Recent Developments

Issues that affect ministers and churches
When a Church Dissolves
Distribution of assets requires legal counsel.

Key point 6-07.04. Church board members have a fiduciary duty of loyalty to their church, and they may be personally liable for breaching this duty by participating in board decisions that place the interests of one or more board members above the interests of the church itself.

Key point 6-15. The procedure for dissolving an incorporated church is specified by state nonprofit corporation law.

A Pennsylvania court addressed the issue of whether a church acted properly when it dissolved due to declining attendance, sold its assets, and transferred most of the sales proceeds to the pastor as compensation for wages that it was previously unable to pay. A church was established in 1902. In 1999, the church hired a new pastor with a starting weekly salary of $150, out of which $90 was treated as a non-taxable housing allowance. The pastor subsequently received periodic salary increases and, eventually, his entire salary was treated as a housing allowance. He was also paid separately for his maintenance work. As of 2008, his annual salary was $17,930. In 2007, thirteen members of the church's congregation unanimously approved the revision to the church's constitution to provide that "in the event of the dissolution of this corporation, all of its debts shall be fully satisfied, including any compensation and benefits due to its Pastor."

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Posted: March 1, 2012
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