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Can a State Demand an Accounting of Church Trust Funds?
Yes, rules a court.
Maine
State:

Does a state have the authority to demand an accounting of church trust funds? Yes, concluded the Supreme Judicial Court of Maine. In 1939, a wealthy individual made a gift of a substantial amount of stock to a church, subject to the following two conditions: (1) the church was to use the trust fund for "charitable uses and purposes," and (2) the church was not to sell or transfer the stock for a period of fifty years. In 1983, after faithfully observing the terms of the trust for forty-four years, the church sought court permission to sell the stock. It noted that the value of the stock had fallen sharply and the rate of return was substantially less than could be achieved with other investments. The court permitted the church to sell the stock (then valued at $733,000) in order to protect the trust fund. In 1987, the state attorney general received information suggesting that the church was not carrying out the terms of the trust. The attorney general asked the church for an accounting of the trust fund. When the church refused to comply, the attorney general sought a court order compelling the church to provide an accounting. The church argued that expiration of the fifty-year restriction on sale of stock expired in 1989, and this gave the church full legal title to the trust. The church also argued that the first amendment guaranty of religious freedom protected the church from complying with the demand for an accounting. The trial court rejected the church's arguments, and ordered the church to provide the attorney general with an accounting. The church appealed, and a state appeals court agreed with the trial court's ruling. The appeals court noted that the fundamental purpose of the trust continued to be for "charitable uses and purposes." This purpose was not affected by the expiration of the fifty-year ban on sales of stock. The court then observed: "Where property is given to a charitable corporation and it is directed by the terms of the gift to devote the property to a particular one of its purposes, it is under a duty, enforceable by the attorney general, to devote the property to that purpose." Accordingly, the church was not free to spend trust funds in any manner it chose. It had to spend them consistently with the trust purpose ("charitable uses and purposes"). And, the attorney general had the legal authority to ensure that the church was complying with the trust purpose, and this authority included the right to demand an accounting of trust funds. The court also rejected the church's claim that requiring it to prepare an accounting would violate the constitutional guaranty of religious freedom. It observed: "Civil courts can constitutionally adjudicate property disputes involving religious organizations if they can be resolved in accordance with neutral principles of law and without interpretation of, or reference to, religious doctrine. We have held that a suit for an accounting of church funds is a property dispute capable of resolution by application of neutral principles of law …. The attorney general is not attempting to inquire into the financial affairs of the church, or impose a regulatory scheme, but only to obtain the information necessary for him to fulfill his statutory obligation to the public. Because we find that the trust is a public trust, separate and distinct from the church, the court ordered accounting can be accomplished by application of neutral principles of law and therefore, does not impinge upon the church's first amendment freedoms." Attorney General v. First United Baptist Church, 601 A.2d 96 (Me. 1992).

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