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What if Someone in Church Has the Virus?

Understanding the rights of congregants, staff, and volunteers.

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As churches reopen across America, they must decide how to handle coronavirus exposure on their campuses. This article will offer guidance for properly responding when church leaders learn that a congregant, an employee, or volunteer might have the virus or been exposed to it.

How churches learn of the virus

Churches may learn about exposure to infection in three ways:

passively, as when an infected person or third party reports it;
constructively, as when a member travels to a hot spot and returns with symptoms; or
actively, by soliciting or deriving the information (e.g., through questionnaires or temperature taking).
Churches should be careful about soliciting information that may wind up getting them into trouble if they mishandle it. While they have no choice but to respond to constructive and actual knowledge of infection, they can decide whether they should actively pursue knowledge of possible infection. The answer may be different for “agents” of the church (e.g., employees and volunteers) compared to “invitees” (e.g., congregants, visitors, and vendors of the church). The more knowledge of infection gained, the more sophisticated the institution must be to make sure the knowledge is well handled.
An obligation to keep employees safe
As agents of the church, employees can confer liability upon the church through their own negligence, such as through the transmission of disease. The US Centers for Disease Control and Prevention (CDC) recommends that if an employee is confirmed to have COVID-19, employers should inform fellow employees in close contact. Even in churches, employees not engaged in “religious services” may be entitled to a safe working environment under the Occupational Safety and Health Act (OSHA) or a similar state law. These same rules should generally apply to volunteers.
Note: Some churches have also elected in favor of workers’ compensation insurance with remedies for workplace hazards.
If an invitee is infected
Churches owe duties to invitees, too. If a church learns that an employee, volunteer, or invitee is infected and fails to warn those in close contact, the church may have liability if early warning could have helped medically or if the individual infects others. Several states recognize a cause of action for negligent communication of a communicable disease in cases involving plaintiffs who were exposed to their detriment by others who negligently failed to tell them or to take reasonable steps to prevent it.
Put simply, knowledge of potential infection confers a duty to investigate and notify, but beware that the due diligence is appropriate and notice should not be too broad or detailed. Churches should provide general information to agents and invitees in close contact with the threat, but should not specifically disclose the identity of any infected individual without written consent. The smaller the group impacted the more difficult it is to maintain anonymity, meaning that the consent of the infected individual becomes more important.
What to share and not share
The information shared should be strictly factual and the minimum information necessary to avoid or mitigate against constitutional privacy and tort claims, such as intrusion or public disclosure of private facts. Some states protect privacy statutorily and constitutionally more so than under federal law. Intrusion is a tort involving the unreasonable and highly offensive intrusion upon the seclusion of another.
A claim for publication of private facts requires proof of (1) the publication (2) of private facts (3) that are offensive and (4) are not of public concern.
A virus could be the type of private fact an individual prefers not to have disclosed. Even the most sophisticated organizations struggle with how and what to communicate and make mistakes when handling sensitive information.
Note: For additional details about privacy issues and what is meant by “intrusion upon seclusion of another,” see the “Invasion of Privacy” section of attorney Richard Hammar’s Pastor, Church & Law.
Reporting infection is imperfect
Some notifications will go too far or be all too obvious about the source of infection. Gossips may force the institution into unanticipated additional disclosures. Due diligence is error prone, leading to over-reporting of false positives and under-reporting of false negatives.
Some who were exposed may be missed and others who were not exposed may be implicated. Some who should be barred from services may attend because they were not warned or found a way in and others who should not be barred will never return.
Swabs, temperature taking, and thermal scanning are imperfect testing means. Reports of infection even by the allegedly infected, much less gossips, are error prone.
Tip. Think twice before soliciting information from invitees that the institution is liable to mishandle.
To report or not to report?
Theologically and morally, churches may think they should do more, but do not neglect to weigh the countervailing privacy and other interests of invitees and the deterrent impact, as well as the uncertain empirical answer to the question of whether doing more really will make a difference.
Tip. Respond to reports of exposure with balanced due diligence and report the minimum necessary information to warn those in close contact, ideally with the approval of the responsible individual.
Consider the threat serious
Take seriously the threat that infected agents pose to those in the pews. Employees fall into this category but so may volunteers who serve in capacities like employees in the church. Due diligence about infection may be more exacting as to employees, subject to discrimination law. The federal Americans with Disabilities Act incorporates a “direct threat” rule, allowing inquiry if an employee poses a direct threat to coworkers and others in the workplace, but state and local disability laws are not always as forgiving.
Focus first on prevention
By taking precautions like deep cleaning and social distancing, many churches will avoid virus exposure in the pews. For those that do not avoid the virus, the best response that considers both agents and invitees will weigh the legal and ethical interests of all and react in a measured fashion. Consulting with legal counsel familiar with religious institutions in the process may also prove advantageous.

Dr. Nathan A. Adams IV is a partner at Holland & Knight. His practice includes representing nonprofit and religious organizations on a variety of matters, including the First Amendment, the ministerial exception, church autonomy, and board and governance issues.

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What an Early COVID-19 Supreme Court Decision Meant for Church Gatherings

A Court decision early in the COVID-19 pandemic rejected a California church’s request to restore in-person gatherings sooner than the state allowed.

Richard R. Hammar, Attorney, CPA

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Update: Since this ruling, the US Supreme Court has made a number of other decisions that began to reshape religious liberty challenges brought against pandemic-related restrictions. For Richard Hammar’s review of all of these decisions, see “The Sacred and the Secular: Assessing US Supreme Court Rulings on Pandemic Restrictions.”

On May 29, 2020, the US Supreme Court delivered an opinion of the case South Bay United Pentecostal Church et al. v. Newsom. The following article explores the background leading up to the opinion, an analysis of the opinion, and what it might mean for churches nationwide.

Background

See our review of several previous religious liberty cases brought against pandemic-related restrictions issued by states.

On March 4, 2020, California Governor Gavin Newsom proclaimed a State of Emergency as a result of the threat posed by COVID-19 (coronavirus). Two weeks later, on March 19, 2020, the governor issued Executive Order N-33-20, which required “all individuals living in the State of California to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors.”

Executive Order N-33-20 gave some Californians the right to leave their residences, including clergy who were holding services “through streaming or other technologies that support physical distancing and state public health guidelines.”

Seven weeks later the pandemic had, in the governor’s words, “stabilized.” As a result, on May 7, 2020, the governor published his four-stage “California Reopening Plan,” with each stage increasing those persons permitted to leave their residences:

Stage 1: only “critical infrastructure” was exempted.

Stage 2: “lower risk workplaces” like curbside retail and additional factories making previously nonessential “things like toys, clothing . . . and furniture” would be permitted to reopen. Stage 2 also included entities that would reopen at a later date within that stage, such as schools, childcare, dine-in restaurants, outdoor museums, “destination retail, including shopping malls and swap meets,” and office-based businesses where telework is not possible.

Stage 3: “higher risk workplaces” like churches could reopen, along with bars, movie theaters, hair salons, and “hospitality services.” According to California’s Public Health Officer, Stage 3 is for “things like getting your hair cut, getting your nails done, doing anything that has very close inherent relationships with other people, where the proximity is very close.” The Governor’s Order places temporary numerical restrictions on public gatherings to address this extraordinary health emergency. State guidelines currently limit attendance at places of worship to 25 percent of building capacity or a maximum of 100 attendees.

Stage 4: concerts, conventions, and spectator sports could reopen.

The governor predicted that while Stage 2 would begin in “weeks, not months,” Stage 3 would begin in “months, not weeks.”

On May 8, 2020, a church sued the governor and several other state and local officers (collectively, “the State”) in federal court claiming that the Reopening Plan’s decision to place churches within Stage 3 instead of Stage 2 violated the Free Exercise of Religion Clause of the First Amendment. The church asked the court to grant an injunction requiring the State to once again allow churches to conduct in-person services. The court refused, and a federal appeals court concurred with the lower court’s decision. The church appealed to the United States Supreme Court.

The Supreme Court’s holding

On May 29, 2020, a deeply divided Court (5-4) rejected the church’s request for an injunction. Chief Justice John Roberts sided with the Court’s four liberal Justices (Justice Ginsburg, Justice Breyer, Justice Sotomayor, and Justice Kagan) to form a majority. He authored a concurring opinion, which the other four Justices did not join. Though it has no binding effect, Chief Justice Roberts’s comments offer insights into his reasons for rejecting the church’s injunction. Of note:

Although California’s guidelines place restrictions on places of worship, those restrictions appear consistent with the Free Exercise [of religion] Clause of the First Amendment. Similar or more severe restrictions apply to comparable secular gatherings, including lectures, concerts, movie showings, spectator sports, and theatrical performances, where large groups of people gather in close proximity for extended periods of time. And the Order exempts or treats more leniently only dissimilar activities, such as operating grocery stores, banks, and laundromats, in which people neither congregate in large groups nor remain in close proximity for extended periods.

The precise question of when restrictions on particular social activities should be lifted during the pandemic is a dynamic and fact-intensive matter subject to reasonable disagreement. Our Constitution principally entrusts “[t]he safety and the health of the people” to the politically accountable officials of the States “to guard and protect.” Jacobson v. Massachusetts, 197 U. S. 11, 38 (1905). When those officials “undertake to act in areas fraught with medical and scientific uncertainties,” their latitude “must be especially broad.” Marshall v. United States, 414 U. S. 417, 427 (1974). Where those broad limits are not exceeded, they should not be subject to second-guessing by an “unelected federal judiciary,” which lacks the background, competence, and expertise to assess public health and is not accountable to the people.

Justice Kavanaugh’s dissent

Justice Brett Kavanaugh issued a dissenting opinion, which was joined by Justice Neil Gorsuch and Justice Clarence Thomas. (Justice Samuel Alito sided with the church, but did not join the dissenting opinion.) Justice Kavanaugh began his opinion by noting:

I would grant the church’s requested temporary injunction because California’s latest safety guidelines discriminate against places of worship and in favor of comparable secular businesses. Such discrimination violates the First Amendment.

In response to the COVID-19 health crisis, California has now limited attendance at religious worship services to 25% of building capacity or 100 attendees, whichever is lower. The basic constitutional problem is that comparable secular businesses are not subject to a 25% occupancy cap, including factories, offices, supermarkets, restaurants, retail stores, pharmacies, shopping malls, pet grooming shops, bookstores, florists, hair salons, and cannabis dispensaries. [The church] has applied for temporary injunctive relief from California’s 25% occupancy cap on religious worship services. Importantly, the church is willing to abide by the State’s rules that apply to comparable secular businesses, including the rules regarding social distancing and hygiene. But the church objects to a 25% occupancy cap that is imposed on religious worship services but not imposed on those comparable secular businesses.

Justice Kavanaugh noted that to justify its discriminatory treatment of religious worship services, California must show that its rules are “justified by a compelling governmental interest” and “narrowly tailored to advance that interest.” California “undoubtedly has a compelling interest in combating the spread of COVID-19 and protecting the health of its citizens. But restrictions inexplicably applied to one group and exempted from another do little to further these goals and do much to burden religious freedom.” What California needs is “a compelling justification for distinguishing between (i) religious worship services and (ii) the litany of other secular businesses that are not subject to an occupancy cap.”

Justice Kavanaugh concluded:

The church and its congregants simply want to be treated equally to comparable secular businesses. California already trusts its residents and any number of businesses to adhere to proper social distancing and hygiene practices. The State cannot “assume the worst when people go to worship but assume the best when people go to work or go about the rest of their daily lives in permitted social settings.”

California has ample options that would allow it to combat the spread of COVID-19 without discriminating against religion. The State could insist that the congregants adhere to social-distancing and other health requirements and leave it at that—just as the Governor has done for comparable secular activities.” Alternatively, the State could impose reasonable occupancy caps across the board. But absent a compelling justification (which the State has not offered), the State may not take a looser approach with, say, supermarkets, restaurants, factories, and offices while imposing stricter requirements on places of worship. . . . In sum, California’s 25% occupancy cap on religious worship services indisputably discriminates against religion, and such discrimination violates the First Amendment. South Bay United Pentecostal Church et al. v. Newsom 590 U.S. ______ (2020)

What this development means for churches

What is the practical relevance of this case to churches? Consider the following points.

First, the Court’s decision means that churches may not be able to look to the courts for assistance when confronted by a state or local law restricting their ability to conduct worship services.

Second, churches can challenge restrictions on attendance that are stricter than those that apply to comparable secular organizations. Comparable organizations would include those that have similar numbers in attendance for similar periods of duration each week, with similar physical interactions. But churches can be subjected to more stringent limitations on attendance if the totality of their interactions with the public are greater than those of other organizations. In this regard, Chief Justice Roberts noted: “The precise question of when restrictions on particular social activities should be lifted during the pandemic is a dynamic and fact-intensive matter subject to reasonable disagreement.”

Third, Chief Justice Roberts stressed that “[our] Constitution principally entrusts the safety and the health of the people” to the politically accountable officials of the States “to guard and protect.” Jacobson v. Massachusetts, 197 U. S. 11, 38 (1905). When those officials “undertake to act in areas fraught with medical and scientific uncertainties,” their latitude “must be especially broad,” and “where those broad limits are not exceeded, they should not be subject to second-guessing by an unelected federal judiciary, which lacks the background, competence, and expertise to assess public health and is not accountable to the people.”

Fourth, Chief Justice Roberts mentioned the Jacobson case in support of the Court’s decision. In Jacobson, the United States Supreme Court rejected a citizen’s claim that his liberty was invaded “when the State subjects him to fine or imprisonment for neglecting or refusing to submit to vaccination, and that a compulsory vaccination law is unreasonable, arbitrary and oppressive, and, therefore, hostile to the inherent right of every freeman to care for his own body and health in such way as to him seems best; and that the execution of such a law against one who objects to vaccination, no matter for what reason, is nothing short of an assault upon his person.” The Court held:

(I)n every well-ordered society charged with the duty of conserving the safety of its members the rights of the individual in respect of his liberty may at times, under the pressure of great dangers, be subjected to such restraint, to be enforced by reasonable regulations, as the safety of the general public may demand.

The Court also held “real liberty for all could not exist under the operation of a principle which recognizes the right of each individual person to use his own, whether in respect of his person or his property, regardless of the injury that may be done to others.” This case suggests, though not conclusively, that safety and health regulations, such as compulsory vaccinations, supersede religious liberty.

Fifth, church leaders that continue to hold worship services in contravention of state or local restrictions must understand that in doing so they are exposing their congregation to possible risks and liability should one or more persons become infected with the COVID-19 virus. These risks include:

Personal liability of church board members if their decision to ignore government mandates and recommendations is deemed to constitute gross negligence. Most states have enacted laws limiting the liability of church officers and directors. The most common type of statute immunizes uncompensated directors and officers from legal liability for their ordinary negligence committed within the scope of their official duties. These statutes generally provide no protection for “willful and wanton” conduct or “gross negligence”—the same standard typically used as a basis for punitive damages.
Punitive damages are monetary damages that a jury can award when a defendant’s conduct is grossly negligent or reckless. This does not necessarily mean intentional misconduct. Punitive damages often are associated with reckless conduct or conduct creating a high risk of harm. The United States Supreme Court has noted that the goal of punitive damages is “deterrence and retribution,” that is, “to further a state’s legitimate interests in punishing unlawful conduct and deterring its repetition.” State Farm Mutual Automobile Insurance Company v. Campbell, 538 U.S. 408 (2003).
It is important for church leaders to understand that reckless inattention to risks can lead to punitive damages, and that such damages ordinarily are not covered by a church’s liability insurance policy. This means that a jury award of punitive damages represents a potentially uninsured risk. As a result, church leaders should understand the basis for punitive damages, and avoid behavior that might be viewed as grossly negligent.

To learn more about how federal and state courts decide religious freedom cases, and to understand which states have state RFRAs or other religious freedom laws, check out the 50-State Religious Freedom Laws Report, a new downloadable resource from Church Law & Tax.

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

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Q&A: Should We Start Digging Into Our Financial Reserves?

Churches that deplete their reserves should replenish them over time.

Michael E. Batts, CPA

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Q: My church is fortunate enough to have a number of investments in reserve. We really don’t want to deplete those investments, but our current cash flow is down because of the pandemic and we’re wondering if now would be the time to convert some of those investments into cash. Should we start digging into our reserves? Is this a good or bad idea?

Like you, churches and other organizations with liquid assets will sometimes put additional assets into marketable security holdings with the hope of generating investment income while they’re being held as reserves.

The assumption is that you would convert those investments to cash when they are needed. Normally, we don’t assume that everyone would want to liquidate their investments and convert them to cash at the same time, but that is, to a large extent, what happened early in this pandemic. That is one of the reasons the stock market dropped as much as it did early on.

So, yes, it is appropriate to prudently use cash reserves when unexpected developments cause cash flow shortages from regular operations. That is the essential purpose of cash reserves.

In my book, Church Finance: The Church Leader’s Guide to Financial Operations, I have several basic metrics of church financial health. One of them relates to liquidity and having cash reserves for operations.

Specifically, I describe two levels of reserves—sound and strong.

I generally believe and espouse the view that having three months’ worth of operating expenses in cash reserves is sound. And having six months’ worth of operating expenses in cash reserves would be strong.

Churches that begin to utilize their reserves—and deplete them going forward—must remember that the fundamentals regarding reserves don’t change. And while we don’t know what the future is going to look like in terms of our financial operations, we still need to keep in mind that cash reserves have a place for unexpected developments that can still be coming.

Once you prudently use cash reserves to help the church through a challenging time, then begin consistently and intentionally restoring the reserves to sound or strong levels over a reasonable period of time. For many churches, it can reasonably take a year to add one month’s worth of operating expenses to cash reserves. In my opinion, that is a reasonable time frame. So, if reduced your reserves during the pandemic from six months of operating expenses to three, it is reasonable to expect that it might take three years to restore the reserves to their former level.

Of course, the specific time frame will be unique to each church, taking into consideration the priority that the church assigns to restoring reserves.

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.

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How to Safely Reopen Your Church and Reduce Legal Liability

Don’t meet until you’ve consulted your local, state, and federal authorities and then follow the strictest guidelines.

Holly Hammar Lear, PhD MPH RN

The past weeks have been full of uncertainty. Churches have pivoted to continue ministering to their congregations in new ways as the COVID-19 outbreak continues. Church food pantries have blessed communities and become front-line ministries, prayers have been offered through screens and windows, and social media has struggled to temporarily replace in-person church as we know it.

UPDATE

In April of 2021, the US Centers for Disease Control and Prevention (CDC) announced full-capacity, indoor worship services were safe to resume during the COVID-19 pandemic for fully vaccinated individuals who wear masks. In September of 2021, in light of increased cases caused by the Delta variant, the CDC advised vaccinated individuals, especially those with compromised immune systems, to wear masks for indoor events in areas experiencing higher levels of infection.

Churches are eager to reopen for in-person worship—an experience that has always had “particularly profound significance to communities and individuals,” as stated in new guidance for reopening from the US Centers for Disease Control and Prevention (CDC).

Services may look different until the COVID-19 threat lessens, but with cities reopening across the country, there are steps your church can take to make a smooth transition back into live, in-person services.

Are you allowed to reopen?

Do not open your church until cleared by your local public health department or governor. You may not be allowed to hold in-person church services for several more weeks. To reduce legal liability, regularly consult your local, state, and federal recommendations and mandates—then follow the most stringent of these.

Government agencies may deliver other important information such as the maximum number of people allowed to meet, which would determine the number of congregants each church service can hold in your facility at a time.

You will also want to consult your insurance company before meeting, and have information ready to give your insurer to prove you are legally allowed to resume services.

It may be prudent to designate someone from your staff to keep track of changes in local health authority policies. This person could make weekly phone calls to the local health department, seeking updates and guidance going forward. The pastoral staff or board can then respond to updates.

You may choose to have a healthcare worker in your congregation be a part of the conversation to reopen or even record or write updates to send out to the congregation. This is a great time to give attention to the heroic medical staff you have in your church family.

Preparation for reopening

You need to a have a plan in place before reopening your church.

The first recommendation for reopening is to restructure service times. Shorten services and offer additional service times to allow for social distancing (six feet between unrelated persons) and to follow your local maximum numbers of people allowed to meet in one place, if your area has such a mandate. Shortened services will avoid putting an undue burden on pastoral staff and volunteers, while still giving the congregation a chance to meet in person.

Consider these steps to shorten the church service:

Replace one 90-minute service with two 60-minute services. Depending on the size of your building and congregation, keep service start times far enough apart to allow for social distancing. This may be a full 30 minutes or more from the end of one service to the beginning of the next.
Reduce the number of songs in worship: if you have five songs throughout the service, only do three.
Shorten the sermon by 10 to 15 minutes, and consider a message with more of a short, devotional feel.
Remove “meet and greet” time to limit physical contact and control the possible spread of infection.
Replace prayer time, which may once have involved laying on of hands, with the pastor praying corporately for the church body as a whole.

A phased approach

The second recommendation for reopening is a phased approach.

Your first service meeting might be an in-person service where the elderly, immunosuppressed, currently symptomatic, and young children (who may not understand social distancing) are asked to stay home.

A second phase of reopening could include more groups: nursery and children’s church, for example, when that’s cleared by your public health department.

A phased approach will communicate to the congregation that you take their health seriously while desiring to worship together. As you plan to resume meeting, direct the congregation to your church website or social media for up-to-date information.

Screening

Before reopening, have a clear policy on how you intend to screen pastors, volunteers, and your congregation before entering the church. Consider what kind of screening you are able to perform as the congregation arrives, and what can be done in advance through communication.

To the extent you are able, you may want to take the temperature of your pastoral staff and volunteers (considered a risk at 100.4 Fahrenheit or above), and even each member as they enter (if that is feasible). Some churches may choose to purchase a body temperature camera that can detect fevers and have a greeter monitor it as people arrive to church, but this is most likely not an option financially for many congregations.

In addition to taking temperatures, you may also ask symptom-screening questions. Ask people as they arrive if they have recently tested positive for COVID-19 or have had interaction with others who have tested positive. Ask if they have had a new or recent onset of a cough, shortness of breath or difficulty breathing, fever, chills, muscle pain, sore throat, or recent loss of taste or smell. As we learn more about COVID-19, this list of symptoms is updated periodically on the CDC website.

A form with screening questions can be emailed out to your congregation prior to your first in-person service, and posted on the outside of the building as a final reminder before entering. Anyone who answers “yes” to a question should be asked to return home with a recommendation to call their doctor. The form should ask whether the person is currently experiencing, or has experienced within the past seven days, the following types of symptoms (as derived from guidance crafted on May 1, 2020, by The Attending Physician for the US Congress):

Fever (temperature greater than or equal to 100.4 F)
Chills with shaking or teeth chattering
Sore throat
Frequent cough
Shortness of breath at rest
Pain or tightness in your chest
Flu-like symptoms
Muscle pain (unrelated to exercise)
Loss of ability to taste or smell

The form also should ask whether the person lives with someone who is sick at home with bronchitis-like or cold symptoms. It also should ask the person whether he or she, or a member of his or her household, are awaiting COVID-19 test results or have been told to self-isolate.

Whether you communicate with your congregation via email, social media, or a sign on the front door as they arrive, be sure to give clear direction on what you are doing to keep them healthy and safe. Communication may be weekly, or you could opt to send updates simply when your current practice changes based on new information from your local health department. This will help ease the minds of many congregants who may be concerned about infection.

Infection control

As you approach your first in-person service, follow these infection control measures to help your church reopen safely without putting your congregation at undue risk:

Janitorial staff should deep-clean the facility before in-person services.
As congregants arrive, doors should be propped open to lessen exposure to frequently touched surfaces. You may also opt to keep doors and windows open (weather permitting) to keep fresh air circulating.
Door knobs, chairs, and other frequently touched areas should be sanitized between services and as frequently as possible.
Bathrooms should be thoroughly cleaned before and after each service.
Pastoral staff and volunteers should have a strong presence near the entrance to set the tone for the new normal.
If you live where facemasks are mandatory, this will need to be enforced at the entrance to your church. Provide facemasks for those who don’t have one, and plan for what to do if a congregant refuses to wear one. If your area does not require facemasks, create your own policy and stick to it.
Welcome everyone to the church at one entrance, maintaining six feet between individuals or households, and direct them immediately to the restrooms where they can wash their hands, or to hand sanitizer stations available for use throughout the facility. Post signs that read, “Please wash your hands before entering the church.”
Greet congregants as they arrive with waving and “air hugs” to give a warm welcome while strongly communicating there will be no handshaking or hugs.
Do not serve coffee or snacks.

Consider these recommendations for the actual service:

Remove the time for “meet-and-greet” or handshaking. Instruct the congregation to refrain from all physical touching (shaking hands, hugging, and even elbow touching, because that is where people cough).
Encourage cough etiquette.
Instruct congregants to walk to a collection plate or designated place to collect offerings to avoid multiple people touching the same item.
Have one-way traffic to avoid crowding, which may be eased with the use of greeters or ushers to direct people.
Instruct congregants to walk to the front of the church to receive communion where gloved servers distribute the elements. Each congregant holds out their hand flat to receive the bread into their open hand. The other communion server places an individual communion cup on a table in front of them, and the congregant who received the communion picks up the cup. Alternatively, if individual communion cups are not an option, distributing only the bread would be fitting. You may also consider pre-packaged communion. Again, use one-way traffic with a clear path of how congregants can come to the front and return to their seat.
Remove prayer partners or time when congregants and leaders and pastors typically pray in close proximity. Instead, ask congregants with prayer needs to raise their hands and stay seated, with the congregation then praying about the needs represented.
Direct the congregation to exit through a different door than the entrance if you are having more than one service. Ensure one-way traffic to avoid crowded areas throughout the service.
Be prepared with a protocol for someone who attends and then believes they start to become symptomatic during the service. The best plan is to ask the person politely but firmly to leave the facility immediately.

Setting these expectations immediately upon reopening will help the congregation model the behavior you want in your church.

Social distancing

Some counties are giving maximum capacity guidelines. If you do not have such guidelines, a simple way of determining how many people you should allow into your building upon reopening is your maximum occupancy as ordered by your local fire department.

Some health officials are recommending a 50-percent capacity of what your building is otherwise allowed to hold. This half-full approach should allow churches to reopen while allowing the congregation to socially distance. In the main sanctuary, help people socially distance by removing every other pew or row of chairs. Remember that rows of chairs can still be spaced immediately next to each other, as households can sit next to each other.

The new 50-percent capacity recommendation (or in some areas, even lower percentages) presents a hurdle to welcoming congregations back to church. The possibility of shortening the length of the service means that a greeter can tell people to please wait until the next service, which now is not so long of a wait. Having overflow rooms with a live stream of the service means the congregation is still able to socially distance in separate rooms.

Exiting the church through the lobby can create crowding. Your building may have additional entrances and exits to utilize as people leave, or hallways to better manage the flow of people between services. Try to have one-way traffic, with one entry point that is different than the exit point. This will be streamlined with clear signage directing people where to go. Enlist greeters or ushers to help organize and monitor traffic flow.

Lastly, make certain staff and volunteers contemplate what to do should a medical emergency arise. In our current outbreak, this could include someone in the church who begins having a COVID-19 symptom from the list above that is so severe they cannot be asked to go home, such as shortness of breath. Most likely, the safest course of action is to immediately call 911 and wait for emergency responders to intervene.

Protecting pastors and staff

Here are safety precautions to take as pastors and staff return to the church office:

If possible, create one-way, circulatory traffic patterns in a church office layout.
Stagger work hours while physically at the office (and perhaps interchanged with work-from-home days).
Stagger seating in break room/lunch room (if it exists).
Make hand sanitizers available in various places throughout the office areas—and be sure employees know where to find them.
Clean workstations regularly. Encourage employees to take responsibility for wiping down their desks and other work surfaces with disinfecting wipes.
Increase the cleaning frequency by custodial staff, including restrooms, stairwells/elevators, and trash removal. (For more guidance on workplace cleaning, see the CDC’s guidance.)
Keep conducting team meetings using video conferencing.
Verify that workstations are spaced far enough apart to maintain occupancy standards with distancing.
Limit the number of volunteers/visitors/guests at the office when it is open.
Post signs reminding of the importance of regular handwashing, use of hand sanitizers, cough etiquette, and other areas where safe practices need to be encouraged.
Consider a Plexiglas shield/barrier for the receptionist.
Check the temperature of anyone who enters the office. Or let employees self-monitor by providing a small table that includes a thermometer, a pack of disposable probe covers, and hand sanitizer; employees can take their own temperature then dispose of the cover in a trash can nearby; afterward, they would sanitize their hands.
Screen employees’ health before they return to the office. You could use a form similar to the one created for Sunday services, which employees complete and submit electronically each day before coming to work. If employees have any COVID-19 symptoms from the list used for Sunday services, they should be instructed to stay home and asked not to return until they have been symptom-free for three days, or 10 days have passed since symptoms first appeared.
Put in place a reporting protocol if symptoms develop. An employee who becomes symptomatic on the job should be sent home immediately. The church also should follow any reporting requirements, whether at the local or state levels, as well as the federal level, including the Occupational Safety and Health Act of 1970 (which churches are subject to).

Holly Hammar Lear is a PhD prepared nurse and public health official. She also serves as a worship leader and her husband is the lead pastor of Resurrection Assembly of God in Iowa City, Iowa.

Image: Strauss/Curtis Getty

Keeping Children and Teens Safe While Ministering Online

Six ways to minimize risk while fostering teaching and community during the pandemic and beyond.

Robert Showers and Justin R. Coleman

With the COVID-19 pandemic and resulting stay-at-home orders being issued by various states and local municipalities, churches have had to look to new ways to minister the gospel to its members and attendees.

With online streaming and digital video conferencing, churches are able to interact with their members in real time. Even when the stay-at-home orders are phased out, the need for online ministry will continue. Online ministry is especially beneficial for youth and children’s ministries due to the familiarity and comfort children and teens have with technology.

Go deeper on children’s and youth ministries abuse awareness training with Reducing the Risk, available on DVD or online streaming video. Learn more about appropriate boundaries for youth ministry in the book Youth Ministry in a #MeToo Culture.

However, technology also brings with it both known and hidden dangers that pastors and youth and children’s ministry pastors/directors should be aware of and investigate before starting or continuing any of their ministry activities online. To protect both your church and the young people you serve, you will need to make certain your child protection policy is up to date and covers, with appropriate modifications, your online ministry, including all communications.

This article will briefly cover six practical questions regarding a virtual children’s and youth ministries. Note that the guidance given is general. Youth and children’s ministry pastors/directors, church boards, and appropriate committees will need to work out the specific policies and procedures in consultation with its legal counsel.

1. What are the hidden dangers in virtual settings for churches and youth and children’s workers?

The explosion of digital and social media in the last decade is both a blessing and a curse for churches and ministries. It provides an instantaneous ability to communicate to members, the local community, and the world. Conversely, it also may tempt individuals to make statements that are inappropriate, immoral, harassing, and potentially illegal because they think they are “invisible” behind the screen of their computers or smartphones. Social distancing has limited inappropriate physical contact, but it has significantly increased inappropriate forms of online communication leading to child abuse, especially the “grooming process.”

Many of these platforms include a text chat feature where the host(s) and participants can send text messages to the group or privately between two individuals. This feature is helpful if the host wants to direct participants to specific chapters and verses of the Bible for the lesson or when someone has a question but does not want to interrupt the host. However, this feature has the potential to be misused.

Many of the cases of child abuse being investigated and prosecuted today were initiated by the abuser contacting the minor through text messages on social media sites or apps that contain a text chat feature. Text chats—especially in games—that disappear shortly after communication further complicates the issues of discovery and enforcement. To avoid such issues, those leading youth and children should prohibit the use of one-on-one chat/text features, so as to keep all correspondence (as best as possible) viewable by everyone in the virtual meeting. Better yet, if possible, turn off the one-on-one message functions.

Tip. Church leaders should train youth and children’s ministry pastors/directors and workers to be aware that the virtual arena is still a public area and what they say and do online should be the same as if they were speaking to that person face to face. Additionally, youth and children’s ministry pastors/directors and workers should be instructed to watch for behaviors or statements from participants that violate church policies and may suggest efforts to groom minors and the parents or guardians responsible for them.

2. What precautions should churches take in conducting virtual children’s and youth ministries?

First and foremost, a church should have a written child protection policy which provides reasonable guidelines for screening, training, and managing staff and volunteers to oversee children’s and youth ministries. Along with handling all areas of in-person programs, this policy would be modified where needed to handle various unique aspect of virtual youth and children’s ministries. This means that any volunteer or church employee hosting or attending the virtual ministry has been properly vetted by the church, which includes a criminal background check.

If possible, any virtual ministry should have two adults present. One worker would lead the group while the other could assist in presenting materials and monitoring participants.

As mentioned above, text chat can be helpful in communicating to a large group, but youth and children’s ministry pastors/directors and workers must be extremely vigilant when using it with minors. Without the ability to interpret inflection, tone, and context, a neutral text can be misinterpreted by the reader. For these reasons, a youth or children’s ministry pastor/director or worker should never initiate a one-on-one text message with a minor, whether through a virtual meeting platform or a mobile device.

Tip. The church’s communications policy should require all text communications to be in a group setting, or at a minimum, should include one additional adult (either another youth worker, a pastor/director, or the minor’s parent) in the response.

Beyond messaging capabilities, other issues require attention. For instance, youth and children’s ministry pastors/directors and workers should ask the following questions when broadcasting a virtual ministry program:

Is my appearance and clothing reflective of someone presenting the gospel to minors?
Is there anything in the background that would be considered inappropriate to view?
Are we saying things to teens or children online that we would not say to them when we are with them face to face in a public setting?

These and other questions related to child safety and appropriate behavior should be answered and resolved prior to launching the video meeting.

Finally, churches should also consult with their insurance agents regarding whether virtual children’s and youth ministry activities are covered in general liability policies (or, if the church has a specialized policy for sexual misconduct, then under that as well). This is an important consideration even when child protection rules and policies are followed. If an allegation of impropriety still arises, and a church finds out the insurer issues a “no coverage” letter for failing to follow some unknown rule or notice requirement, the church could end up paying for its own legal defense when that could have been easily avoided.

3. What online service platform should we use for virtual youth ministry?

There are a number of digital platforms available that provide video conferencing or live streaming for free or a low, monthly subscription fee (e.g., Zoom, Google Hangout, GoToMeetings, Microsoft Teams, EZtalks, and Bluejeans). Likely your church is already using one or more of these platforms for streaming regular worship services or conducting administrative meetings and you are familiar with the various features.

If your church is considering launching or currently conducting a virtual children’s or youth ministry, it would be wise for your leadership to conduct its due diligence on the choice of platforms. One particular concern should be the ability for the host to control:

participants entering and leaving the meeting,
the ability to record and limit recording of the meeting, and
the ability to control what is shared or broadcast by participants.

For example, Zoom provides a host with a number of options in overseeing a virtual meeting, including, but not limited to, requiring a participant to enter a password to access the meeting, the ability to mute and turn off a participant’s camera, the ability to limit who can record the meeting, and the ability to remove a participant from the meeting.

Caution. While Zoom is working through a number of security issues, there are still concerns. As pointed out in this article by IT expert Nick Nicholaou, users should consider alternatives or at least follow Nicholaou’s Zoom usage recommendations.

The church should review and compare competing digital platforms to determine which ones provide sufficient security for the church in both overseeing who is entering and exiting the session as well as reducing the opportunity for potential abuse, harassment, and bullying.

4. What are the privacy concerns for virtual children’s and youth ministry?

COPPA Requirements

With the expansion of digital communication, the need to protect private information, especially relating to minors, is paramount. In 1998, Congress passed the Children’s Online Privacy Protection Act (COPPA). Under COPPA, any commercial website or online service must provide a privacy policy outlining the information it collects and must get parental consent before collecting personal information if it is either:

directed to children under 13 years of age and collects their personal information, or
directed to a general audience but has actual knowledge that it collects personal information from children under 13 years of age.

COPPA stipulates that “personal information” includes, but is not limited to, the child’s name, address, screen name, any photo, video, or audio file, and IP address.

Church websites are not considered subject to COPPA because their nonprofit religious activities are not considered “commercial,” which is true unless online postings collect personal information which could be used for marketing or other purposes. However, for best-practice purposes, churches should adopt a privacy policy that is compliant with COPPA.

A COPPA-compliant privacy policy for minors must include clear language stating:

a description of the personal information collected and how it will be used;
a list of all operators collecting personal information (both the church and any third parties); and
a description of parental rights in regard to the personal information.

To be COPPA-compliant, the church also must obtain the parent’s verifiable consent before collecting the minor’s personal information. COPPA does not provide one specific method to obtain consent. It only states that the method used reasonably ensures the person giving consent is, in fact, the child’s parent or legal guardian. Like with most youth activities, the most common method would be by providing parents or guardians a written permission form prior to the activity to sign and return. If the church plans on recording any of these virtual ministry events, the permission form should include a waiver and release to permit the church to record their child.

Tip. For more on COPPA, along with other guidelines and precautions, see attorney Frank Sommerville’s answer in this Q&A.

Recording Audio and Video

Recording should only be used for private, internal purposes and should not be posted/published in any public forums (e.g., church website or private social media). As discussed above, most digital platforms allow the host to control a participant’s ability to record the meeting. However, that may not stop an individual from using other devices to record the audio or video. Hosts should be aware of this possibility in all situations but particularly when conducting youth and children’s ministry.

Tip. Prior to virtual meetings with minors, the host should state upfront that the church’s policy prohibits participants from recording the event on any device.

Since recording laws vary by state, ministers and directors for teens and children should be knowledgeable as to whether their state is a one-party consent state or an all-party consent state to record conversations.

In the Mid-Atlantic, where we practice law, Virginia, North Carolina, and the District of Columbia are all one-party consent states. This means that any recording of a phone or video conversation is lawful so long as one side consents to the recording. Maryland is the only all-party state in the Mid-Atlantic region. This means that all the people participating in the call must be made aware of and agree to being recorded for it to be lawful.

This is also why we also recommend that directors or ministers of youth and children’s ministries record and save all virtual ministry sessions for a certain period of time. If an allegation is ever made against a children’s ministry or youth pastor/director or worker suggesting inappropriate comments or actions occurred, the church would have objective evidence to investigate the allegation. The church’s procedure would be similar to any recording and storage of church security footage. Further, the church’s policy should state that law enforcement may view the recorded information but may not obtain a copy due to privacy concerns of the other children or youth on camera without a warrant or subpoena.

5. How should churches respond to online bullying?

One of the most prevalent problems with online activities for young people is cyberbullying. Church leaders should first and foremost reflect Jesus Christ in their interactions with youth and children and encourage the members of their youth and children’s ministries to do the same on any digital platform.

All participants should view these digital platforms as public spaces and honestly determine if they would make the same comment to the person if they were face to face instead of in a text or on video. Sessions for children and teens should invite parents or guardians to attend digital ministry events and encourage them to attend.

Tip. Monitor all posts on digital platforms, noting statements that could be construed as harassing to one or more participants. Afterward, have a discussion with the individual or individuals who posted such statements. Having at least two adults present during meetings will provide a second set of eyes and ears, making it easier to pinpoint inappropriate language and behavior and help reduce bad actors from participating in these ministries.

Leaders of virtual meetings should encourage young participants to let them know if they receive harassing or bullying messages from their peers or adults. If it’s an adult, the church should look to its child protection policy on how to appropriately respond and whether the church has any duty to report the incident under that state’s mandatory reporting statute.

If it’s a peer who sends messages that could be seen as bullying or harassing, the church should approach the situation with appropriate discretion and Christian understanding. There are numerous resources and nonprofit organizations dedicated to educating parents and organizations on cyberbullying such as:

6. What other basic guidelines should be included on a checklist for online ministry?

Do not use texting/electronic communication to discuss or post sensitive topics, including any of a sexual nature.
Notify parents and guardians if texting/videoconferencing may occur and give parents and guardians the opportunity to opt out on behalf of their child or teen.
Try as much as possible to communicate online in groups and with another adult present.
Help children and youth be aware of appropriate boundaries in online communication and enforce the boundaries. (Expectations regarding boundaries should be clearly spelled out—with pertinent examples—in the children’s and youth ministries protection materials.)
Tell parents and young people who to tell if a violation occurs or if they have concerns about any online communications.
Conduct all social media posts and exchanges through existing groups, such as through a ministry Facebook page. Adult leaders should not befriend (or “friend”) or directly message minors. Adult leaders should keep their profiles private to limit access to private information.
Scan recorded conferences after events.
Encourage other ministry leaders in the church to drop in on videoconferencing sessions with minors and adults.
As stated above, adapt all child protection policies and measures to the online setting. And remember: Don’t say or type anything online that you would not say in public to a teen or child.

Be intentional, be vigilant

If your church has launched and plans to continue virtual children’s and youth ministries, leaders and workers in these ministries should always remember that those procedures outlined in the church’s child protection policy also apply to the digital world. This policy should be reviewed by knowledgeable legal counsel to assure that it covers various types of digital communication, places adequate restrictions on communications with minors, and identifies proper responses to potential claims of abuse. Also, always be aware that the virtual arena is still a public area and what is said and done online should be the same as if said or done in person.

Finally, you may have set up your online ministry with the pure intentions to serve children and youth in a difficult time. The majority of the people you work with may think likewise; however, it only takes one bad apple to derail your ministry. You must be intentional and vigilant about implementing and consistently carrying out appropriate guidelines and policies. In doing so, you will help to greatly reduce your church’s risk for liability as you provide ministry to children and youth during this time of social distancing and virtual ministry and outreach.

Robert Showers , an advisor at large with Church Law & Tax, is an attorney and principal with the law firm Simms Showers, LLP. Justin R. Coleman is an attorney and an associate with Simms Showers.

This article is adapted the “Conducting Youth/Children Ministry in a Digital Age”—an article on the Simms Showers blog. Used with permission.

Image: maskot | Getty

Advantage Member Exclusive

Will Our Church Get Sued for Reopening?

How church leaders should weigh the potential legal liabilities associated with public gatherings during the pandemic.

Matthew Branaugh, Business Owner

Bio

Editor’s Note. This article is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

Should churches reopen?

It was the question weighing on the minds of church leaders nationwide in the spring of 2020, and continued well into 2021. The evolving storyline of the COVID-19 (coronavirus) pandemic, coupled with varying local and state government directives issued to try and slow the virus’s spread, left many congregations feeling uncertain and frustrated.

In several states, directives limited public gatherings to small groups of people—oftentimes 10 or fewer—and forced “nonessential” businesses and organizations, including churches, to remain shuttered. Orders also included “shelter-in-place” restrictions requiring people to remain in their residences unless tending to an essential need, such as a trip for groceries or to see a physician. Some states issued religious exemptions as part of their directives, but many did not.

Cases and deaths attributed to COVID-19 continued to climb throughout late 2020 and early 2021, but as the economic tolls of these measures also mounted, so too did pressures to begin aggressively reopening the country. Numerous political protests in Michigan, Colorado, and elsewhere emerged. A number of religious liberty lawsuits were filed by houses of worship, with results mixed.

States responded to the virus and the public pressures in different ways. Most states already opted to follow “phased” reopening plans, while a handful moved slower.

Against this confusing and ever-changing backdrop, church leaders faced numerous questions as they wrestled with what they should do. Even as the pandemic’s effects lessen heading into the summer of 2021, questions remain. Questions undoubtedly range from congregational demographics to building logistics to staff and volunteer readiness, among others. A Washington Post article from spring of 2020 detailed the tensions many congregations in Maryland and Virginia felt as those respective states began phased reopening efforts (with the former including houses of worship in its phased reopening plans).

Before addressing these questions pertaining to reopening, though, church leaders must first make one crucial assessment: what legal liabilities their church faces if it reopens.

Create an information baseline

While a decision to reopen a church’s doors shouldn’t be based solely on the likelihood of a future lawsuit, the existence of such a possibility looms large. Leaders must seriously weigh the prospects of potential litigation, and other possible regulatory or criminal penalties, and determine how much legal risk they are willing to tolerate. Otherwise, they may unintentionally make their church vulnerable to an adverse court decision or a costly sanction down the road.

Several types of legal matters could arise for churches, ranging from a civil lawsuit alleging the church’s decision to reopen caused an attender’s or volunteer’s injury or death, to an employment-related claim brought by an employee who becomes ill after returning to the office, to fines administered by local law enforcement.

Before sorting out these various possibilities, leaders must first establish a baseline of information about how government and medical officials are handling the public health risks for their area.

Finding and prioritizing the information

Preferably daily, but at least every few days, leaders must verify the recommendations, guidelines, and—most importantly—mandates issued by local, state, and federal authorities, attorney and senior editor Richard R. Hammar told Church Law & Tax.

Local information usually can be found on the town, city, or county’s website, or those of the local public health authority. Likewise for information issued by the state. (Relatedly, this free article from The Wall Street Journal includes an excellent map that tracks state reopening plans and offers regularly updated summaries covering how each state is proceeding.)

In terms of federal guidance, presidential executive orders related to the pandemic are logged by the Federal Register, while the US Centers for Disease Control and Prevention (CDC) on May 14, 2020, released reopening guidelines for both workplaces and faith-based organizations. Although the CDC’s materials are not binding, they nevertheless establish publicly available standards of care that churches should take into account.

The information-gathering process can be challenging when optional guidance—but not mandates—exists. It can be especially challenging when government sources conflict with one another. In general, church leaders should identify the materials most clearly labeled as mandates, orders, or bans and prioritize those first, followed by guidelines or recommendations. If contradictions arise between information sources, particularly with respect to what is or is not legally mandated, church leaders should carefully document the materials they find, consult with qualified local legal counsel and their church’s insurer, and then decide how to proceed.

A church that desires to fully minimize its legal liabilities will want to follow the strictest directives applicable to it, whether at the local, state, or federal level, Hammar said. Beyond directives, the church will want to abide by the most rigorous of any optional guidelines or recommendations applicable to it, which will help demonstrate the church strove to follow the most cautious approaches publicly available.

Not all churches will choose to follow the most conservative path, under a belief that they can tolerate a higher risk for potential legal issues. Or, in some instances, governmental authorities will give optional recommendations, but few, if any, mandates, leaving the decision to reopen—and the ways of doing so—in the church’s hands. For churches finding themselves in either position, they will want to consider these additional points before making a final call:

Denominational guidance. Churches affiliated with a denomination will want to reference any guidance or mandates established by regional or national denominational offices and make certain their decision is appropriately aligned.
Insurance. Church leaders should consult with their insurer regarding their policy (or policies) to determine what is—and is not—covered in terms of opting to reopen and risking an outbreak in their congregation. Leaders should verify whether any employment-related coverage will apply in the event an employee becomes ill. Lastly, the church should determine with the insurer whether coverages will include the provision of legal representation in the event any type of claim tied to COVID-19 is brought against the church.
Workplace practices. Churches that reopen their offices and require pastors and staff members to lead services will have to meet regulatory requirements designed to ensure safe workplaces. Churches must legally comply with the Occupational Safety and Health Act of 1970 (OSHA). OSHA requires employers to provide “employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm,” including COVID-19. OSHA also deems COVID-19 to be a required reporting event if an employee becomes ill on the job.

Additionally, state labor safety laws must be accounted for.

Tip. Learn more about OSHA- and CDC-related guidance for COVID-19 in workplaces, as well as other employment law considerations, in this Advantage Member article.

Criminal penalties. Violations of government orders or bans can result in numerous penalties that church leaders will want to weigh carefully. As attorneys Theresa Sidebotham and Nicole Hunt noted in March, consequences can include “financial penalties, forced closure, stripping state benefits from the organization, or even jail time for church leaders.”

Could we get sued?

Lastly, leaders must weigh the likelihood of facing a lawsuit should they reopen.

In places where local or state directives currently prohibit public gatherings, a church that still decides to open is likely in the most vulnerable position with respect to a future lawsuit, Hammar noted. The likelihood of such a lawsuit prevailing is not clear, since a plaintiff will have the burden of proving the church’s gathering directly caused the plaintiff to contract COVID-19. If only one or two people became ill after the church met, then it will be harder to convince a jury. Conversely, if dozens of churchgoers become ill, then the odds improve of convincing a jury.

Hammar also said it’s important to note that attorneys who represent plaintiffs likely will pursue a certain type of legal claim known as “negligence per se” in situations involving businesses or churches that choose to reopen even though local or state mandates prohibited them from doing so. Under a “negligence per se” claim, a defendant’s causation of a plaintiff’s injury is automatically assumed if the defendant violated a local, state, or federal mandate in place at the time the injury occurred. If a church decides to meet in person for services and activities, despite directives mandating otherwise, then causation may automatically be assumed for a plaintiff who brings a lawsuit against the church, Hammar said. The ability for the plaintiff to prevail then becomes much easier.

Relatedly, members of Congress debated the creation of an immunity provision throughout 2020 that would have shielded businesses and other entities from civil litigation if they comply with applicable local, state, and federal mandates while reopening during the pandemic. No such federal provision ever emerged. But even if one had, church leaders still must recognize the vital importance of “complying with applicable mandates” in order to attain any benefits provided by such a shield, Hammar said.

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

Image: getty/kingWu

Checklist: Do We Understand the Effects of Our Church’s Political Activity?

Use this checklist to understand the potential effects of your church’s political activity.

When it comes to political activity, churches need to understand their constitutional protections, as well as the Internal Revenue Code’s restrictions for 501(c)(3) tax-exempt organizations. Take the following quiz to test your knowledge. The answer key is at the end of the article.

Download a PDF version of this assessment.

There are two distinct limitations in the tax code. First, churches may not engage in substantial efforts to influence legislation. Second, churches may not participate or intervene in any political campaign, even to an insubstantial degree. The first limitation is referred to as the “lobbying” limitation. The second limitation is referred to as the “campaign” limitation.

The income tax regulations interpreting the limitation on political campaign intervention provide that neither a church nor any other organization can be exempt from federal income taxation if its charter empowers it “directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.” The regulations further provide that:

The term “candidate for public office” means an individual who offers himself/herself, or is proposed by others, as a contestant for an elective public office, whether national, state, or local. Activities that constitute participation or intervention include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.

Consequences of Church Political Activity

None of the political activities described above are “illegal.” The primary legal consequence of church political activity is that the church’s exemption from federal income taxation may be jeopardized.

Loss of a church’s federal income tax exemption would have several potential penalties, including the following: (1) the church’s net income would be subject to federal income taxation; (2) the church’s net income would be subject to state income taxation (except in those few states not having an income tax); (3) donors no longer could deduct charitable contributions they make to the church; (4) the church would be ineligible to establish or maintain “403(b)” tax-sheltered annuities; (5) possible loss of property tax exemption under state law; (6) possible loss of sales tax exemption under state law; (7) possible loss of exemption from unemployment tax under state and federal law; (8) loss of preferential mailing rates; (9) a minister’s housing allowance might be affected; (10) the significant protections available to a church under the Church Audit Procedures Act may no longer apply; and (11) the exemption of the church from the ban on religious discrimination under various federal and state civil rights laws may be affected.

These consequences should be considered when deciding whether or not to engage in political activities that may jeopardize the church’s tax-exempt status.

Answer Key: (1) F (2) F (3) F (4) F (5) T (6) T

Can Churches Dismiss an Employee Without Cause?

Understanding the limitations of “employment at will,” and the idea that an employee can leave a job without cause, too.

Donn Meindertsma

While “employment at will” is a phrase most church leaders have heard, not everyone knows what it truly means.

In a nutshell, the employment at-will rule establishes a default rule that an employment relationship is indefinite, not for a certain duration of time, and can be ended at the will of either the employer or employee.

The rule is a presumption courts use that employment may be ended without notice, without giving any reason, and without consequences—unless the employer and employee have agreed to a different type of arrangement.

We often think of the rule from the perspective of the employer’s right to discharge a worker at will. It may be helpful to understand it from the employee’s perspective. That is, a worker may, at his or her will, walk away from a job at any time, for any reason or no reason. Perhaps, at one time or another, most of us have felt like doing just that. If so, we had no reason to worry whether our employer would try to sue us for quitting.

So, is everyone employed “at will”? Again, the law presumes so, but the parties can voluntarily change that. The simplest way to do that is in a contract. In addition, federal and state laws that protect employee rights undercut the strength of the at-will rule, as discussed below.

Explicit contract limitations

A job seeker might be willing to accept a job offer only if the employer guarantees that the employment would last for at least a certain duration, say two years. If the employer agrees and makes that promise, the parties will have negated the at-will presumption. Consequently, if the employer breaks the contract and lets the employee go after only six months, the employee may then bring a claim for damages.

Other types of contract provisions also limit the at-will arrangement.

Contracts with high-ranking employees (in the ministry context, say, a senior pastor) often contain provisions that permit the employee’s discharge only if there is “just cause” to do so. Sometimes just cause is undefined; other times the contract delineates specific types of misconduct or other events that constitute just cause. In the context of contracts, a just cause provision mainly functions as a way to determine if severance benefits are owed. Thus, if an employee is discharged for a violation of a significant workplace policy (i.e., with just cause), he or she might not be entitled to severance benefits that would have been owed if the termination was for something other than cause (say, a staff reduction).

As another example, a deferred compensation agreement between a church and pastor might include a provision under which compensation is forfeited if the pastor engages in specified misconduct. Ultimately, the parties’ obligations depend on the language of the contract they negotiate.

As a caution, it is important that contract provisions regarding “cause” for termination are carefully drafted to avoid unnecessary conflict that might arise from ambiguities. For such provisions, employers should seek guidance from an attorney with expertise in labor and employment law.

Implied contract limitations

Contracts that abrogate the at-will presumption might not always look like formal, written agreements bearing official signatures. Though many might not realize it, employment policies and handbooks can create contracts between an employer and its workers. If so, the employer must abide by the agreement.

Policies that describe an employer’s procedures in unambiguous, mandatory language (e.g., “shall” or “will”) may be deemed binding, and deviation from the promise can be a breach of contract. For that reason, policies and handbooks should explicitly disclaim that they constitute a promise of employment for any certain period of time or restrict the bases for discharge. They should also state—up front and in bold language—that employment is at will and that the policy/handbook does not alter that relationship.

Legal limitations

Federal and state laws have significantly eroded the force, if not the letter, of the at-will rule. Countless statutes prohibit the discharge of an employee (at will or not) if the employer acted for an illegal reason.

For example, while a church employer may discharge a 65 year-old worker at the employer’s will (assuming it did not enter a contract with the worker), it usually may not do so if the reason is the worker’s age. (Small employers, however, may not be covered by age discrimination laws.)

The same is true for other protected characteristics (e.g., race, gender, disability) or protected conduct (e.g., blowing the whistle on fraud, filing a claim for workers’ comp, refusing to engage in illegal conduct, or opposing discrimination). Those protections differ from one state to the next. Church leaders should check their state’s law in these matters.

Keep in mind that religious groups may have a defense to statutory and other employment claims by virtue of the ministerial exception.

Practicalities

Assume that a recently discharged at-will worker sues over the termination. Logically, the employer should be able to argue that it does not need to give any reason for discharging the worker because he or she was employed at will. But here is where the at-will rule is sometimes misunderstood.

At-will employment does not mean that the employee is barred from pursuing a lawsuit against the employer. It only means that the employer and employee haven’t agreed between themselves to limit either party’s right to end the job relationship.

Indeed, in practical terms, employers must always be prepared to articulate a legitimate reason for discharging a worker. In a sense, that is not an undue burden: there always will be a reason for the employer’s decision—say, the employee isn’t performing well or the employer didn’t need or couldn’t afford to keep the worker.

On the other hand, because there are so many employee protections under federal and state laws, nearly any employee who believes he or she was unfairly discharged has a basis for filing a complaint. The moral of the story here is that at-will workers have every right to contest their discharge in court.

Note that some states liberally allow employees to file lawsuits challenging disciplinary actions less severe than a discharge, such as a demotion. Again, church leaders should check their state’s law in these matters.

All in all, an employee’s at-will status provides limited protection for employers. Accordingly, employers should not expect the at-will rule, although a highly touted staple of American employment law, to offer a reliable defense if an employment claim arises.

Adapted from an article that first appeared in the Employment Law for Ministries newsletter from Conner & Winters. Used with permission.

Donn Meindertsma is a partner in the Washington, D.C., office of Conner & Winters, LLP, and specializes in employment law.

Do We Have Clear Procedures for Facility Use?

Discover if your church is prepared to share its property.

Well-developed policies regarding the use of church facilities create a clear understanding between church leaders and users of the facilities—critical to good relationships with members and non-members alike. They also help to limit the church’s exposure to property damage and injury claims, should something go wrong in the use of the facilities. How clear are your facilities-use policies in these areas? Use this checklist to find out.

Download a PDF version of this checklist.

Allowing others to use empty church facilities seems like an easy call—especially when you can recoup some of the cost of maintaining the facilities. It raises issues of security, damages, and liability that you need to consider carefully before you open your doors. We can help you build a facility use policy with our simple tips.

Building Your Policy

Know the tax implications. Consider federal and state tax laws when building your policy. The type of organization requesting use and the nature of the event both play into whether you can lend your facilities and whether you can charge fees without jeopardizing your tax-exempt status.

Establish a fee schedule. Determine under what conditions you will charge for building use. Create a fee schedule that clearly defines the fees for different rooms and different activities.

Avoid scheduling conflicts. Limit conflicts over scheduling priorities by defining your reservation policy. Decide whether ministry events and congregant requests have preferential scheduling over outside party requests and community events.

Sweat the small stuff. Include details in your building use policy on what activities and decorations are allowed, whether furniture can be moved, and what to do with dirty dishes. If you don’t address an item in your policy, you can’t hold people accountable for it.

Day-to-Day Management

Who’s in charge? Appoint a facilities manager to track building scheduling and use. The manager should approve building request forms and maintain a centralized scheduling calendar.

Sign here. Require that a building use agreement be executed for events. The responsible party should sign the agreement. Consider a separate agreement for large events like weddings.

Do damage control. Complete a thorough post-event inspection of the room. Look for damage and evidence of policy violations. Determine if any building use policies need to be revised or if any damage claims should be filed.

Image: Getty Images

Managing Tough Financial Times

Articles to help you adjust budgets, think strategically, and approach the challenge with confidence.

The Editors

Few could have imagined in January 2020 the magnitude of the economic challenges that face us amid the COVID-19 pandemic. Global and national financial issues ultimately flow down to churches. As giving drops, unemployment soars, and uncertainly continues, we’ve gathered some helpful information to guide you.

For additional information church leaders should know, visit Coronavirus and the Church: The Latest News and Advice from Church Law & Tax, Online Worship and Meetings, and Online Giving: Start or Strengthen This Type of Offering.

Q&A: What’s the Best Way to Cut Our Budget as We Weather the Effects of the Pandemic?

This Q and A will help your church address the budget in the best way to weather the financial strain created by the pandemic.

Michael E. Batts

Q&A: In Light of the Pandemic, What Should We Include in Our Cash Balances for Forecasting Purposes?

It’s important to remember that liquidity refers to cash available for operations.

Michael E. Batts

Q&A: Dynamic Cash-Flow Forecasting is Key to Managing Rapid Change

Budgeting during a time of rapid change is a matter of ditching the annual budget and doing some dynamic cash-flow forecasting and planning.

Michael E. Batts

Giving Is Climbing, Say Some Church Leaders

New survey offers reasons to be cautiously optimistic after weeks of restrictions on in-person gatherings.

The Editors

Q&A: Adopting a New Budget During Extraordinary Times

If your fiscal year begins July 1, budgeting during the pandemic presents unique challenges—but there is a way forward.

Michael E. Batts

Q&A: Should We Start Digging Into Our Financial Reserves?

Churches that deplete their reserves should replenish them over time.

Michael E. Batts

Church Loan Modifications in a Crisis

Restructuring your church’s debt when full payment, or any payment, becomes difficult.

Vonna Laue and Michelle Sanchez

Church Financial Management in Challenging Times

CPA Michael E. Batts helps churches navigate financial concerns created by the pandemic in this on-demand webinar.

Featuring Michael E. Batts

Some Churches Keep Their Budgets Rolling

Navigating unexpected ups and downs with an alternative budget.

Michael E. Batts

Let Financial Ratios Strengthen Your Church Budget

Learn about—and use—the various ratios that financial experts use to strengthen and improve your church budget process.

Vonna Laue

Where’s the Money to Fix This?

Six tips that will keep a church from breaking the bank on big-ticket fixes.

Bobby Ross Jr.

Do We Follow Sound Employment Practices?

A 12-question checklist to find out.

The Editors

Use the following checklist to gauge how your church is doing at following good employment practices.

Download a PDF version of this checklist.

The federal government oversees a complex array of laws designed to protect employees from being taken advantage of by employers. These regulations affect about 10 million employers, including many churches.

Whether your ministry employs one person or one hundred, it may need to comply with many of the federal, state, or common law provisions that apply to employers.

Here are just some of the areas that labor laws regulate:

Wages and hours
Wage garnishment
Workplace safety and health
Workers’ compensation
Employee benefits
Family and medical leave
Veterans’ employment rights
Discrimination (age, race, gender, genetic information, disability, national origin, religion)
Sexual Harassment
Accommodation for employees with disabilities
Wrongful termination
Invasion of privacy

That is why it’s important for you to be aware of current labor laws and create policies and procedures that help your ministry to abide by them.

Is Our Church Prepared for Disaster?

A 10-question checklist to determine steps to take.

Use the following checklist to gauge how your church is doing at preparing for a disaster.

Download a PDF version of this checklist.

When churches plan for disasters, it’s always with the hope that the plans will be unnecessary. But if a disaster—be it a hurricane, a tornado, a fire, flooding, or something else—does strike your church, you’ll be glad you’ve taken the following things into account.

Take inventory. Having a record of the church’s possessions is extremely helpful in the event of a disaster. But this needs to be done prior to the disaster. A post-disaster inventory undoubtedly will be incomplete—and it will lack the photos (or video) that can streamline the post-disaster process.

Think “when” not “if.” When discussing the potential for disasters, it’s easy to focus on the unlikelihood of each scenario. Focusing on what to do when it happens, however, forces church leaders to take the risks seriously—no matter how slim the chances are. And if the unlikely becomes a reality, your church community will be grateful that its leaders took the planning process seriously.

Creating a crisis response team. A crisis response team should be well-trained and authorized to act when necessary. Most importantly, this team needs to be familiar with the necessary procedures in the event of a variety of different disasters—because the immediate needs will vary depending on the type of emergency.

A crisis response team should also be prepared to see the church through the crisis—not just immediately, but also following up on any needs that emerge after the initial phase of the crisis.

Focus on the people—not just the problem. When a disaster strikes, people are going to be impacted. The more traumatic the disaster is, the more people will need spiritual and emotional support. Focusing on physical needs (such as rebuilding, cleaning up, replacing destroyed or damaged property, etc.) often is easier than ministering to those who might be reeling—emotionally and physically.

As you help with the practical needs that surface in the wake of a disaster, be constantly looking for people who need a word of encouragement or someone willing to process things with them. Plan to ask the questions, “How are you doing?” and “Do you want to talk about it?” And be sure to listen—to really listen—to their responses.

Stay disciplined. In the aftermath of a disaster, people are often eager to lend a hand—willing to do anything necessary. But in these times, one’s spiritual disciplines are often put on hold. Ignoring spiritual disciplines is a recipe for another type of disaster. When things are difficult, relief workers need to make their spiritual lives a priority—even when it seems like there are more pressing needs.

Image: getty/steve cicero

A 12-Point Checklist for Setting Church Fundraising Guidelines

This downloadable 12-point checklist is created for those wondering how to establish church fundraising guidelines.

Jeff Hanna

Last Reviewed: November 1, 2023

Download a PDF version of the 12-point checklist below, and use it to gauge how your church is doing at setting church fundraising guidelines.

Before you launch your next fundraising effort, be sure to consider some aspects that may be putting your church and your members at risk. Use the simple tips below help ensure that your next fundraiser is safe.

Physical Safety

Outside Vendors. Most vendors are reputable. However, some may be inexperienced or unprofessional. Be sure to select vendors who have references. Utilize a written contract outlining their duties and get proof that they have adequate insurance.

Equipment. All equipment, whether owned by the church, rented, or brought in by a vendor should be safe. The only way to insure this is to have it inspected by a certified inspector. Further, all equipment should be run by a trained, responsible person who has safety in mind.

Food Sales. Anytime you are selling food, extra care should be provided. Adults should make sure the food is kept at the proper temperatures and safe to sell.

Financial Safety

Cash. Every effort should be made to secure the funds as soon as possible, even as it accumulates during the event. A responsible security team (of two or more) should take cash to a secure room, and lock it up until it can be counted. Once the money is secured, it should be handled in the same way as the church collection. Use two or more people to count the money, document it, and ensure its safe deposit. Never allow cash to be taken home or counted by just one person.

Tax-Deductible Donations. Some churches raise funds by asking people to donate items to the church. The church then sells or uses these donations, and the donor can receive a tax deduction. Take care to follow proper IRS guidelines for accepting donations and reporting them. Churches should consult a competent tax person who knows the law regarding nonprofits.

Are We Violating Copyright Law?

Take this quiz to make sure you’re staying within the guidelines.

Jeff Hanna

Worship music and websites are two places were churches may infringe on copyright law if they’re not careful. Use this checklist to gauge how your church is doing at following good guidelines.

Download a PDF version of this checklist.

There are two primary areas churches may need to consider when it comes to intellectual property and copyright issues.

Music

The first and most common relates to music usage. Many churches like to record their worship services, project words on an overhead, or create their own songbook. Without the proper license, all of these activities are illegal.

Most of us have heard of or are members of CCLI, Christian Copyright Licensing International. As a member, you have permission to use over 150,000 songs in the context of ministry. A license will allow you to:

Record worship services
Project words on a projector or overhead
Print words in the bulletin or on a handout
Create a songbook
Create a database of songs on a computer
Audio or videotape a wedding or special service

Therefore, without the license, participating in any the above is a copyright violation.

The bottom line is ownership. Those who write and own the songs have a right to benefit from their use. The cost of license is based on the size of the church. For more information, go to us.ccli.com.

Videos

The second primary area involves video use. In essence, the FBI warning at the beginning of a rented video states that it is for home use. Showing a complete video outside of the home is considered a violation of the law.

Some have challenged this law citing the “Fair Use Clause” allowing nonprofits to use the video for educational purposes. However, it is smart to look into purchasing an annual license from Christian Video Licensing International (CVLI) and following their guidelines for usage (cvli.org).

Image: Alistair Berg | Getty Images

Zoom’s Security Flaws: How Churches Can Respond

Other options for connecting and what to do if you continue using this popular online meeting tool.

Nick B. Nicholaou

Most organizations were a bit unprepared for the increased remote work forced on us by the current pandemic. Churches and ministries are communication-focused, and most organizations are letting staff use communication tools they normally might not work with.

Videos: Church IT experts Nick Nicholaou and Jonathan Smith discuss some simple approaches for communicating online with church staff and with the entire congregation.

Many people are using Zoom, but this online meeting tool has a reputation for poor security. Is it valid? And if you want to use Zoom anyway, how should you approach doing so?

Why is Zoom so controversial?

Zoom has had a number of security vulnerabilities come to light—including password breaches, takeover of webcams, data mining, multiple security flaws, and uninvited people joining meetings and doing unwelcome things on camera. Even federal law enforcement has recommended not using it.

But many of its users don’t care! Zoom is fun and easy! So much so that those responsible for running churches and ministries are having a hard time reining in its use.

What to use instead of Zoom

There are better solutions than Zoom. Solutions that don’t come with security warnings! Here’s what I recommend and why:

FaceTime. It is free, secure, easy, and fun, but it only works on Apple devices (which is why it is secure—Apple strongly controls their ecosystem). The downside is that everyone has to have an Apple device to participate, and that’s often not the case.
Microsoft Teams. Anyone with an O365 account has free access to Teams. It is secure and easy to use—you can create a meeting in Outlook and send it to everyone you want in the meeting, and they’ll be able to join easily. It is free, even to those without O365 accounts.
GoToMeeting. Secure and pretty easy to use. It is free for 30 days.

Zoom usage recommendations

Our organization does not recommend Zoom because of its many security vulnerabilities, but is allowing it until we select an organization-wide solution.

If you’ve decided to use—or let team members use—Zoom, I recommend you communicate the following to each participant in advance of their next Zoom meeting:

When setting up a Zoom meeting, use the password and waiting room options, and do not post your meeting invite details or meeting screenshots online.
Do not use a user ID and password combination you use for any other website, database, etc. Make certain your user ID and password in Zoom are unique to your Zoom account. Doing so will ensure that if Zoom’s user base gets hacked again, you won’t be vulnerable.
While in a Zoom call, please do not talk about:

• Any financial specifics (your financial institutions, account numbers, etc.);
• Family structures and names, ages, etc.—nor the schools your children attend;
• Missionaries or pastors of churches in closed countries; or
• Anything else you would not want to be made public.

That may seem like overkill, but is appropriate.

Adapted from an article that first appeared in MinistryTech magazine. Used with permission from the author.

Find answers to many of your technological questions in Nicholaou’s book Church IT: Using Information Technology for the Mission of the Church .

Board Member Checklist

Nine questions to help you understand your role and responsibilities.

James Cobble and Tyler Charles

Your role as a church board member is incredibly important for the church. There are also liabilities and responsibilities that you should know about that come with this role. Use this assessment to determine how prepared you are to serve in this way.

Stay Informed to Prevent Church Lawsuits

Years ago church leaders didn’t have to worry about litigation. Churches simply were not likely to be sued. Times have changed. With today’s churches facing huge verdicts on high-profile lawsuits, board members cannot afford to be uninformed about the legal liabilities facing the church. Consider these litigation trends among churches:

Lawsuits involving churches cover almost every area of church life. The most common lawsuits stem from personal injury cases. Other common areas include employee disputes, membership disputes, employment problems with clergy, lawsuits over title to property, litigation with zoning boards, tax and IRS disputes, and violations of securities law. In recent years, church board members have also been named as defendants in cases. For example, church board members have been called on in cases relating to the negligent selection of church workers who later molested a child.

Lawsuits involving children require particular attention. Past studies have shown that nearly 1 church in 100 reported responding to an allegation of child molestation in a church-sponsored program. Research indicates that when child molestation occurs, 10 to 20 percent of the time, there are multiple victims. Churches are at great risk of a lawsuit when an allegation of child sexual abuse is made.

Embezzlement is on the rise. Past studies have shown that as many as 15 percent of churches reported having had problems with theft among volunteers and paid staff members. This percentage is rapidly increasing.

Unfortunately, in many churches nothing is being done to reduce these major legal liabilities. Research has shown that:

Approximately 75 percent of churches do nothing to assess liability risks.
Most churches use no formal employment application and less than one-fourth screen staff members who work with children.
Almost 90 percent of churches surveyed had no sexual harassment policy.
Less than 1 in 3 churches had an employee handbook, and of those that did, only 10 percent had been reviewed by an attorney. The vast majority of church leaders don’t even know of an attorney that can help them with respect to the unique legal needs of churches.

As a board member, make it your mission to stay informed. Your vigilance will become your church’s greatest protection from legal entanglements.

Download a PDF version of this checklist.

Image: dowel | Getty Images

Poll: Two-Thirds of Churches Report Sizable Giving Declines Since Coronavirus Shutdown

Leaders also report numerous steps taken to curb expenses during sudden downturn.

Matthew Branaugh, Business Owner

Bio

Two-thirds of self-identified church leaders say giving to their churches has dropped significantly since the COVID-19 (coronavirus) pandemic became widespread nationwide in March—with sizable numbers reporting sharp declines of 50 percent or more.

The results come from the State of the Plate, a nationwide constituency poll promoted April 8-20, 2020, by Church Law & Tax and several other church-serving organizations. The online poll did not use scientific methodology, but instead attempted to capture an immediate snapshot revealing how the fallout from the outbreak—and the public-gathering restrictions implemented to try and slow it—have affected congregations.

Questions pertaining to church finances and decision-making received answers from 1,091 individuals representing primarily American Protestant churches. When asked how the shutdown affected giving, about 64 percent reported declines, 27 percent said giving was stable, and 8 percent said giving increased.

Among those indicating decreases:

17 percent said giving was down 10 percent or more;
17 percent said giving was down 20 percent or more;
13 percent said giving was down 30 percent or more;
8 percent said giving was down 50 percent or more; and
9 percent said giving was down 75 percent or more.

The declines are “pretty steep,” said Brian Kluth, State of the Plate’s founder. When compared to a similar poll conducted in 2010 in the wake of the so-called Great Recession, “this is a much deeper, broader, and immediate fall-off-the-cliff experience,” stressed Kluth.

Churches polled ten years ago split into thirds between decreases, increases, and stability. Even still, the drop-off at that time was “the worst we had seen churches experience” in decades—and perhaps ever, Kluth said. That downturn was fueled primarily by unemployment and stagnated wages.

Unemployment is rapidly becoming a major factor with the current crisis, further compounded by congregations’ continued inabilities to meet physically together.

“The ripple effects throughout the economy are going to be deep and long term,” Kluth said. “The economic aftershocks will continue through the summer and into the fall. There will be a significant portion of churches that will have financial challenges. You’re going to see churches having to make some hard decisions.”

Some “better positioned” than others

David King, the director of the Lake Institute on Faith and Giving, said certain congregations are set up better to weather the pandemic. Based on the institute’s comprehensive study of congregational finances, conducted between 2014 and 2017, King said 61 percent of congregations have at least three months of operational expenses available to cover personnel and other operational costs. Additionally, many congregations are set up to handle electronic giving, and those that have done so typically report higher overall levels of giving.

With the current crisis, this suggests a majority of churches may have a greater ability to ride out stay-at-home directives and public-gathering restrictions, assuming those measures don’t last too far into the summer.

King concedes larger congregations in urban and suburban settings are likelier better positioned to hold up than small, rural churches, though. In particular, the latter tend to be less adjusted to technological tools for online streaming, much less online giving. “Seventy-eight percent of all giving comes through worship services on any given weekend. If there’s not a way to engage that giving, and encourage it through online formats or encourage people just to mail in checks, then congregations will struggle,” he said. “There’s a divide there between different types of congregations that are more equipped and ready for this.”

A new survey report released on April 21, 2020, by Exponential, Leadership Network, and the Billy Graham Center’s Send Institute confirms as much. Of the 1,937 respondents, most of whom represent larger-sized congregations, nearly two-thirds again report giving is down, but the size of the group indicating decreases of 50 percent or more is smaller (11 percent overall).

Update. In an April 22, 2020, report released by CPA firm Capin Crouse, it says 25 percent of churches it surveyed said there has been “no impact” on giving due to COVID-19, while 19 percent reported increased giving, and 56 percent reported decreased giving. Among those reporting decreases, 20 percent said their giving was down by 20 percent or more. The report does not disclose the number of churches that responded to the survey. Separately, CapinCrouse’s Church Financial Health Index, which shows real-time data regarding churches it serves, reports the average number of days of operating cash and investments on hand to cover expenses is 98 days.

The State of the Plate poll also showed some promising signs regarding online formats, and that may help smaller congregations stabilize their giving in the weeks to come, King added. Nearly 47 percent said they’re attracting anywhere from two to five times the number of online viewers than normal attendees. Many indicated greater investment in online giving platforms, with some signing up for the first time.

Responsive measures

The new poll revealed numerous other maneuvers many churches have taken throughout the past six weeks. The clear top move was to continue paying full salaries and benefits of pastors and staff members. Closing facilities and adjusting building thermostats placed second, followed by the postponement of major projects or purchases. Applying for financial help from available state and federal government programs, including the recently enacted CARES Act’s Paycheck Protection Program (PPP), ranked fourth.

Those churches that receive a PPP loan, which has the potential to convert into a nontaxable grant, will get “breathing space for a couple of months,” Kluth added. With economic conditions likely to remain challenging, though, many congregations will need to contemplate further action longer term.

“The budget is going to get hammered,” he said. “The budget a church had in January is not going to exist in August. It’s just gone away. They’re going to have to come up with a new budget.”

The average annual church budget is $125,000, and half of the typical budget is spent on personnel. Kluth, whose work includes helping the National Association of Evangelicals with its ongoing Bless Your Pastor campaign to assist pastors facing financial challenges, said the initiative will ramp up publicity again soon to help churches find additional ways to bless pastors and staff members beyond just money.

Budgets will need to adjust, King agreed. Past recessions have shown that any lost donations often are not recouped later. There’s also the unprecedented nature of this moment that makes current and future giving difficult to predict. “Typically, giving to religion and congregations does much better in recessions than other types of charitable giving,” King added. “But this is unique and different in many ways. Prohibiting the ability to meet together as a community is new. We’ve never had to do this before.”

Looking ahead

Beyond cutting expenses, some churches may need to take more drastic measures, such as contemplating a shift to a house church model, merging with another struggling congregation, folding into a larger church as a satellite location, or closing, Kluth said. Some will make enough cuts to stay afloat until greater economic stability returns. And some will thrive, even under the harsher conditions, he added.

“It’s understanding what the new normal is, and then having to be very creative. Scarcity leads to clarity. Clarity leads to priorities. Priorities leads to creativity,” Kluth said.

King echoed Kluth’s optimism about the ways churches will weather through the pandemic. King noted many congregations have turned more attention toward meeting individual needs, whether inside the church or in their surrounding communities.

That some churches won’t make it after the crisis subsides is a strong possibility. But new opportunities for ministry will emerge, too, King added.

“Some congregations will have to shutter their doors. Others will weather the storm in smaller versions of themselves. Some will be fine. And some will even grow,” he said. “Congregations will continue to be resilient and innovative and will find ways to meet the challenge ahead, even though it will take some hard decisions and a lot more creativity about new ways to do church into the future.”

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

Advantage Member Exclusive

Do Your Church’s Governing Documents Allow Virtual Business Meetings?

Answering this crucial question can help legally validate decisions made during the coronavirus outbreak—and beyond.

Sarah E. Merkle, Attorney

Bio

Editor’s Note. This article is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

The law governing business meetings for churches is state-specific, meaning that whether your church can hold a virtual business meeting through a video conference or other technological means is ultimately governed by the law of the state where your church is incorporated. Once you have gained an understanding of what applicable state laws say about virtual business meetings for your board or membership, you then need to check your bylaws and any other organization-specific rules applicable to business meetings.

Step one: Find bylaw language relevant to board and membership meetings

First, look at the section in your bylaws that discusses the church board and its meetings. Find language that discusses when and how the church leaders or officers may meet.

Next, look for language in your bylaws that discusses membership meetings. That language might be in the section titled “Members,” or it could be in a section titled “Meetings” or “Annual Meeting.”

As you look at the bylaws language regarding board meetings and member meetings, you are looking for language that indicates “yes, you may have a virtual meeting”—wording that addresses whether the board or membership may meet other than when the members are physically present in the same room.

If the bylaws allow virtual meetings, the language describing this permission could take various forms:

An explicit provision allowing participation via communication equipment that allows for simultaneous participation; or,
Language that states a quorum is present either through the physical presence of a specific number of members, or presence through remote communication technology.

Alternatively, the bylaws may not address virtual or remote meetings at all. They might simply say something general, such as, “Meetings may be held at a place determined by the board.”

Step two: Evaluate how the relevant bylaw language relates to applicable state law

Once you have identified the bylaw language that is relevant to how your board and membership may meet, you need to fit that language together with the applicable state law.

Five questions churches should answer to make sure their decisions are valid if they can hold an in-person meetings.

Understanding how the law and your governing documents fit together on the issue of virtual meetings is one of the most important parts of my virtual church meetings toolkit. The section below explains three possible—and common—scenarios. The toolkit also contains a useful decision tree that can provide you with a visual guide. If you are unsure of how to proceed, consider contacting qualified legal counsel for help.

Three common scenarios

These are the three most common scenarios churches encounter when interpreting state law and bylaws to determine whether they can validly conduct business or membership meetings through virtual technology:

If applicable state law expressly allows virtual business meetings but only if your bylaws also allow virtual business meetings, your board or membership cannot meet virtually unless your bylaws include language that expressly allows virtual business meetings.
If applicable state law expressly allows virtual business meetings unless your bylaws expressly disallow them, your board or membership can meet virtually unless your bylaws expressly disallow virtual business meetings.
If applicable state law is silent about virtual business meetings, your board or membership cannot meet virtually unless your bylaws include language that expressly allows virtual business meetings.

Excerpted from Your Complete Guide to Virtual Church Meetings: A toolkit for legal and compliant business meetings, by Sarah Merkle. Used with permission.

The downloadable, step-by-step toolkit helps churches determine whether virtual business meetings are permitted, make decisions when virtual business meetings are not an option, and prepare to hold a legal and compliant virtual business meeting. It also offers easy-to-reference resources, such as a guide to state laws addressing virtual meetings and a detailed list of the special rules necessary for holding a compliant virtual meeting. Get your copy today at ChurchLawAndTaxStore.com.

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

Attorney General: Religious Exercise Should Not Be Significantly Burdened

The Attorney General’s statement emphasized religious exercise should be not significantly burdened by pandemic mandates.

Matthew Branaugh, Business Owner

Bio

Government-ordered restrictions on public gatherings of 10 people or more began emerging around the country in early March of 2020, followed closely by “shelter-at-home” directives. The regulations, designed to help slow the spread of the unfolding COVID-19 (coronavirus) pandemic, received almost instantaneous pushback from some religious leaders and groups.

Tracking religious liberty cases. In the midst of lockdowns and other government directives, federal courts are addressing First Amendment arguments raised by churches. We’re covering these cases and will offer updates as they come our way.

Their primary concern: the orders represent an overreach by governments, violating protections found in the First Amendment’s guaranty of religious freedom.

While the protection of religious belief is considered absolute under the First Amendment, the protection of religious exercise has limitations. Church legal experts have noted restrictions are constitutionally possible, depending on the circumstances involved and the types of measures implemented.

“The rights in the Bill of Rights, including the free exercise of religion, are not absolute,” said attorney and Church Law & Tax senior editor Richard Hammar in a webinar given on March 18, 2020. “They are subject to exceptions. The Supreme Court of the United States has said that the freedom of religion guaranteed by the First Amendment is superseded by health and safety regulations of government agencies.”

Examples of permissible regulations include permits for construction projects, building codes for fire prevention and safety, and food safety regulations for church-run kitchens serving the public, Hammar added.

However, a recent statement issued by US Attorney General William Barr reminded local municipalities of the limitations to their regulations when they intersect with religious activities.

Religious liberty lawsuits

Individuals and organizations expressing religious liberty concerns grew increasingly vocal in the days leading up to Easter Sunday, and have in the days since. Some churches attempted to work around directives by hosting drive-in worship services—only to be met in some instances by resistance from local law enforcement. The controversy now centers on whether state and local restrictions, perhaps constitutionally permissible in an emergency like the pandemic, still run aground by unfairly targeting religious groups and gatherings.

For instance, Greenville, Mississippi, issued an April 7, 2020, order closing churches and barring drive-in and parking lot services. Members of one church subsequently were given $500 citations as they attended a drive-in service with their windows up and their doors closed. Meanwhile, nearby businesses allegedly served patrons via drive-throughs without penalty.

Lawsuits have ensued, and Barr himself criticized Greenville’s mayor and police department as news reports of the ticketing gained national attention. The mayor has since reversed the ban on drive-in services.

Similar legal battles between municipalities and churches are emerging elsewhere, including Tennessee and Kansas (on April 25, 2020, Kansas Governor Laura Kelly reached a settlement with two Baptist churches that brought challenges there). A New Mexico federal district court on April 17, 2020, refused a megachurch’s request to stop enforcement of that state’s five-person public-gathering limit.

Update. Pew Research released this map graphic on April 27, 2020, showing most states offer some type of religious exemptions for social-distancing measures.

What government can—and cannot—do

In an April 14, 2020, statement, the Attorney General noted “the constitution does allow some temporary restriction on our liberties that would not be tolerated in normal circumstances,” and characterizes the social distancing measures tied to the coronavirus outbreak as one meriting special treatment.

However, Barr also said:

But even in times of emergency, when reasonable and temporary restrictions are placed on rights, the First Amendment and federal statutory law prohibit discrimination against religious institutions and religious believers. Thus, government may not impose special restrictions on religious activity that do not also apply to similar nonreligious activity. For example, if a government allows movie theaters, restaurants, concert halls, and other comparable places of assembly to remain open and unrestricted, it may not order houses of worship to close, limit their congregation size, or otherwise impede religious gatherings. Religious institutions must not be singled out for special burdens.

He then later continued:

[W]here a state has not acted evenhandedly, it must have a compelling reason to impose restrictions on places of worship and must ensure that those restrictions are narrowly tailored to advance its compelling interest. While we believe that during this period there is a sufficient basis for the social distancing rules that have been put in place, the scope and justification of restrictions beyond that will have to be assessed based on the circumstances as they evolve.

Religious freedom protections

The federal statutory law that Barr referenced is the Religious Freedom Restoration Act (RFRA), which was passed nearly unanimously in 1993 by Congress in response to a controversial Supreme Court decision made three years earlier. Twenty-one states have subsequently passed their own RFRAs after a 1997 Supreme Court decision barred the application of the federal RFRA to state-level activities.

Whether the federal RFRA or a state RFRA, the key language involved—as mirrored in Barr’s recent statement—emphasizes any government law or action that significantly burdens religious exercise must be both necessary to advance a compelling government interest and crafted in the least-restrictive manner possible. This high standard is difficult, albeit still possible, to meet. For a church in a state with a RFRA, such a law can serve as an effective defense if a local or state ordinance or law—or the application of one—appears to greatly affect churches, even during the current pandemic crisis.

But not every state has a RFRA on the books, and only some have court decisions that include language extending protections of this sort. If questions or concerns arise, church leaders should consult with qualified local legal counsel.

Relatedly, local, state, and federal government entities are also limited in how they create ordinances or laws that appear neutral and broadly applicable on the surface, but were either covertly intended to target religious exercise and activity or enforced in such a manner.

In the Supreme Court’s decision in Church of the Lukumi Babalu Aye v. City of Hialeah, 508 U.S. 520 (1993), the Court held that a law described to be neutral and generally applicable, but instead truly created or enforced to target religious exercise, also must meet the high standard of fulfilling a compelling government interest in the least-restrictive way possible. This means a church may still be in a position to mount a formidable challenge to a neutral, generally applicable restriction or law adopted during the pandemic if it can show the true purpose—either in its adoption or enforcement—was instead to target religious activity.

To learn more about how federal and state courts decide religious freedom cases, and to understand which states have their own RFRAs, check out the 50-State Religious Freedom Laws Report, a new downloadable resource from Church Law & Tax.

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

Paycheck Protection Program FAQ

Answers to 30 frequently asked questions from church leaders.

Richard R. Hammar, Attorney, CPA

Bio

Editor’s Note: After this article published, the US Small Business Administration issued the application and instructions for Paycheck Protection Program (PPP) loan forgiveness. On May 22, 2020, the SBA issued two new Interim Final Rules (IFR) (the Loan Forgiveness IFR and the Review Process IFR). Tax attorney and CPA Ted Batson’s updated article addresses the developments associated with these IFRs. Additionally, in early June, Congress nearly unanimously passed the Paycheck Protection Program Flexibility Act, and on June 5, 2020, President Trump signed it into law. The legislation modifies several key provisions of the CARES Act. Batson wrote a new article further detailing these developments as well. Readers are strongly encouraged to read through these additional updates to ensure they have the most current information available.

Additionally, Congress passed another bill—which President Trump signed on July 4, 2020—that extends the deadline for PPP loan applications to August 8, 2020. Unfortunately, it’s not yet clear what the new application deadline means for the various dates and deadlines associated with the program, but future guidance from the Treasury Department and SBA should shed light on any changes resulting from the extension.

Richard Hammar answers the following questions submitted to Church Law & Tax about the Paycheck Protection Program (PPP).

Determining eligibility

Are churches eligible to participate in the Paycheck Protection Program (PPP)?

Yes, so long as they have less than 500 employees. The US Small Business Administration (SBA) has issued a document titled Frequently Asked Questions Regarding Participation of Faith-Based Organizations in the Paycheck Protection Program (herein “Faith-Based Organizations FAQ”) explicitly affirming this point. This document also clarifies

that faith-based organizations are eligible to receive SBA loans regardless of whether they provide secular social services. That is, no otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization. The requirements in certain SBA regulations . . . impermissibly exclude some religious entities. Because those regulations bar the participation of a class of potential recipients based solely on their religious status, SBA will decline to enforce these subsections and will propose amendments to conform those regulations to the Constitution.

For more on the availability of the PPP to churches, see Churches and Faith-Based Organizations May Apply for CARES Act Loans and SBA Updated Guidance: Religious Liberty Protections Will be Provided with Loan Program.

Does church participation violate the First Amendment of the United States Constitution which prohibits the establishment religion?

It is likely that the eligibility of churches and other religious organizations to participate in the loan program will be challenged in court as an unconstitutional establishment of religion in violation of the First Amendment. But consider three important points:

1. Any legal challenge will be hampered by the fact that this program ends on December 31, 2020.

2. The United States Supreme Court has ruled that laws benefiting a wide range of secular nonprofit organizations are not rendered unconstitutional by the fact that religious organizations are included among the beneficiaries.

To illustrate, in 1970 the Court upheld the constitutionality of a New York law exempting churches from property taxes, in part because property used for religious purposes was but one of a wide variety of classifications of property that were exempted from tax. The state had not singled out churchowned property for the exemption, but rather it had included such property in a long list of other exempted properties owned by organizations whose activities the state had decided were socially desirable and deserving of protection through exemption from tax. Walz v. Tax Commission, 393 U.S. 664 (1970).

Similarly, in 1989 the United States Supreme Court ruled that a Texas law exempting religious periodicals from state sales tax violated the First Amendment’s nonestablishment of religion clause. Texas Monthly, Inc. v. Bullock, 109 S. Ct. 890 (1989). From 1984 until 1987 Texas law imposed a sales tax upon all periodicals except those “published or distributed by a religious faith and that consisted wholly of writings sacred to a religious faith.” This law was challenged by a secular publisher, and the United States Supreme Court agreed that the Texas law violated the First Amendment’s ban on the establishment of religion.

But the Court stressed that “insofar as a tax exemption is conferred upon a wide array of nonsectarian groups as well as religious organizations in pursuit of some legitimate secular end, the fact that religious groups benefit incidentally does not [violate the First Amendment].” The court emphasized that if Texas chose to grant a tax exemption to “all groups that contributed to the community’s cultural, intellectual, and moral betterment, then the exemption for religious publications could be retained.” The court specifically ruled that a statute exempting organizations created for “religious, educational, or charitable purposes” from the payment of state sales tax would be a “model” exemption statute.

3. The above conclusion is affirmed by the following clarification in the Faith-Based Organizations FAQ:

The PPP and EIDL loan programs are neutral, generally applicable loan programs that provide support for nonprofit organizations without regard to whether they are religious or secular. The CARES Act has provided those program funds as part of the efforts to respond to the economic dislocation threatened by the COVID-19 public health emergency. Under these circumstances, the Establishment Clause does not place any additional restrictions on how faith-based organizations may use the loan proceeds received through either the PPP or the EIDL loan program. . . . In addition, the CARES Act does not impose unique burdens or limitations on faith-based organizations. In particular, loans under the program can be used to pay the salaries of ministers and other staff engaged in the religious mission of institutions.

Key point: The above three points strongly suggests that any constitutional challenge to the inclusion of religious groups in the Paycheck Protection Loan Program will fail.

Some church leaders have expressed concern that participation in this loan program could subject a church to an increased risk of government regulation. Is this a likely outcome?

The SBA Faith-Based Organizations FAQ document addresses this concern as follows:

Receipt of a loan through any SBA program does not (1) limit the authority of religious organizations to define the standards, responsibilities, and duties of membership; (2) limit the freedom of religious organizations to select individuals to perform work connected to that organization’s religious exercise; nor (3) constitute waiver of any rights under federal law, including rights protecting religious autonomy and exercise under the Religious Freedom Restoration Act of 1993 (RFRA) . . . section 702 of the Civil Rights Act of 1964 . . . or the First Amendment.

Simply put, a faith-based organization that receives a loan will retain its independence, autonomy, right of expression, religious character, and authority over its governance, and no faith-based organization will be excluded from receiving funding because leadership with, membership in, or employment by that organization is limited to persons who share its religious faith and practice. . . .

[But] receipt of a loan through any SBA program constitutes Federal financial assistance and carries with it the application of certain nondiscrimination obligations.

Any legal obligations that you incur through your receipt of this loan are not permanent, and once the loan is paid or forgiven, those nondiscrimination obligations will no longer apply.

Consistent with certain federal nondiscrimination laws, SBA regulations provide that the recipient may not discriminate on the basis of race, color, religion, sex, handicap, age, or national origin with regard to goods, services, or accommodations offered. But SBA regulations also make clear that these nondiscrimination requirements do not limit a faith-based entity’s autonomy with respect to membership or employment decisions connected to its religious exercise. And . . . SBA recognizes the various protections for religious freedom enshrined in the Constitution and federal law that are not altered or waived by receipt of Federal financial assistance.

SBA therefore clarifies that its regulations apply with respect to goods, services, or accommodations offered generally to the public by recipients of these loans, but not to a faith-based organization’s ministry activities within its own faith community. For example, SBA’s regulations will require a faith-based organization that operates a restaurant or thrift store open to the public to serve the public . . . . But SBA’s regulations do not apply to limit a faith-based organization’s ability to distribute food or clothing exclusively to its own members or co-religionists. Indeed, SBA will not apply its nondiscrimination regulations in a way that imposes substantial burdens on the religious exercise of faith-based loan recipients, such as by applying those regulations to the performance of church ordinances, sacraments, or religious practices, unless such application is the least restrictive means of furthering a compelling governmental interest.

This is a very helpful clarification coming from a federal agency. While the nondiscrimination provisions of employment and public accommodations laws may apply with respect to “goods, services, or accommodations offered generally to the public” by recipients of Paycheck Protection Program loans, including churches, they will not apply to a church’s “ministry activities within its own faith community.” In other words, any exemption applicable to churches is limited, and so churches that engage in commercial activities targeting the general public should expect that they will be covered by the nondiscrimination provisions in employment and public accommodations laws until the loan is paid or forgiven.

Are there any limitations on how faith-based organizations can use the PPP and Economic Injury Disaster Loans (EIDL) loan money they receive?

No. SBA’s Faith-Based Organizations FAQ provides:

The PPP and EIDL loan programs are neutral, generally applicable loan programs that provide support for nonprofit organizations without regard to whether they are religious or secular. The CARES Act has provided those program funds as part of the efforts to respond to the economic dislocation threatened by the COVID-19 public health emergency. Under these circumstances, the Establishment Clause does not place any additional restrictions on how faith-based organizations may use the loan proceeds received through either the PPP or the EIDL loan program. . . . In addition, the CARES Act does not impose unique burdens or limitations on faith-based organizations. In particular, loans under the program can be used to pay the salaries of ministers and other staff engaged in the religious mission of institutions.

Is a church disqualified from any SBA loan program because it is affiliated with another church or denomination?

Not necessarily. SBA’s Faith-Based Organizations FAQ provides:

Under SBA’s regulations, an affiliation may arise among entities in various ways, including from common ownership, common management, or identity of interest. 13 C.F.R. §§ 121.103 and 121.301. These regulations are applicable to applicants for PPP loans. Some faith-based organizations likely would qualify as “affiliated” with other entities under the applicable affiliation rules. Entities that are affiliated according to SBA’s affiliation rules must add up their employee numbers in determining whether they have 500 or fewer employees.

But regulations must be applied consistent with constitutional and statutory religious freedom protections. If the connection between your organization and another entity that would constitute an affiliation is based on a religious teaching or belief or is otherwise a part of the exercise of religion, your organization qualifies for an exemption from the affiliation rules. For example, if your faith-based organization affiliates with another organization because of your organization’s religious beliefs about church authority or internal constitution, or because the legal, financial, or other structural relationships between your organization and other organizations reflect an expression of such beliefs, your organization would qualify for the exemption. If, however, your faith-based organization is affiliated with other organizations solely for nonreligious reasons, such as administrative convenience, then your organization would be subject to the affiliation rules. SBA will not assess, and will not permit participating lenders to assess, the reasonableness of the faith-based organization’s good-faith determination that this exception applies.

What type of assistance will independent contractors be eligible for?

Refundable tax credits are available for independent contractors who would have qualified for coronavirus related paid leave if they were employees. IRS will be posting information soon on these credits on its website (irs.gov), including information on how to claim these credits.

Fifty percent of certain self-employment taxes are deferred through the end of 2020. Deferred taxes will not become due until end of 2021 and end of 2022, with 50 percent of the liability being paid at each date. Independent contractors are also eligible for assistance through the Small Business Administration’s new Paycheck Protection Program and Economic Injury Emergency Grant Program.

Can a church get more than one PPP loan?

No, a borrower is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same employer.

What do I need to apply for a PPP loan?

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by August 8, 2020.

Do I need to first look for other funds before applying for a PPP loan?

No. The SBA is waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources.

How long will the PPP last?

Although the program is open until August 8, 2020, potential borrowers are encouraged to apply as quickly as possible because there is a funding cap and lenders need time to process your loan. (Editor’s Note: Contact your lender immediately to determine funds availability.)

Housing allowance confusion

Are housing allowances included in the definition of “payroll costs”? (If so, a church’s maximum loan amount will be higher since the maximum amount is 2.5 times average monthly payroll.)

The CARES Act refers to payroll as a permitted expense in disbursing a Paycheck Protection Program loan. It defines “payroll” to include “the sum of payments of any compensation with respect to employees that is a . . . salary, wage, commission, or similar compensation.”

Does this definition include a housing allowance? The SBA released an updated “frequently asked questions” document on April 26, 2020, in which it states that a minister’s housing allowance is considered part of “payroll costs.” The document includes this question and answer:

Question: Does the cost of a housing stipend or allowance provided to an employee as part of compensation count toward payroll costs?

Answer: Yes. Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.

In filing Form 941, housing is not going to show up since it is not taxable income. So, how do we document housing allowance as a payroll expense with the lender, who requires Form 941 for the PPP loan application?

Churches should provide their lender with a letter documenting the points made in the response to the previous question.

What’s covered, what’s not

The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that exclusion apply to all employee benefits of monetary value?

No. The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:

employer contributions to defined-benefit or defined-contribution retirement plans;
payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
payment of state and local taxes assessed on compensation of employees.

Do PPP loans cover paid sick leave?

Yes. PPP loans cover payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response.

Does the maximum loan amount (2.5 times average monthly payroll costs) apply to just payroll costs or does it include rent, utilities, and mortgage payments?

The maximum loan amount is 2.5 times average monthly payroll costs. It does not include rent, utilities, or mortgage payments.

What about a church camp whose activity increases from April to June. Considering activity from that period would be a more accurate reflection of my business’s operations. However, my small business was not fully ramped up on February 15, 2020. Am I still eligible?

In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020, or for an 8-week period between February 15, 2019, and June 30, 2019.

What can I use PPP loans for?

You should use the proceeds from these loans on your:

Payroll costs, including benefits;
Interest on mortgage obligations, incurred before February 15, 2020;
Rent, under lease agreements in force before February 15, 2020; and
Utilities, for which service began before February 15, 2020.

What counts as payroll costs?

Payroll costs include:

Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
State and local taxes assessed on compensation; and
For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

Loan forgiveness

Editor’s Note: On May 15, 2020, the SBA released the loan forgiveness application and related instructions and schedules. This in-depth article covers the process.

How should a borrower account for federal taxes when determining its payroll costs for purposes of the maximum loan amount, allowable uses of a PPP loan, and the amount of a loan that may be forgiven?

Under the Act, payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax.

For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.

The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over a covered period. When does that period begin?

The covered period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

What is the covered period of a PPP loan?

According to the SBA’s frequently asked questions documents, the covered period “begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of the loan approval.”

Payroll taxes and payroll providers

What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?

SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation.

Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

Calculating payroll costs

The maximum amount of a loan under the Paycheck Protection Program is 2.5 times a church’s average monthly payroll costs for the past 12 months. Are payroll taxes included in computing the maximum amount of a loan?

No, the loan amount calculation is based off payroll costs.

The maximum amount of a loan under the Paycheck Protection Program is 2.5 times a church’s average monthly payroll costs for the past 12 months. Are 1099 workers included in computing the maximum amount of a loan?

The Treasury Department’s “fact sheet” published the week of April 13, 2020, stated PPP applicants could include “nonprofits [with 500 or fewer employees] … sole proprietorships, self-employed individuals, and independent contractors.”

Key point. Earlier guidance from the SBA seemed to suggest employees who received a 1099 were included, but independent contractors were not counted. The more recent Treasury Department guidance seems to suggest self-employed workers and independent contractors are treated the same and should not be counted because they can apply for a PPP loan on their own. Applicants should confer further with their lending bank, since the decision is ultimately up to the lending bank.

Which one-year period do we use to calculate the average monthly payroll costs? Some say the applicant can choose—either the calendar 2019 year or the 12-month period ended preceding the date of the loan (i.e. an April application would use 3/31/19 to 3/31/20).

The SBA has published a series of questions and answers that answer this question as follows:

In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020. Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).

Confirming the calculation of salary and benefits for average monthly payroll costs: Up to $100,000 of salary is counted, plus employer-paid health care benefits, employer-paid retirement benefits, and employer-paid state/local taxes. So, if we have an employee who makes $85,000 in salary, and we have $22,000 in qualifying employer-paid benefits, then $107,000 is added into the amount used to determine average monthly payroll costs, correct?

The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to noncash benefits, including:

employer contributions to defined-benefit or defined-contribution retirement plans;
payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
payment of state and local taxes on compensation of employees

How do you determine how many part-time employees are considered full time for the application?

The term “full-time equivalent employee” is used 10 times in the 900-page CARES Act, but is not defined. Many tax professionals are recommending use of the Affordable Care Act’s definition of full-time equivalent employee, at least until guidance is provided by the SBA. The ACA defines full-time equivalent employees as “a combination of employees, each of whom individually is not a full-time employee because they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee.” Fortunately, many employers already are using software to compute full-time equivalent employees for purposes of the ACA, so using the ACA definition in the context of PPP loans should not be difficult.

Expenses not forgiven

If we receive a PPP loan and then find we’re not going to use all of the funds by the end of the covered period, can we just pay back the unused portion (and is there a penalty)? Or are we required to keep the unused portion and have it convert into a loan?

Yes, you can pay back the unused portion at the end of the overed period. These loans contain no prepayment penalties.

PPP loans not applied fully to allowable expenses continue on as a loan but on what terms?

Loans are repayable at one percent interest for a five-year term, but payments are deferred for six months.

Unemployment insurance

Who is eligible for unemployment insurance under the CARES Act that’s not traditionally eligible for unemployment benefits?

While this question isn’t about the PPP, it is one that keeps coming up. For my answer, turn to the “Unemployment insurance provisions” section in my overview of the CARES Act.

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