happen

There are many reasons why people transition off church staffs:
  • Positive reasons:
    Sometimes, pastors or staff members feel God’s call to leave to expand their ministry or challenge their gifts.
  • Painful, but straightforward reasons:
    Dismissals due to negligence, a breach of ethics, or moral failure are difficult, but the steps for severing employment and protecting the church are usually clear, thanks to established HR practices.
  • Most troublesome reasons:
    Some transitions happen because an individual simply doesn’t have the gifts or skills needed for the role.
    Even the most sincere and beloved team member may not be able to meet the expectations of the position.
    It’s often a case of the right person in the wrong position.

If you cannot move the individual into a more suitable role, you must make the hard decision to transition them off the staff.

Handling Difficult Transitions Well

This type of situation is never easy.
In my years of church management experience, I’ve seen it handled with godly wisdom—and sadly, I’ve also seen it handled poorly.

The following guidelines can help you navigate a difficult staff transition with grace and professionalism:

1. Follow the Golden Rule

“Do to others as you would have them do to you” (Luke 6:31, NIV).

This verse should be the guiding principle for handling staff transitions.

2. Frame the Situation Correctly
  • It’s not about failure.
  • It’s about matching the right gifts and strengths to the right role.
  • No one sets out to fail—they simply discover that their abilities don’t align with the job’s requirements.

3. Document and Communicate Clearly

Before making a decision:
  • Document contributing factors thoroughly.
  • Communicate unmet expectations clearly, citing specific events and dates.
  • Ensure the employee knew about these issues when they occurred.

Important:
If there are surprises during the transition conversation, you are not ready to proceed.

4. Communicate In Person
  • Do not communicate transitions via email, text, or letters.
  • Always handle the conversation face-to-face.
  • You hired this person—show them the respect they deserve by handling this relationally.

5. Offer Dignified Transition Options

When possible:
  • Allow the individual to resign voluntarily if they agree the role isn’t the right fit.
  • Offer a transition period rather than an abrupt exit.
  • Recognize that problems developed over time—resolution doesn’t need to happen overnight.

6. Manage Staff Communication Carefully
  • Inform the staff before news leaks out.
  • Frame the situation correctly, both for the church’s sake and the individual’s reputation.
  • Managing the communication helps minimize misinformation and protect all parties.

7. Support the Staff Member’s Family

Senior leadership should:
  • Reach out personally to the family.
  • Reassure them of the church’s love and support.

This step goes a long way in helping both the family and the congregation heal and move forward in a healthy way.

8. Act Generously with Transition Benefits

Expressions of grace help minimize hard feelings.
Consider offering:
  • Unused vacation pay.
  • Severance pay.
  • Continuation of health-care coverage for a specified period.

9. Assist with Future Opportunities

If possible:
  • Help the staff member find new ministry opportunities elsewhere.
  • Matching their strengths to a new role communicates true care and support.

If the situation becomes difficult:
  • Consult an attorney immediately.
  • If the employee resists the decision, or if legal risks are unclear, don’t hesitate to seek professional help.

Reminder:
Do not risk the church’s legal standing by wading into uncertain waters without guidance.

A Call to Careful Leadership

Managing a staff transition when a person simply isn’t the right fit is one of the toughest responsibilities a church leader faces.
Handled with wisdom, grace, and care, these difficult moments can still strengthen the health and integrity of your church community.

We’ve used a combination of AI and human review to make this content easier to read and understand.
Related Topics: Posted: Last Reviewed:
Image: AdobeStock/Tomasz Zajda

A Question of Church Driver Liability

Who is liable when church volunteers drive for church events?

Jack Crabtree

Q: Who is liable if church volunteers are using their own private vehicle to transport kids to and from Bible Study each week?

Liability for both parties

In most cases when there is a vehicle accident there are liability issues for both the volunteer driver and the church or organization for which they were driving. Liability is not a pre-determined formula, but depends on the legal examination and determination of what happened and who is found to be negligent or at fault.

When a young person is under the care or supervision of a church volunteer, that volunteer has the responsibility to make decisions about safety and to avoid danger as a reasonable and prudent person would do. An important consideration in establishing negligence is whether the accident was caused by conditions that were foreseeable and could have been avoided by taking necessary precautions.

Who owns the vehicle?

Volunteer drivers and local church/youth organizations can anticipate liability issues and prepare for them. Most often the person who owns and operates the vehicle involved in the accident will be the primary focus of the liability. In most states it is important for volunteers using their vehicle to transport young people to carry at least $100,000/$300,000 liability coverage plus a personal liability umbrella policy.

Obviously the increased insurance coverage means higher premiums for the volunteer on their personal vehicle. Many local churches and organizations now require written proof of a specified amount or liability insurance from volunteers who will be driving vehicles as part of their volunteer application process.

Written standards

Another important way to prepare for liability issues is for the volunteer driver to agree to a written set of safety standards and follow them when they operate their vehicle for the youth programs (i.e. obeying all traffic laws especially speed limits, not using mobile phones while driving, mandatory use of seat belts for all passengers, etc.).

The liability issues the church or organization faces center on the selection/approval of volunteer drivers and the safety standards required and enforced for these drivers.

Record-keeping is key

The church or organization is wise to select and approve volunteer drivers on the basis of a written policy standard that specifically addresses age, driving record, personal insurance coverage and agreement to safe driving standards. Paperwork showing verification (including background checks from DMV) for each volunteer is the minimum level of protection a church should be able to produce in a liability matter.

The church or organization can also prepare for liability issues by informing parents of who is driving their kids and the safety standards required. Parents can be asked to give permission for their young person to be transported to the church activities by a volunteer driver. Records of these meetings or permission slips should be kept on file.

Specific questions on volunteer and organizational liability should be researched locally with legal and insurance professionals who advise the church or organization.

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What to Do If Your Church Delays Your W-2 Form

Churches must provide W-2 forms to ministers by January 31 to comply with IRS regulations. If your church delays issuing your W-2, you may need to escalate the issue with leadership or report noncompliance. Learn your options, including filing without a W-2.

Vonna Laue, CPA
Bio

Q: I am a full time minister. I have a work agreement with the church that covers my parsonage allowance and professional expenses. Every year it is like “pulling teeth” to get a W-2 from our church treasurer. My W-2 doesn’t get to me until as close to April 15th as you can get. This year I mentioned it in the business meeting and I was told I could file for an extension and file late! How can I go about resolving the problem? Can I file without the W-2?

I have not run into an issue with an organization not sending a W-2.

If the W-2 form is not mailed by January 31, the church is out of compliance with the IRS requirements.

The W-3 form and Copy A of all W-2 forms must be postmarked to the IRS by February 28.

A penalty can be assessed by the IRS for every form that is filed late. The only formal recourse an employee would have is to report the employer to the IRS. Filing without a W-2 would in essence do this as well. I would suggest discussing this with the governing board or the finance committee so they understand the potential issues this could create for the church.
Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.
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Church-Provided Life Insurance for Pastors: Tax Implications Explained

Churches offering life insurance to pastors must follow tax rules—learn how to stay compliant.

Elaine L. Sommerville, CPA
Bio

Last Reviewed: January 30, 2025

Q: We’re a small rural church, and our pastor is the only employee. We’re considering getting him a $50,000 life insurance policy and paying the premium on it. He will name the beneficiary. Can the church get a $50,000 group life insurance policy with only one employee? Would the premium the church pays on this be considered a taxable fringe benefit if the minister names the beneficiary of his choosing (even if it’s $50,000 or less)?

Understanding Church-Provided Life Insurance for Pastors

Providing life insurance to a pastor, whether or not he is the only employee of the church, has tax consequences. Life insurance paid by an employer is a taxable benefit in instances where the employee can select the beneficiaries. Without a separate provision, the cost of the life insurance should be added to the employee’s wages in Box 1 of the Form W-2.

Can a Church Get a Group Life Insurance Policy for One Employee?

While employers can provide life insurance up to $50,000 of coverage through a group-term life insurance plan on a tax-free basis, one employee does not constitute a group. Therefore, a group-term life insurance benefit is not available in this instance.

Are Life Insurance Premiums a Taxable Fringe Benefit?

The church may pay the life insurance premiums for the minister, but it must treat them as a taxable fringe benefit for payroll reporting purposes. This is true regardless of the amount of life insurance provided. Since the pastor names the beneficiary, the premium payments are considered taxable income and should be reported accordingly.

FAQs About Church-Provided Life Insurance for Pastors

1. Can a church provide tax-free life insurance to a pastor?

A church can offer tax-free group-term life insurance only if it has more than one qualifying employee. If only one employee is covered, the benefit does not qualify as tax-free.

2. How should a church report life insurance premiums paid for a pastor?

The church must include the premiums as taxable income on the pastor’s W-2 form.

3. What if the church owns the policy instead of the pastor?

If the church owns the policy and is the beneficiary, it may not be considered taxable income to the pastor. However, legal and tax consultation is advised.

4. Are there alternative benefits churches can offer pastors?

Yes, churches can explore tax-free benefits such as a properly structured health reimbursement arrangement (HRA) or a 403(b) retirement plan.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
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Q&A: Creating a “Paid Time Off” Policy

Many churches are adopting a PTO (Paid Time Off) policy to replace traditional leave structures. Discover the benefits, legal requirements, and procedural considerations for implementing PTO for church staff.

Kathleen Turpin
Bio

Last Reviewed: January 29, 2025

Q: Our church is looking into the possibility of using a PTO (paid time off) policy to govern time away related to vacations, illnesses, conferences, and study leave. This would replace the policy we have, which allocates a certain number of days for each of these “time off” categories. Is there any precedent for use of PTO for paid church staff? It is fairly common in corporate America. Are there any legal or procedural issues we should consider in our review of this policy?

PTO is a common practice for churches and ministries

Yes, using paid time off (PTO) is a common practice used by ministries as well as businesses.

The idea behind PTO is, rather than having so many days dedicated to specific time off (such as sick, vacation, personal time, funeral, or in some cases even holidays), the organization creates one big “bucket” of time that can be used for any time off needs.

This approach gives the employee the responsibility and control of managing his or her paid time off.

Implementing a sound PTO program

There are a few legal and procedural issues to be aware of when implementing a PTO program.

First, it is important to clearly identify when PTO becomes available. For example, the policy should state how much PTO is earned, what PTO can (and cannot) be used for, what time increments PTO can be taken, and whether days can be carried from one year to the next.

Secondly, a written policy should state whether PTO will be paid out upon termination of employment. Be aware that some states require employers to pay all earned PTO. Other states permit the employer to establish whether it will be paid upon termination, as long as it is in writing and has been communicated to the employee. The Fair Labor Standards Act also does not permit an employer to dock an exempt employee’s pay if he or she works any portion of a day; even if the employee has exhausted all PTO.

This can become a challenge if the employee uses all his or her PTO as vacation time early in the year, only to miss time later in the year due to illness or other reasons.
Image: AdobeStock/Svitlana

Understanding the Tax Rules for Valuing Volunteer Labor

Learn why the value of volunteer labor isn’t tax deductible and how churches can show gratitude for donated services.

Michael E. Batts, CPA
Bio

Last Reviewed: January 9, 2025

Q: A church member who has a business donated numerous hours to rewire the church sanctuary and install new lighting. He billed the church on his company letterhead for items purchased that we reimbursed him for. In addition, he listed total hours spent on the project and the value at an hourly rate. We can acknowledge that he did the work and the numerous hours he donated, but is that deductible for his taxes?

Donated Services Are Not Tax Deductible

You are correct in acknowledging the generous gift of donated labor, and from a donor relations perspective, expressing gratitude is important. However, federal tax law is clear: the value of donated services is not tax deductible.

Why Donated Services Are Not Deductible

While this rule may seem unfair at first, it makes sense when you consider it from two perspectives:
  • Economic Substance: If the church had paid the business for the services and the business subsequently donated the same amount to the church, the business would be in the same economic position. In this scenario, the business would have revenue equal to the payment and a corresponding deduction for the charitable contribution, resulting in no net financial effect.
  • Practical Considerations: Allowing deductions for donated services would create complex income tax issues. How would the value of services be determined for choir members, Sunday school teachers, nursery workers, musicians, or other volunteers? Documenting time spent and assigning values would be challenging and inconsistent.

Federal Tax Law Logic

Although federal tax law isn’t always straightforward, the rule excluding deductions for donated services makes practical and economic sense in this context. Acknowledging and appreciating these contributions remains vital for donor relations, even if they are not deductible.

How Churches Can Respond

Churches can and should express their gratitude for donated services by providing a written acknowledgment. While this acknowledgment does not hold tax benefits, it strengthens relationships with members who generously contribute their time and skills.

FAQs About Valuing Volunteer Labor
  • Are donated services ever tax deductible? No, federal tax law does not allow deductions for the value of donated services.
  • Can churches issue a receipt for donated services? Churches may issue a letter of acknowledgment but cannot provide a tax receipt for the value of donated labor.
  • What about reimbursed expenses? If a volunteer incurs expenses on behalf of the church and is not reimbursed, those expenses may qualify as a charitable deduction, provided they are properly documented.
  • Why does this rule exist? The rule simplifies tax administration and ensures consistency by focusing on tangible contributions rather than subjective valuations of service.

For more detailed guidance on charitable contributions and federal tax laws, visit the IRS website.
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: AdobeStock/KingmaPhotos

Accounting for Sales of Pastor’s Preaching Resources

How churches can properly account for and handle taxes on a pastor’s preaching resources sold through church gift shops.

Vonna Laue, CPA
Bio

Last Reviewed: January 21, 2025

Q: We are looking at a cost split for preaching resources sold in our church’s gift shop. The arrangement is a 50/50 split between the pastor and the store. What is the proper way to account for the pastor’s portion of that income? The pastor has a 501(c)(3) organization for his book-selling activities, and the funds would be transferred to him through that account. How should this be handled to remain compliant with tax regulations regarding taxes on pastor’s products?

Should the Church Purchase Directly from the Pastor?

While it may seem straightforward to purchase directly from the pastor, it is better to structure the transaction through the pastor’s 501(c)(3) organization. This method avoids potential conflicts of interest and ensures the church maintains proper accounting practices. Board approval is essential since this constitutes a related-party transaction, and transparency is critical.

What Steps Should Be Taken to Ensure Compliance?

1. Obtain Board Approval

As this involves a related-party transaction, the church’s board should approve the arrangement. Documenting the approval demonstrates transparency and ensures alignment with governance standards.

2. Purchase at Fair Market Value

Ensure the resources are purchased from the 501(c)(3) at fair market value. Paying an unreasonable amount could raise concerns with the IRS and potentially jeopardize the church’s tax-exempt status.

3. Use the Church’s Inventory and Cost of Goods Sold Accounts

When resources are purchased from the 501(c)(3), the transaction is recorded as an increase in inventory. The cost of goods sold account reflects the expense when the resources are sold. This approach avoids any direct financial transaction with the pastor while maintaining proper accounting practices.

4. Let the Pastor Handle Royalties

The pastor can establish a royalty arrangement with the 501(c)(3). This ensures that any income from book sales is managed appropriately within the organization, keeping personal and organizational finances separate.

FAQs: Taxes on Pastor’s Products

1. Can the church buy preaching resources directly from the pastor?

It’s better to purchase from the pastor’s 501(c)(3) organization to avoid potential tax and governance issues. This approach keeps transactions transparent.

2. Why is board approval necessary for this transaction?

Board approval is required for related-party transactions to ensure transparency and compliance with governance best practices.

3. How should the church record these purchases?

The purchases should be recorded as inventory, with sales tracked through the cost of goods sold account. This keeps the church’s financial records accurate.

4. Does the pastor owe taxes on income from these sales?

If the income flows through the pastor’s 501(c)(3), it is managed by the organization and not considered personal income. However, the pastor should consult a tax advisor for specific guidance.

By structuring transactions properly and adhering to tax laws, churches can avoid complications when handling taxes on pastor’s products. Consulting with legal and tax professionals ensures compliance and transparency.
Vonna Laue has worked with ministries and churches for more than 20 years. Vonna was a partner with a national CPA firm serving not-for-profit entities through audit, review, tax, and advisory services. Most recently, she held the role of executive vice president for a Christian ministry that works to enhance trust in the church and ministry community.
Image: Getty/Rawpixel

How to Handle Disruptive People in Church

When you need to ask someone to leave your church.

Richard R. Hammar, Attorney, CPA
Bio

Does a church have a legal right to keep people from accessing its property or attending services? For example, let’s say that a church has an encounter with a disruptive person, and asks him not to return. What if he shows up again the next week? How should ushers respond?

This issue has been addressed by a number of courts.

Generally, the courts have been sympathetic to attempts by churches to deny access to disruptive individuals. To illustrate, one court ruled that a church could bar a disruptive individual from entering its premises. It noted that the person had been clearly informed and understood that his privilege to attend the church had been revoked. The court rejected the person’s claim that a church is a public place that cannot deny access to anyone.

A church, like any property owner, has the right to determine who can access its premises.

Let me mention another case in which a court ruled that a church could prevent a disruptive person from accessing its property. The person had disrupted church services, and harassed members, in the past. A court issued an order prohibiting the person from coming within 200 yards of the church. This order was upheld by a state appeals court, which found it to be a reasonable limitation on socially unacceptable behavior. Such cases demonstrate that the civil courts will assist churches in keeping disruptive individuals away by issuing appropriate orders. This obviously is a last resort, but it is one that is available in dealing with persons who will not behave appropriately.

You can learn more about how to handle people who disrupt your services or pose a potential threat to the safety of your church members in Dealing with Dangerous People.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Can We Not Pay Employees Who Fail to Turn in Timesheets?

Is it legal to delay employee’s wages?

Kathleen Turpin

Q: We have several employees who are routinely late in submitting payroll time sheets. What recourse do we have? Can we delay pay until the next time period, or will this get us into legal trouble?

A better approach

No, in most situations it is not appropriate to withhold pay because the employee fails to submit a time card in a timely manner. The best approach is for the employer to pay the estimated time that the employee is believed to have worked.

The estimated time would be the time the employer actually knows the employee worked.

If the employee fails to submit a time card and the employer includes what is reasonably believed was worked (even if it was less than what the employee actually worked), any necessary corrections can be made at the next pay period.

So, if an employee normally works 35 hours a week, and you have no reason to believe that employee didn’t work 35 hours that week, the employee should be paid the standard wage. If it is unclear what the employee worked, a good estimate should be made.

Example:

Let’s say the employee normally works 35 hours a week (five seven-hour days), and took one day off. You aren’t sure how many hours the employee actually worked (let’s assume the employee is out of vacation time), so you only pay that employee for 28 hours that week. Later, the employee disagrees with the time card you submitted, or you discover the employee actually worked 30 hours that week. You would then add the additional two hours the following pay period. You still have to pay the employee the hours worked, but you have complied with the legal requirement to pay an employee for the time you know the employee actually worked.

The best approach with an employee continuously submitting time cards late is to discipline the employee for not following your guidelines or requirements. This is a better practice than just not paying the employee.
Image: AdobeStock/Davide Angelini

Tips For Screening Underage Church Volunteers

How can we adequately screen adolescents before recruiting them to work in our children’s ministries?

Richard R. Hammar, Attorney, CPA
Bio

Last Reviewed: February 13, 2025

Q: Our church uses teenage workers to assist adults in various children’s ministries and programs. We screen adult workers. Should we do the same with teenagers? If so, how?

Criminal checks not possible

Most churches use minors to assist in various children’s or youth programs, and so some screening should be done. You obviously cannot perform criminal records checks on persons under 18 years of age, and even for persons who are 18 or 19 a criminal records check will have limited significance. You really need to approach the screening of adolescents in a different manner. Let me suggest two options.

Step 1: Ask for references

First, obtain two or three reference letters from persons who have seen the applicant interact with other minors (this would include church workers, coaches, school teachers, scout leaders, etc.). You want an opinion from such persons about the applicant’s suitability for working with minors. Obviously, if you receive two or three references from such persons, you have very compelling evidence that you exercised reasonable care in the selection process, and in the final analysis, this is the standard by which you will be judged if your church is sued for the molestation of a child by an ado-lescent worker. The bottom line is that you cannot conduct criminal records checks on such persons, but you must take other steps to demonstrate reasonable care.

Step 2: Learn he “community practice”

Second, contact local youth-serving charities such as the public school district, Boy/Girl Scouts, YMCA, Boys/Girls Clubs, etc. and ask them what screening they use for adolescent workers. Be sure to make a record of each contact. By basing your screening policy on “community practice” you will be reducing your risk of liability based on negligent screening.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Understanding Federal Rules Related to Certifying Church Buses

Are church buses subject to state motor vehicle regulations?

Richard R. Hammar, Attorney, CPA
Bio

Q: Our church owns a small bus that has 18 seats. While the bus is used mostly for local transportation, we occasionally use it for out-of-town trips. Some of these trips go across state lines. Some members of our church have asked if the bus needs to be certified by the U.S. Department of Transportation and display a Department of Transportation sticker. Does it?

Understand federal rules and regulations

Any vehicle designed to carry more than 15 passengers (including the driver), that is used across state lines, and that does offer transportation services for hire, is a “private motor carrier of passengers” (PMCP) subject to Federal Motor Carrier Safety Regulations (FMCSRs). Even if you do not operate your bus in interstate commerce, you may still be subject to state regulations similar to the FMCSRs.

Business or non-business use

As a private motor carrier of passengers, your vehicle will fall into one of two groups: business or non-business. In most cases, church-owned PMCPs are non-business, meaning that you provide private, interstate transportation of passengers that is not in the furtherance of a commercial enterprise. The Department of Transportation lists “churches, scout groups and other charitable organizations that may purchase or lease buses for the private transportation of their respective groups” as examples of non-business PMCPs.

PCMP requirements

As a PMCP, you must meet certain requirements of the FMCSRs. These requirements differ slightly depending on if you are classified as a business or non-business PMCP. Business PMCPs must meet (1) eight driver qualification requirements; (2) seven “driving of motor vehicle” requirements; (3) eight “parts and accessories” requirements; (4) “hours and services” requirements; and (5) inspection, repair and maintenance requirements. Non-business PMCPs are subject to these same requirements, except that they are exempt from the recordkeeping requirements under the driver qualification provisions.

USDOT number probably required

Note that a United States Department of Transportation (USDOT) number is required if you are an interstate PMCP regardless of business or non-business status. No fee is assessed to obtain a USDOT number. You must complete Form MCS-150 (Motor Carrier Identification Report) to obtain a USDOT number. Form MCS-150 can be completed online or you can print a copy of the form to complete and mail to the address indicated. If you do not have access to the Internet, you can call the Federal Motor Carrier Safety Administration’s toll-free number at 1-800-832-5660 to have the form mailed to you.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: AdobeStock/ BOTAHRY DEX

Are Church Members Allowed to Insert “Write-in” Candidates?

Along with turning to your version of parliamentary procedure, you should consult two other legal resources.

Richard R. Hammar, Attorney, CPA
Bio

Q: Our church bylaws state:

“All nominees for the office of deacon shall be chosen from the membership of the church and must be nominated by a nominating committee of seven members appointed by the pastor and church board. A list of all nominees shall be distributed to all members on the night of the election.”

During our annual church business meeting, one member asserted that write-in ballots are always permissible. He insisted he was right, and also stated that both state law and parliamentary procedure allow it.

Was he right? Do members have a right under state law or parliamentary procedure to insert “write-in” candidates on their ballots when this is not authorized by our bylaws?

Refer to Robert’s Rules of Order

There are several published versions of parliamentary procedure. Many churches use Robert’s Rules of Order, Newly Revised, which contains the following brief mention of write-in voting:

If the bylaws require the election of officers to be by ballot and there is only one nominee for an office, the ballot must nevertheless be taken for that office unless the bylaws provide for an exception in such a case. In the absence of the latter provision, members still have the right, on the ballot, to cast “write-in votes” for other eligible persons.

This language suggests that church members have the right to “write in” the candidate of their choice when voting in an election, even if that person is not a candidate who was selected by a nominating committee.

However, there are two other legal resources that must be consulted when deciding if write-in candidates are permitted. One of these is the state nonprofit corporation law under which a church is incorporated. While most state nonprofit corporation laws do not address write-in voting, some do so. Church leaders should know how their state nonprofit corporation law addresses this issue.

A second legal resource that may address write-in voting is a church’s own bylaws or governing document. Once again, church leaders should be familiar with any provisions in their church’s governing document that address write-in voting. Note that such provisions generally supersede conflicting provisions in state nonprofit corporation law.

If write-in voting is not addressed in either state nonprofit corporation law, or a church’s governing document, then future confusion over this issue can be resolved in advance by amending the church’s governing document to explicitly permit or prohibit this practice.

Church governing documents often list qualifications for board members. The common practice of using a nominating committee to select nominees for board positions helps to ensure that candidates meet these qualifications, since such committees typically limit the list of nominees to persons who are known to meet the qualifications.

There is no such assurance when members are permitted to “write in” the candidate of their choice on a ballot, since members will not necessarily know if the candidate of their choice meets the qualifications mentioned in the church’s governing document.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Church Governance: 15 Essentials

What every church leader should know about bylaws.

Richard R. Hammar, Attorney, CPA
Bio

Most churches, whether incorporated or unincorporated, have a governing document that addresses several issues of governance and administration. While the name for this document varies from church to church, it often is called bylaws, and it is this name that will be used in this article as a matter of convenience. There are several legal issues that are associated with church bylaws. This article will address 15 of them.

What are bylaws?

What are church bylaws? The Model Nonprofit Corporations Act (3rd ed. 2008), which has been adopted by several states, defines bylaws as “the code or codes of rules (other than the articles of incorporation) adopted for the regulation and governance of the internal affairs of the nonprofit corporation, regardless of the name or names used to refer to those rules.”

One court defined bylaws as follows:

The bylaws of a corporation are the rules of law for its government. The term “bylaw” may be further defined according to its function, which is to prescribe the rights and duties of the members with reference to the internal government of the corporation, the management of its affairs, and the rights and duties existing among the members. Bylaws are self-imposed rules, resulting from an agreement or contract between the corporation and its members to conduct the corporate business in a particular way. Until repealed, bylaws are the continuing rule for the government of the corporation and its officers. Schraft v. Leis, 686 P.2d 865 (Kan. 1984).

Because bylaws contain rules for internal governance and administration, they are indispensable for both incorporated and unincorporated churches.

Know your current version

In many churches, the bylaws were adopted long ago, and have been amended numerous times over the years. As a result, there may be various “editions” in circulation. Often, these editions are undated, and this can make it difficult if not impossible to identify the current one. This can create confusion.

Example A church conducts an annual business meeting at which 15 percent of the members are present. Some members question whether a quorum exists. Church staff scour the church office, looking for a copy of the church’s bylaws. Two editions are found. One defines a quorum as 20 percent of the church’s membership, and the second defines a quorum as 10 percent of the church’s membership. Neither edition is dated, and no one knows which of these editions is more recent, or even if either of them represents the current edition. What steps can church leaders take to identify the current version of the church bylaws?

Here are two common procedures that can be very effective in identifying the current edition of a church’s bylaws:
  • Identify copies of the church bylaws with a numeric designation. To illustrate, a church identifies its current bylaws as “version 1.0.” During the church’s membership meeting in 2010, two amendments are made to the bylaws. Following the meeting, the revised bylaws are printed, and designated as “version 1.1.”
  • Identify copies of the church bylaws by date. For example, designate the current bylaws “Current as of [date].”

In either case, be sure that all printed copies of the bylaws bear the appropriate designation, and dispose of undesignated versions.

The United States Supreme Court has observed that “all who unite themselves to [a church] do so with an implied consent to its government, and are bound to submit to it.” Watson v. Jones, 80 U.S. 679 (1871). A church’s “government” generally is defined in its charter, constitution, bylaws, resolutions, and practice.

(Cal. App. 2008).

Do Churches Need Both a Constitution and Bylaws?

Some churches maintain both a constitution and bylaws, a practice that dates back over a century. However, having both is rarely necessary unless:
  • The constitution is clearly superior to the bylaws (by explicit language or a stricter amendment process).
  • The constitution governs only the most significant matters (e.g., doctrine, property).
  • The bylaws handle routine governance and administration.

⚠️ Common Conflict

Churches that maintain both documents often include overlapping provisions. Over time, this can lead to confusion and legal risk.

Example:
A church amends its bylaws to change the size of the church board, but forgets to update the corresponding language in its constitution. Now the two governing documents are in conflict.

🚫 Don’t Combine Without Clarity

Using the term “constitution and bylaws” without distinguishing between them is imprecise and should be avoided.

What Should Be in a Church’s Bylaws?

According to the Model Nonprofit Corporations Act (3rd ed. 2008):

“The bylaws of a nonprofit corporation may contain any provision for managing the activities and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.”

Common Bylaw Topics

Include provisions that address:
  • Member qualifications, selection, and removal
  • Scheduling of annual and special meetings
  • Meeting notices and quorum requirements
  • Voting rights and procedures
  • Election, term limits, and removal of officers/directors
  • Filling board vacancies
  • Board and officer responsibilities
  • Amendment procedures for the bylaws
  • Procedures for property transactions
  • Standing committees (e.g., audit, investment, insurance)

💡 Tip: Drafting bylaws is complex. Always consult an attorney experienced in nonprofit or church law.

Frequently Omitted (But Valuable) Bylaw Provisions

Consider adding these often-overlooked clauses:
  • Mediation or Arbitration Requirement – To resolve internal disputes.
  • Parliamentary Procedure Reference – Specify which system (e.g., Robert’s Rules of Order) governs meetings.
  • Resignation Limits During Discipline – Clarify that members undergoing discipline cannot resign mid-process (see The Guinn Case).
  • Contract Approval Procedures – Who can legally bind the church?
  • Check Signing Authority – Require two officers; name them.
  • Employee Bonding – For those handling funds.
  • Annual Financial Audit or Review – For transparency and risk reduction.
  • Indemnification Clause – Protect officers/directors sued over church decisions.
  • Fiscal Year Definition
  • Staggered Board Elections – Ensures continuity.
  • Meeting Flexibility – Allow virtual or phone meetings if needed.
  • Proxy and Absentee Voting – Must be explicitly allowed in bylaws.
  • Custody of Records – Clarify who holds official documents.
  • Membership Record Inspection – Define rights, limits, and procedures.
  • Voting Clarity – Define terms like “two-thirds vote.”
  • Automatic Suspension for Absences – Set expectations for board attendance.

⚠️ IRS Alert: In 2008, the IRS denied tax-exempt status to a church, citing the absence of bylaws and a conflict of interest policy. Even though not explicitly required, these documents are strong indicators of responsible governance.

The Guinn Case: Withdrawing During Church Discipline

In Guinn v. Church of Christ, the Oklahoma Supreme Court ruled that:
  • Churches may discipline active members (still under membership).
  • Discipline of those who resign first is not protected by the First Amendment.
  • Churches can prevent resignations mid-discipline only if members waive their right to resign—ideally through a bylaw clause.

What Not to Include in Bylaws

Bylaws govern internal church operations. Other matters are better suited for resolutions or separate policies.

Better Addressed Elsewhere:
  • Personnel Policies – Use an employee handbook.
  • Volunteer Screening – Use child protection or HR policies.
  • Doctrinal Statements on Marriage – Often unnecessary in bylaws if the church already defines the Bible as its doctrinal authority.
  • Clergy Compensation or Housing Allowances – Use board resolutions instead.

How Bylaws Differ from Articles of Incorporation

Articles of Incorporation (aka Charter) Typically Include:
  • Church name and address
  • Duration of existence
  • Purpose(s)
  • Names of initial board members
  • Required dissolution clause (e.g., assets must go to a 501(c)(3) upon dissolution)

🔎 Tip: Many states don’t require churches to file bylaws. Check with your state’s corporations commission for local requirements.

How to Prioritize Governing Documents

When conflicts arise, the following hierarchy generally applies:
OrderDocument/Source
1Charter (Articles of Incorporation)
2Constitution (if separate and superior)
3Bylaws
4Adopted parliamentary authority (e.g., Robert’s Rules)
5State nonprofit corporation law (gap-filler)
6Board Resolutions
7Established custom
8Majority rule (only if no other guidance exists)

Resolving Conflicts Between Documents

In general:
  • Charter > Constitution > Bylaws > Resolutions
  • State law fills gaps unless church documents already address the issue
  • Courts may avoid ruling on ambiguous bylaws that touch on doctrine

Ambiguity in Bylaws: Why It Matters

Ambiguous language in bylaws can lead to:
  • Internal disputes
  • Legal uncertainty
  • Judicial interpretation (sometimes unfavorable)

🧭 Tip: Regularly review and update bylaws to avoid confusion.

Do You Need to Rewrite Your Bylaws?

You might need to rewrite or revise your bylaws if:
  • They’re outdated (10+ years old)
  • They weren’t drafted by a knowledgeable attorney
  • They were adapted from another church or a template
  • Your church is now larger or more complex

Filing Requirements
  • Most churches do not need to file bylaws with the state.
  • However, some exemptions or zoning applications may require submission.
  • Always verify requirements with your state’s corporations division.

Denominational Limitations

If your church is part of a denomination:
  • Your ability to create or amend bylaws may be restricted
  • Some provisions may be mandatory per denominational rules
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Pastor Emeritus Status: Key Considerations for Churches

Before granting a retiring pastor the title of pastor emeritus, churches must carefully review compensation agreements, legal responsibilities, and tax obligations. Learn the key factors to consider for a smooth transition.

Richard R. Hammar, Attorney, CPA
Bio

Last Reviewed: January 29, 2025

Q: Our senior pastor will be retiring soon, and our church board would like to name him “pastor emeritus.” It is our understanding that concerns have been raised about high-profile pastors manipulating a church board into agreeing to a financially burdensome compensation package following their retirement, often based on their status as a pastor emeritus. Do you have any suggestions for us?

Let me share a number of factors for your consideration:

‘Pastor Emeritus’ is ambigious

Pastor emeritus status is an ambiguous status in many cases due to a lack of any definition in a church’s governing document (i.e., bylaws). If a church’s governing document does not address this status, then it is a purely honorific status conveying no legal authority.

Carefully review compensation agreements

Some churches have adopted compensation agreements for a retiring pastor that may or may not be linked to pastor emeritus status. These agreements are perfectly legitimate so long as the following requirements are satisfied:

  • The agreement is duly authorized pursuant to the church’s governing document. To illustrate, an agreement adopted by the church board will be legally unenforceable if the board lacked the authority under the church’s governing document to enter into the agreement.

  • If the church’s governing document authorizes the board to approve a compensation agreement with a retiring pastor, then there are two fiduciary duties that must be recognized and discharged by the members of the board. The first is the fiduciary duty of “reasonable care” that any board member owes to the organization. This duty requires board members to exercise prudence, care, and independence in fulfilling their duties, and this requires the full and objective consideration of any compensation arrangement with a retiring pastor.

Duty of loyalty

A second fiduciary duty that is implicated in such arrangements is the duty of loyalty. This duty, which is recognized by the nonprofit corporation laws of most states, requires board members to place the corporation’s interests above their own. This means, among other things, that board members (such as the senior pastor) who will personally benefit from a particular board decision should recuse themselves from the discussion and take no part in the vote. Further, the duty of loyalty requires full disclosure of all the terms and conditions of a particular action, and that a board-approved action that personally benefits a particular member must be “fair” to the organization. These constraints transcend any ethical imperative. They are a matter of law.

Include language to keep options open

Some compensation agreements with former pastors may become burdensome to the church in future years. For this reason, I recommend that such agreements contain language that gives the church the ability to unilaterally modify or terminate its obligations under the agreement.

Review tax reporting requirements

It is essential that a church comply with the tax reporting requirements associated with such transactions. Any compensation that a church provides to a retired pastor, including pastors who are given the status of pastor emeritus, is taxable and must be reported to the IRS. The notion that such remuneration is a nontaxable “love gift” is widespread but mistaken.

The failure to report taxable compensation to the IRS will convert the compensation into an “excess benefit transaction” under section 4958 of the tax code. This could result in substantial excise taxes (called “intermediate sanctions) of up to 225 percent of the amount that the IRS determines to be excessive compensation.

If a compensation agreement provides for the payment of compensation in future years, it may constitute a non-qualified deferred compensation plan subject to strict new requirements under section 409A of the federal tax code. A failure to comply with these requirements can result in substantial penalties.

Additional compensation

If a pastor emeritus remains employed by the church in some capacity, then several additional issues are implicated, including workers compensation and fringe benefits.

Benefits to surviving spouse

Any agreement approved by the church board or congregation that recognizes a pastor emeritus should address the issue of continuation of benefits to a surviving spouse.

Consult an attorney

Legal counsel should review any agreement pertaining to a retiring pastor before it is executed.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Ground Rules: Why Church Bylaws Matter

Church bylaws are critical, and amending them should not be taken lightly.

Michael Allison

Q: Although our church has bylaws in place, we do not operate strictly according to these as a body. If we amend them to reflect how we operate now, will that create any problems?

Why bylaws matter

A church that is not following the provisions of its bylaws could certainly run into trouble. Bylaws are a critical component of church operations. Yet, in many churches, they are filed away, forgotten and ignored. Church bylaws spell out who will run the ministry and how it will operate. Key organizational issues typically addressed in the bylaws include:
  • Who in the church is authorized to make various decisions, including major financial decisions;
  • How the governing board is organized;
  • The relationship between the governing board and the congregation;
  • Who has authority to make hiring and firing decisions involving pastors and staff;
  • When and how meetings of the governing board and the congregation will occur;

…And much more.

Keep bylaws current

An initial set of bylaws is generally adopted when the church is first formed. As time goes by, however, ministry operations change, and a church can find itself to be out of step with its own bylaws. When this is discovered, one of two things should happen as soon as possible: The church should either revise its practices to conform to the bylaws, or the bylaws should be amended.

Because church bylaws represent an important legal document, any change should be done in consultation with an attorney. The bylaws will usually contain a provision stating how they can be amended. This sometimes involves a vote of the governing body of the church, sometimes involves a congregational vote, and sometimes requires both. Your attorney can help walk you through the implications of any suggested change to the bylaws, and the steps that should be taken to ensure that the bylaw changes are done in a way that is legal and binding.

Every ministry organization should review its bylaws every three to five years, or more frequently if it is growing rapidly or changing the way it operates. Again, having an attorney involved in the bylaw review is important to ensure that it’s done properly. Bylaws can be complex, and they differ dramatically depending on whether the church is incorporated, the type of governing approach it uses, the role that the pastor plays in the church, and numerous other factors. Since reviewing and amending bylaws is important to the life and health of the organization, having a legal professional involved in the process is a must. This is akin to having a physician involved in a medical assessment, whether it’s a regular check-up or a more significant medical procedure.
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Managing Health Risks in Children’s Ministry: Balancing Safety and Inclusion

When a nursery worker has Hepatitis B, churches must balance child safety, worker inclusion, and leadership policies. Learn how to assess risks, develop response plans, and create informed policies for your ministry.

Dave Staal

Q: We have a trained nursery worker who has been diagnosed with Hepatitis B. Under normal circumstances, she poses no health threat to the children, plus she works with two other adult volunteers in the room. What is our risk in using her in this ministry?
Here’s how I handled these situations in my work in children’s ministry. First, consider what’s best for the children. Second, think through what’s right for the individual. Third, keep consistent with church leadership. Let’s expand on all three.
What’s best for the children always remains top priority for anyone in children’s ministry. You describe the individual as “no threat” under normal circumstances. Look further into what’s needed to maintain normal, and what could happen to change circumstances into a more serious situation. If you still feel comfortable with the risk, do you have a response plan for when the unexpected happens?
You seem to already address what’s right for the individual. Specifically, open dialogue about the situation is a practice that will keep assumptions and fears low or non-existent. Plus, you have an excellent opportunity to surround this person with a loving, accepting community. However, keep in mind that child safety trumps community in children’s ministry.
Third, don’t make decisions like this alone. Involve your pastor and other senior leaders so that whatever decision happens will fall under the overall risk policies of the church. Your church can benchmark other child-centered institutions to craft infectious risk policies, such as schools, daycare centers, even the public library. While these places have very different missions and values, they likely paid for well-researched policies and procedures that are difficult for churches to afford. Open communication with individuals at your church who need involvement will help the right decision become clear to all.
In this or any similar situation, always prioritize what’s best for the children that God, and parents, have entrusted to your care.
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Legal Considerations for Church Layoffs: Protecting Your Ministry

Layoffs in a church setting require careful planning to ensure compliance with employment laws and ethical considerations. Learn how to protect your church, navigate discrimination risks, and manage severance, benefits, and legal obligations.

Richard R. Hammar, Attorney, CPA
Bio

Last Reviewed: January 29, 2025

Q: In what ways do church leaders need to protect the church from potential legal problems relating to layoffs? And to what extent does the church need to substantiate the need for specific layoffs or position elimination?

If your church is contemplating laying off employees, there are several legal issues to address. Let me mention six of them.

Consult your policy manual

First, most church employees, other than perhaps the senior pastor, ordinarily are employed indefinitely. Such employees have no expectation of continuing employment. However, some church employees are hired for a specific term, i.e., one year. In general, these employees cannot be terminated without good cause. Of course, a sharp drop in church income may well constitute good cause. Church policy manuals often address this issue, and they should be consulted.

Weight the impact to protected persons

Second, be sure that any reduction in the number of employees does not adversely impact persons who are protected by state or federal employment discrimination laws. The courts have ruled that declining revenue is a legitimate, non-discriminatory reason to dismiss employees, including those members who are of a protected class. However, layoffs cannot disproportionately impact them.

Comply with existing policies and procedures

Third, if your church has a policy or employee manual, and it addresses layoffs, be sure that you are fully complying with it.

Pay what is owed

Fourth, be sure that laid off employees are provided with any accrued benefits to which they are entitled, such as unused vacation time.

Understand the tax issues tied with severance agreements

Fifth, some churches use severance agreements when laying off some employees. Church leaders need to be very careful when utilizing such agreements, since there are a number of tax issues that must be addressed, including tax reporting and withholding, the availability of a housing allowance, and compliance with the nonqualified deferred compensation regulations under section 409A of the tax code.

Does COBRA apply?

Sixth, church leaders should be aware of the possible application of COBRA, or similar state laws, to laid off employees. COBRA is a federal law that allows certain employees covered under an employer’s group health plan to continue health insurance coverage at their own expense after the termination of their employment. COBRA was amended by the recently enacted American Recovery and Reinvestment Act of 2009 to reduce an employee’s cost of continuing coverage under COBRA to 35 percent, with the employer picking up the remaining 65 percent. This change only applies to employees who are involuntarily terminated between September 1, 2008 and January 1, 2010.

Church plans are exempt from COBRA, but most states have comparable laws that may or may not exempt church plans. Church leaders should be familiar with the possible application of state law before authorizing an employee layoff.

Seek a lawyer’s advice

Given the complexity of these issues, it is a good practice for church leaders to enlist the assistance of legal counsel before authorizing or implementing any layoffs.

Many for-profit companies have implemented creative solutions to reducing their work force. For example, some companies are reducing compensation across the board, or imposing shorter work weeks, in order to realize the savings needed to retain all current employees. Such adjustments are especially appropriate for churches whose employees often are not eligible for unemployment benefits.

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

Failure to promptly notify can result in devastating loss.

Richard R. Hammar, Attorney, CPA
Bio

An insurance company issued a homeowner’s policy to a married couple (the “Taylors”) covering occurrences at their residence. The couple had two minor boys who lived with them. The policy provided coverage for any “occurrence,” defined as bodily injury or property damage caused by an accident. The policy contained the following section regarding the providing of notice of potential claims to the insurer:

In case of an accident or occurrence, the insured will perform the following duties …

A. Give notice to us or our agent as soon as practicable setting forth:
  1. identity of the policy and insured;
  2. reasonably available information on the time, place and circumstances of the accident or occurrence; and
  3. names and addresses of any claimants and available witnesses.

Case study

Mrs. Taylor invited her sister and her family to live with them. The sister’s five-year-old minor daughter (the “victim”) had been sexually molested by a babysitter and the family wanted to move away from the home where the crime occurred. The sister’s family eventually moved out of the home. Several years later, the victim informed her mother that she had been sexually molested by one of the Taylors’ boys when they lived together. The sister threatened to sue the son, who was now an adult, but ultimately chose not to do so after the son agreed to pay the victim’s counseling fees.

Over time, the relationship between the two families deteriorated, and four years after the initial disclosure of the abuse the sister gave the Taylors notice of her intention to sue their son. It was then, for the first time, that the Taylors notified their insurer of a possible claim. A few weeks later the sister sued the Taylors’ son, and, to the Taylors’ surprise, she also sued them.

The lawsuit alleged that the Taylors’ son sexually molested the victim in his home, and at the church his family attended, during the time they lived together. The sister claimed that the Taylors were aware that their son was molesting the victim, but did nothing to stop him. The lawsuit sought compensatory damages of $3,000,000 and punitive damages of $350,000.

The Taylors forwarded the lawsuit to their insurer, expecting the insurer to provide them with a legal defense and payment of any verdict or settlement. To their surprise, the insurer denied coverage on the ground that the Taylors had failed to notify it of the occurrence “as soon as practicable,” as required by the insurance policy. The insurer asked the court to confirm that it had no duty to defend or indemnify the Taylors.

The court’s ruling:

The court began its opinion by noting that “the courts have consistently held that policy provisions requiring that written notice of an accident be given ‘as soon as practicable’ or ‘immediately’ are reasonable and enforceable, and are a condition precedent which, if not complied with, bar recovery under the policy.” Such provisions “only require that the insured act within a reasonable time, considering all of the circumstances.” The question, therefore, was whether the Taylors complied with the policy’s notice requirement by providing notice within a reasonable time under the circumstances.

The court concluded that the Taylors failed to give notice “as soon as practicable,” and therefore their insurer had no legal obligation to provide them with a defense of the lawsuit or pay any portion of a verdict or settlement. It observed: “They were aware of the allegations against [their son] in 2002, but never informed their insurer of these allegations until 2007. A delay of nearly five years is, as a matter of law, unreasonable.”

The court stressed that “the duty to notify arises when an insured learns of an occurrence that, from an objective standpoint, may potentially lead to a claim against the insured that might implicate his or her policy.” It added that the duty to notify is not triggered “only by the anticipation of valid claims that may be covered; instead, the duty of notice is broader; it extends to incidents sufficiently serious as to lead a person of ordinary intelligence and prudence to believe that any claim arguably covered by the policy may be brought, even claims that may ultimately fail or that the insured may believe are not valid in law or fact.”

The court concluded:

In summary … the Taylors were bound by the policy to give notice as soon as reasonably practicable after learning of the sexual molestation allegation. This is so because these allegations were very serious—they alleged the sexual molestation of their niece, by their son, in their home. Such allegations are sufficiently serious to lead a person of ordinary intelligence and prudence to believe that a claim might be brought against them and their sons …

Of course, this does not mean that insureds are required to anticipate every conceivable claim that may be brought. All that is required is that the insured notify the insurer of an occurrence where a reasonable person, based on the facts of the occurrence known to the insured, would anticipate that a claim might be brought that would implicate the policy. This duty of the insured to notify the insurer of occurrences that might give rise to invalid claims is consistent with the duty of the insurer to defend the insured against such claims, as the duty to defend is broader than the duty to indemnify.

Importance to church treasurers

Most insurance policies impose on the insured a duty to promptly notify the insurance company of any potential claim. Failure to comply with this condition can result in a loss of coverage. Be sure you are familiar with the notice provisions in your church’s insurance policies, and comply with all of the relevant requirements. Pay special attention to the following considerations:

(1) Timely notice. Provide the insurer with notice of an accident or occurrence within the time limits specified by the relevant policy. It is common for policies to require the insured to notify the insurer of an accident or occurrence “as soon as practicable,” or “immediately.” In this case, the Taylors failed to inform their insurer of the accident or occurrence until a lawsuit was filed naming them as defendants. This was nearly five years after they had reasonable cause to believe that an accident or occurrence had occurred.

KEY POINT. The gravity of failing to comply with an insurance policy’s notice requirement is graphically illustrated by this case. The Taylors’ failure to provide their insurer with timely notice of the potential claim relieved the insurer of any legal duty to provide them with a legal defense of a $3,350,000 lawsuit or pay any portion of an adverse verdict or settlement. As a result, the Taylors had to retain and compensate their own attorney, and were solely responsible for any adverse verdict or settlement.

(2) What triggers the notice requirement? The duty to notify your insurer arises when you learn of an “occurrence” that, “from an objective standpoint, may potentially lead to a claim against the insured that might implicate the policy.” The court in this case stressed that the duty to notify an insurer is not triggered “only by the anticipation of valid claims that may be covered; instead, the duty of notice is broader; it extends to incidents sufficiently serious as to lead a person of ordinary intelligence and prudence to believe that any claim arguably covered by the policy may be brought, even claims that may ultimately fail or that the insured may believe are not valid in law or fact.”

KEY POINT. Church leaders should notify their insurer of a potential legal claim even when they are not certain that it is valid. Err on the side of caution. Remember, a failure to comply with the notice requirement can have disastrous financial consequences for the church.

(3) The content of a valid notice. Your insurance policy will describe the information that needs to be communicated when notifying your insurer of a potential claim. The policy in this case required the insureds to notify the insurer of “reasonably available information on the time, place and circumstances of the accident or occurrence” and the “names and addresses of any claimants and available witnesses.”

(4) Notifying your broker may not be enough. Many churches purchase their insurance through a local broker. Sometimes this person is a member of the congregation. Church leaders naturally assume that in the event of an accident or injury they can simply call this individual and everything will be “taken care of.” This is not always the case. A broker may not be deemed to be an “agent” of the insurance companies he or she represents, and accordingly when a church provides its insurance broker with notice of an accident or loss it is not necessarily notifying its insurance company.

If you notify your insurance broker of a loss, insist on a written assurance that he or she will notify the insurance company in writing within the period of time specified in the insurance policy. If you do not hear back within a week or so, contact the broker again to follow up. Better yet, the church itself should notify both its broker and insurance company. The insurance company’s address will be listed on your insurance policy. Ask the insurance company to provide you with written confirmation of receipt of your notice.

(5) Written rather than oral notice. If your insurance policy requires written notice, then be sure you provide written rather than oral notice of a loss.

KEY POINT. Church leaders should be familiar with the insurance policy’s provisions regarding notification of the insurance company. Is written notice required? If so, how soon after a loss? It is essential that these provisions be scrupulously followed in order to prevent a loss of coverage.

If you change insurance companies, be sure to review the new insurance policy. Do not assume that it will contain the same “notice” provisions as your previous policy.

KEY POINT. The duty to inform your insurance company of an accident or loss arises when the injury occurs, and not when a lawsuit is filed. The purpose of the notice requirement is to give your insurance company sufficient time to investigate the incident and provide a defense.

Example. A pastor is informed by a parent that her minor child was molested by a church volunteer. The volunteer is questioned, and admits having molested the child. This incident represents a potential “loss” under the church’s insurance policy, triggering a duty to inform the church’s insurance company of the loss within the period of time specified in the insurance policy. The church should inform its insurance company immediately. It is very important that it not wait until a lawsuit is filed to notify its insurance company. Such a delay not only hinders the insurance company’s ability to investigate the incident and defend the case, but it also may result in loss of coverage under the policy. This could have disastrous consequences to the church.

This article first appeared in Church Finance Today, April 2009.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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