Charitable Contributions – Part 1

Church Law and Tax 1989-11-01 Recent Developments Charitable Contributions Richard R. Hammar, J.D., LL.M., CPA

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Charitable Contributions

Church Law and Tax 1989-11-01 Recent Developments

Charitable Contributions

Richard R. Hammar, J.D., LL.M., CPA

• Is a “pledge” legally enforceable? That was the issue before a New Jersey state appeals court in an important case. An individual pledged to give a specified amount of money to a religious organization, but later changes his mind. The organization filed a lawsuit seeking a court order compelling the individual to honor the pledge. A trial court ruled in favor of the organization, and the individual appealed. The state appeals court began its opinion by noting that “the great bulk of [states], including New Jersey, hold that a charitable pledge constitutes an enforceable contract.” This rule admittedly has created some confusion, since an enforceable contract generally consists of an exchange (each party gives and receives something of value). But what benefit does the donor receive in exchange for his or her pledge? Why should a pledge be viewed as an enforceable contract rather than as an unenforceable statement of intent to make a gift? The court reviewed a number of theories that have been used to support the characterization of pledges as enforceable contracts, but found none of them satisfactory. It candidly observed that “the real basis for enforcing a charitable [pledge] is one of public policy—enforcement of a charitable pledge is a desirable social goal.” The court continued: “Lightly to withhold judicial sanction from such obligations would be to destroy millions of assets of the most beneficent institutions in our land, and to render such institutions helpless to carry out the purposes of their organization.” In conclusion, most courts view the enforceability of charitable pledges as socially desirable, and accordingly they characterize them as “contracts” in order to ensure their enforceability even though it is doubtful that they qualify as valid contracts. The New Jersey court correctly observed that charitable pledges are “disguised as a contract in order to effectuate a public policy.” Whether based on contract law or public policy, most courts view charitable pledges as legally enforceable commitments. Obviously, few religious organizations would consider suing a donor to enforce a pledge. On the other hand, religious organizations often incur sizable obligations (buildings, missions commitments, etc.) in reliance upon pledges, and they may be able to persuade reluctant donors to recognize their moral obligation to honor their pledges if they realize that the courts view pledges as binding legal commitments. Jewish Federation v. Barondess, 560 A.2d 1353 (N.J. Super. 1989).

© Copyright 1989, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m08 c0689

Legal Developments

Freedom of Religion – Part 3

Church Law and Tax 1989-03-01 Recent Developments Freedom of Religion Richard R. Hammar, J.D., LL.M.,

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Freedom of Religion

Church Law and Tax 1989-03-01 Recent Developments

Freedom of Religion

Richard R. Hammar, J.D., LL.M., CPA

• A New Jersey state appeals court upheld the validity of a city’s “Sunday closing law.” The court noted that the ordinance had been adopted, by the city of Paramus, to “achieve a reduction of traffic … and afford the residents of Paramus a day of rest and relaxation from the everyday hustle and bustle in order to preserve and uplift the public health, safety, and welfare of the borough and its inhabitants.” Such purposes, concluded the court, were permissible justifications for a Sunday closing law. The court disagreed with the contentions of several merchants that the law in question (1) was unlawfully discriminatory, (2) violated the merchants’ first amendment right to “commercial speech,” (3) was overbroad, (4) was too vague, (5) imposed an unlawful burden on commerce, and (6) was invalid due to lax and inconsistent enforcement. Mack Paramus Co. v. Borough of Paramus, 549 A.2d 474 (N.J. Super. 1988).

Legal Developments

Church Funds

Can church funds earmarked by a donor for a specific purpose ever be used by

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Charitable Contributions

Can church funds earmarked by a donor for a specific purpose ever be used by the church for other purposes?

A recent New Jersey state court decision addresses this important issue. In 1911, a Quaker church established a fund for the care and maintenance of its graveyard, and began soliciting contributions for the fund. By 1988, the fund had increased to nearly $200,000, and had annual income far in excess of expenses. In 1985, the church discussed the possibility of using the excess income for purposes other than graveyard maintenance, and ultimately expressed a desire to use excess income from the fund for general church purposes (including upkeep and maintenance of church properties). A church trustee who administered the fund took an unbending position that the fund could not be used for any purpose other than graveyard maintenance.

The church and trustee thereupon sought an opinion ("declaratory judgment") from a local court as to the use of the fund for other purposes. The trial court ruled that the excess income could be used for general church purposes other than graveyard maintenance, and the trustee appealed the case to a state appeals court on the ground that the trial court's decision "conflicts with the express intent of the donors." The appeals court agreed with the trial court on the basis of the "cy pres" doctrine. Under the cy pres doctrine, if the specific purpose of a charitable trust is frustrated or becomes impossible, then a court can apply the trust fund to a charitable purpose similar to the original purpose if the donor "manifested an intent to devote the trust to a charitable purpose more general than the frustrated purpose." The cy pres doctrine was created "for the preservation of a charitable trust when accomplishment of the particular purpose of the trust becomes impossible, impractical, or illegal."

The court concluded that "if income from a charitable trust exceeds that which is necessary to achieve the donor's charitable objective, cy pres may be applied to the surplus income 'since there is an impossibility of using the income to advance any of the charitable purposes of the [donor]." Therefore, to the extent that the graveyard fund in question "exceeds maintenance and preservation costs, application of cy pres is appropriate since there is an impossibility of using the excess income to advance the particular purpose expressed by the donors." The only remaining question was whether or not the donors manifested an intention to devote excess income to a charitable purpose more general than graveyard maintenance.

The court concluded that the donors to the graveyard fund in fact manifested such an intent: "Since the donations were made for the perpetual maintenance of a graveyard, it is logical to assume conclude that the donors expected excess income would be used … 'to strengthen the very institution to which [they] entrusted their money' to permit it to survive in perpetuity in order to carry out the donors' intent. A contrary result, that the income be held in the trust and accumulate in perpetuity for maintenance of the graveyard, is both illogical and contrary to the probable intent of the donors. The only sensible conclusion to be reached is that the donors did not intend that the trusts would grow while the [church] itself may cease to exist because of lack of funds. We are also convinced that use of the funds for general meeting purposes is sufficiently similar to the particular purpose of the [donors] to apply the cy pres doctrine."

Finally, the court emphasized that only trust income in excess of graveyard expenses could be applied for general church purposes, and that the church's bylaws required an annual audit of the fund by certified public accountants. Sharpless v. Medford Monthly Meeting of the Religious Society of Friends, 548 A.2d 1157 (N.J. Super. 1988).

Legal Developments

Personal Injuries – Part 3

On Church Property or During Church Activities

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Church Property, Schools

Church Law and Tax 1989-01-01 Recent Developments

Personal Injuries – On Church Property or During Church Activities

Richard R. Hammar, J.D., LL.M., CPA

• The New Jersey Supreme Court ruled that a church-operated school located on church property could be sued by a pedestrian who suffered permanent injuries when she slipped on a sidewalk abutting the school that had not been cleared of snow and ice. Such a result, concluded the court, was “less harsh than imposing the entire loss on a pedestrian injured by the negligent maintenance of a sidewalk,” and “would in no way interfere with the exercise of religion” by the church. Further, requiring church schools to clear abutting sidewalks of snow and ice “would not greatly add to the type of maintenance tasks [such schools] routinely undertake.” Finally, the court rejected the church’s claim that the state “charitable immunity law” (which prevents charitable and religious organizations from being sued in some cases by their “beneficiaries”) prevented it from being sued—since the injured pedestrian was not a beneficiary of the church. While acknowledging “the good works performed by religious and charitable organizations,” the court concluded that “religious institutions do not enjoy an absolute immunity from worldly burdens.” Brown v. St. Venantius School, 544 A.2d 842 (N.J. 1988).

Legal Developments

Court Ruled That a Building Used as a Training Center for Religious Counseling Did Not Qualify for a Property Tax Exemption

A New Jersey state appeals court ruled that a building used in part as a

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Counseling, Taxation - Church Property

A New Jersey state appeals court ruled that a building used in part as a training center for religious counseling did not qualify for a property tax exemption.

A state law exempts from taxation "buildings actually and exclusively used in the work of … corporations organized exclusively for the moral and mental improvement of men, women, and children, or for charitable purposes, provided … [the activities] are not conducted for profit."

The court, in rejecting the organization's claim that the property was used exclusively for nonprofit, charitable purposes, observed that "counselors charged fees that were only slightly lower than comparable rates for private psychologists." It concluded that "where there is what might be considered a duplication of a private practice or service, the applicant for a tax exemption has a duty to demonstrate that the circumstances, charges, and public betterment justify exemption and do not reflect merely private practices cloaked in charitable coverings."

Church Contribution Trust v. Mendham Borough, 541 A.2d 249 (N.J. App. 1988)

Legal Developments

Court Upheld the Application of the Fire Safety Provisions of a State Boarding House Law to a Rescue Mission

The New Jersey supreme court upheld the application of the fire safety provisions of a

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Freedom of Religion

The New Jersey supreme court upheld the application of the fire safety provisions of a state boarding house law to a rescue mission. The law in question was enacted in 1979 because of a number of fatal boarding house fires.

In rejecting the mission's claim that it was not subject to the fire safety provisions of the law, the court observed that "the state may justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest." Protecting the residents of religious missions from fire hazards was an overriding governmental interest that outweighed any claim of religious freedom.

The court observed that "we suspect that had there been a fatal fire at a religious boarding house, society would not have shrugged its shoulders and concluded that the tragedy was of no moment since it had befallen a religious shelter. The state's legitimate concern for safety need not end at the shelter's door."

The court also upheld provisions in the law giving the state the authority to oversee and review the day-to-day operations of the mission, and to strike down any rule or practice it deemed unreasonable. However, the court emphasized that the "regulatory scheme cannot require such comprehensive, discriminating, and continuing state surveillance" as would result in an excessive entanglement between church and state. And, the court warned that "should the [state] exercise its discretion in a manner that unnecessarily intrudes into the mission's religious affairs, we shall promptly reconsider the matter."

Market Street Mission v. Bureau of Rooming and Boarding House Standards, 541 A.2d 668 (N.J. 1988)

Legal Developments

Court Concluded That a Church’s Religious Freedom Claim Was Outweighed by a Compelling State Interest—the “Broad Public Interest in Maintaining a Sound Tax System”

Is property acquired by a church after the "tax assessment date," and used exclusively for

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Freedom of Religion, Taxation - Church Property

Is property acquired by a church after the "tax assessment date," and used exclusively for religious purposes, subject to local property taxes?That was the question before a New Jersey state appeals court.

Under New Jersey law, the taxable or exempt status of any tract of property is determined as of the tax assessment date (October 1 of the preceding calendar year). A church purchased property on December 12, 1983, and used it immediately for exclusively religious purposes. The church applied for a tax exemption, but was informed that no exemption would be available for calendar year 1984 since the property was not owned by the church as of October 1, 1983.

The church claimed that it was doctrinally opposed, on the basis of biblical passages, to paying taxes with funds obtained from tithes and contributions, and accordingly, that requiring the church to pay property taxes for 1984 would violate the constitutional guaranty of religious freedom. The court acknowledged that "the free exercise of religious beliefs can be crushed and closed out by the sheer weight of the tribute which is exacted." However, it also noted that "it is equally well-settled that religious groups are not free from all financial burdens of government" and that "not all burdens on religion are unconstitutional."

A state may "justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest" and there exists "no less restrictive means" of achieving the state's interest. The court emphasized that the issue was not the tax-exempt status of church property—since New Jersey law clearly exempted such properties from tax. Rather, the issue was whether or not the constitutional guaranty of religious freedom requires church-owned property to be exempt from taxation the moment it is acquired.

The court concluded that the church's religious freedom claim was outweighed by a compelling state interest—the "broad public interest in maintaining a sound tax system." Specifically, the court observed that "mid-year cancellation of tax liability by reason of a property so listed becoming exempt during the year would result in major dislocation and an unfair burden to the remaining taxpayers." Further, "a requirement imposed by the [courts] mandating that property acquired by an exempt owner must receive an exemption at the exact time of its acquisition would severely impair the ability of the tax authorities to predict revenues for the tax year."

In conclusion, the court observed that the maintenance of "an organized society that guarantees religious freedom to a great variety of faiths requires that some religious practices yield to the common good."

Bethany Baptist Church v. Deptford Township, 542 A.2d 505 (N.J. Super. 1988)

Legal Developments

Schools

Church Law and Tax 1988-09-01 Recent Developments Schools Richard R. Hammar, J.D., LL.M., CPA •

Richard R. Hammar, Attorney, CPA

Bio

State: Connecticut
Categories: Schools

Church Law and Tax 1988-09-01 Recent Developments

Schools

Richard R. Hammar, J.D., LL.M., CPA

• Private schools may be eligible to seek a deferral until May 9, 1989 of the October 12, 1988 deadline for submitting an asbestos management plan to their state government. Deferrals will only be granted if several conditions are satisfied. First, a school must submit an application for deferral to the appropriate state office. Second, the application must explain why, despite good faith efforts, the school will not be able to meet the original October 12, 1988 deadline for submitting an asbestos management plan. Third, the application must indicate that one of the following documents is available for inspection at the school: (1) a solicitation by the school to contract with an accredited asbestos contractor for inspection or management plan development; (2) a letter certifying that school district personnel are enrolled in an EPA-approved training course for inspection and management plan development; or (3) documentation showing that suspected asbestos-containing material from the school is being analyzed at an accredited laboratory. Fourth, the application must indicate that the school has notified affected parent, teacher, and employee organizations of its intent to file for a deferral. Fifth, the application must contain a proposed schedule outlining the activities that will lead up to the submission of a management plan by May 9, 1989, including inspection of the school. This schedule must contain a deadline of no later than December 22, 1988 for entering into a contract with an accredited inspector (unless inspections are to be performed by accredited school personnel). Schools in the states of Connecticut, Illinois, New Jersey, and Rhode Island have slightly different requirements, since these states independently sought waivers of the October 12, 1988 deadline. Schools in these states must also submit an application for deferral, but their applications need only contain the following assurances: (1) their state requested a waiver from EPA prior to June 1, 1988, and (2) the school has notified affected parent, teachers, and employees groups about its intention to apply for a deferral. Other conditions apply. For more specific information regarding deferral requests, and a listing of the state agencies in each state to which deferral requests should be submitted, contact the EPA at 1-202-554-1404.

© Copyright 1988, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m65 c0588

Legal Developments

Court Had Authority to Compel Jewish Male to Submit to Jewish Ecclesiastical Court

A New Jersey state appeals court ruled that it had authority to compel a Jewish

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Freedom of Religion, Marriage

A New Jersey state appeals court ruled that it had authority to compel a Jewish male to submit to the jurisdiction of a Jewish ecclesiastical court.

The man and his wife were married in 1969, and executed a written contract committing themselves to be bound by the laws of Moses and Israel. The spouses were later divorced, and the wife sought to remarry. However, under Jewish law, she could not remarry without first obtaining a "get" (an ecclesiastical release) from her former husband, since under Jewish law the two would continue to be married until he "released" her.

The court consulted with the Bible and the Encyclopedia Judaica to evaluate the significance of Jewish marriage and divorce, finding such study "necessary because the parties have signed a contract … committing themselves to be bound by such law."

The court concluded that "to compel the [husband] to submit to the jurisdiction of the Jewish ecclesiastical court, the 'Bet Din,' and initiate the procedure to secure a 'get' is within the equity powers of this court." The court's ruling directly contradicts a 1969 ruling of the United States Supreme Court prohibiting the civil courts from ever again resolving disputes on the basis of interpretation of religious doctrine or polity. Burns v. Burns, 538 A.2d 438 (N.J. Super. 1987)

Legal Developments

Court Addressed Zoning Restrictions on Church Construction in Residential Areas

A local Jehovah's Witnesses congregation purchased a 59-acre tract and applied for approval to construct

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Zoning

A local Jehovah's Witnesses congregation purchased a 59-acre tract and applied for approval to construct a 1500-seat hall in a rural township having a population of 1200. Churches were permitted uses in the township at the time of the application. However, while the application was pending, the township amended its zoning ordinance by placing the entire 59-acre tract in an "R-2" zone and then excluding churches as a permitted use in such zones.

The congregation sued, claiming that the zoning amendments were "arbitrary, capricious, discriminatory, and unlawful," and that they constituted "unlawful discrimination directed against the religious beliefs" of Jehovah's Witnesses and that they violated the constitutional guaranty of religious freedom. A trial court agreed, ruling that "the total exclusion of churches and places of worship from residential districts violates the guaranty of freedom of religion as provided for by the New Jersey Constitution."

However, a state appeals court recently reversed this ruling on the ground that it was not supported by sufficient evidence. The appeals court, noting that "the exclusion of churches from residential districts … [is] one of the most common church-zoning issues facing the courts," concluded that "there is one common theme in the cases and academic comment—the court must make a thorough exploration and a careful evaluation of the facts bearing on the competing religious and governmental interests."

Facts that must be considered in such a determination include: (1) whether the activity allegedly burdened by the zoning ordinance is in fact religious; (2) whether the zoning ordinance imposes a significant burden on religious practice; (3) what alternative locations are reasonably available to the religious organization and what zoning alternatives are available to reasonably accommodate the organization; and (4) what interest does the government have in establishing and maintaining the zoning plan. With respect to the last factor, the court noted that "there is a substantial difference between a church conducted in the humble residence of its minister and … plopping down Canterbury Cathedral in the middle of bucolic Somerset County …."

Since the trial court had evaluated none of these factors in reaching its decision, the appeals court remanded the case back for further review. Jehovah's Witnesses Assembly Hall v. Woolwich Township, 537 A.2d 1336 (N.J. Super. 1988)

Legal Developments

Court Ruled City Violated the Guaranty of Religion Clause by Changing Zoning Laws Prohibiting Jehovah’s Witness Building a Church

A Jehovah's Witness congregation applied to city officials for approval to build a church in

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Church Property, Freedom of Religion, Zoning

A Jehovah's Witness congregation applied to city officials for approval to build a church in an area zoned for manufacturing use. The city then rezoned much of the community, changed the area where the church was to be built from a manufacturing to a residential district, and then prohibited the building of churches in all residential districts.

The congregation challenged the city's action as a violation of the constitutional guaranty of religious freedom. The court agreed: "Municipalities have the power to zone their districts, but to exclude churches and other places of worship from the very areas (residential communities) that they draw their members from and relocate them to a less desirable zone of the township … offends the very essence of … the New Jersey Constitution." Jehovah's Witnesses v. Woolrich Township, 532 A.2d 276 (N.J. Super. 1987)

Legal Developments

Civil Court Cannot Resolve Clergy Tenure

Is a civil court the proper forum to resolve a controversy between a rabbi and

Richard R. Hammar, Attorney, CPA

Bio

State: New Jersey
Categories: Clergy - Removal

Is a civil court the proper forum to resolve a controversy between a rabbi and a synagogue over his continued tenure?

No, concluded a New Jersey appeals court. The synagogue had sought a court order barring the rabbi from any further service, citing his lack of spiritual leadership, disruption of religious services, and the dissension and division he had created within the congregation. The court, noting the "pervasive religious overtones" of the case, ruled that any resolution of the case would require an inquiry into religious tenets and polity, and that civil courts are "an inappropriate forum to resolve such issues." Elmora Hebrew Congregation v. Fishman, 522 A.2d 497 (N.J. Super. 1987).