Oregon

Legal Developments

Oregon Federal Court Affirms Ministerial Exception’s Application to State Law

This noteworthy decision also shows how churches should assert ministerial exception as a defense in employment cases.

Richard R. Hammar, Attorney, CPA
Bio

Key Point 8-10.01 The civil courts have consistently ruled that the First Amendment prevents them from applying employment laws to the relationship between a church and a minister.

A federal court in Oregon ruled the “ministerial exception” prevented it from resolving a discrimination claim by an applicant for a pastoral position in a church.

The decision reveals three important ideas.

1) It shows how this powerful legal doctrine directly applies to state anti-discrimination employment laws.

2) It shows how it applies to ministers and religious teachers, regardless of whether the individual is a prospective hire of the church’s, employed by the church, or no longer employed by the church.

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3) It shows how churches should assert the ministerial exception as an affirmative defense when dealing with a lawsuit related to ministers and employment.

An open worship pastor position

In 2020, a church posted a job for “Pastor of Worship and the Arts” (“Worship Pastor”). The qualifications for the position were:
  • “A Pastor’s heart. (We) are not merely looking for a musician, but someone who will actively pastor our community.
  • Comfort and familiarity with technology and its application into worship services.
  • Ability to utilize ProPresenter in the planning and implementation of worship services.
  • Knowledgeable in multicultural communities and communication.
  • A clear multicultural understanding and philosophy of worship that will translate to powerful multicultural worship experiences.
  • Ability to lead musical worship, ideally with ability and experience in one or more instruments traditionally utilized in a worship setting.”

“Plaintiff” claimed that he possessed all the qualifications for the position, including “formal education in theology, psychology, and music” and significant experience as a “Worship Leader and Pastor, Preacher, and worship song writer.”

However, he was not selected.

The Plaintiff applied for the position two more times over the next few years. Again, he was not selected.

He said this was because he was not a native English speaker and was not familiar with American culture. The Plaintiff sued the church, claiming the church did not hire him because he was not a native English speaker and was unfamiliar with American culture.

He claimed discrimination based on national origin in violation of Title VII of the Civil Rights Act of 1964.

Church claims ministerial exception

The church moved for dismissal on the ground that the ministerial exception doctrine bars civil courts from resolving employment disputes between churches and clergy.

The federal court agreed.

The ministerial exception . . . in the employment context, allows religious institutions the “authority to select, supervise, and if necessary, remove a minister without interference by secular authorities.” The ministerial exception “insulates a religious organization’s employment decisions regarding its ministers from judicial scrutiny under Title VII.”

The court acknowledged that “there is no rigid formula for deciding when an employee qualifies as a minister.” But the inquiry focuses on “the actual functions of the employees said to be within the exception,” and considers “whether they are ordained, teach religion to other members, or perform duties that are primarily religious in nature.” (per Bohnert v. Roman Catholic Archbishop, 136 F. Supp. 3d 1094 (N.D. Cal. 2015).

The court concluded:

Plaintiff applied for the position of “Worship Pastor.” The qualifications included “a Pastor’s heart,” actively “pastoring” to the community, an understanding of the “philosophy of worship” and the “ability to lead musical worship.” These allegations establish that the job and duties at issue hold “ecclesiastical significance” and are similar to the “paradigmatic application of the ministerial exception to the employment of an ordained minister… .”

The Supreme Court has emphasized that when analyzing whether an employee qualifies as a minister, “what matters, at bottom, is what an employee does.” (per Our Lady of Guadalupe School v. Morrissey-Berru, 140 S.Ct. 2049 (2020)).

The allegations show that the “Worship Pastor” is meant to engage in “important religious functions” including leading others in worship and pastoring to the community… . The Court finds [the church] sought to hire for a role that falls under the ministerial exception. Accordingly, [the church] has “the authority to select and control who will minister to the faithful… .” The court dismisses Plaintiff’s Title VII claims as barred under the ministerial exception.

What this means for churches

Now let’s expand upon the three important ideas offered at the outset of this article.

1. The idea that the powerful ministerial exception doctrine can apply to state-level anti-discrimination employment laws

The Plaintiff asserted an appeal that the ministerial exception under Title VII only applies to federal cases, not state cases like this one. The court rejected this position, noting:

Plaintiff argues the ministerial exception does not apply to his state law claims because [the church has] not provided a case that applies the exception to Oregon’s anti-discrimination laws. The ministerial exception derives from Supreme Court case law interpreting the First Amendment to the United States Constitution. It thus applies to state law claims… . [The exception is] applicable to any state law cause of action that would otherwise impinge on the church’s prerogative to choose its ministers or to exercise its religious beliefs in the context of employing its ministers. Thus, any claim … that would require the church to employ [a minister] would interfere with the church’s constitutionally protected choice of its ministers, and thereby “would run afoul of the Free Exercise Clause.” (per Puri v. Khalaa, 844 F.3d 1152 (9th Cir. 2017)).

2. The idea that the ministerial exception can apply to ministers and religious teachers, regardless of whether the individual is a prospective hire, employed, or no longer employed by the church.

Previous cases regarding the ministerial exception usually involve ministers—or individuals who fulfill important religious duties through their roles—who are either employed by a church or recently dismissed by a church. As this case illustrates, the legal doctrine also applies to individuals during the application and selection phases for open roles.

3. The idea that churches can use the ministerial exception as an affirmative defense

The court concluded that the ministerial exception is an affirmative defense.

Generally, affirmative defenses to a lawsuit must be pleaded in a defendant’s response to a lawsuit or they are waived.

The ministerial exception’s status as an affirmative defense is not known by some attorneys who deal infrequently with church litigation. Therefore, it would be wise for church leaders to share this important point with the church’s attorney in any lawsuit in which the church will plead the ministerial exception.

A failure to do so may result in a loss of the exception.

Chris v. Kang, 2022 WL 2967455 (D. Ore. 2022).

Legal Developments

Clerical Errors Cost Church Its Tax Exemption

As this Oregon case shows, even the smallest clerical errors can derail a church’s tax status.

Richard R. Hammar, Attorney, CPA
Bio

Key point. Clerical errors can derail a church’s tax exemption and application and since most states do not automatically exempt from churches from property taxation, an error-free and timely application is crucial for getting and keeping that tax-free status.

Summary: The Oregon Tax Court ruled that a church’s property did not qualify for exemption from tax because of defects in the church’s application for exemption.

Church had two chances to retain tax exemption

A church failed to timely respond to a county tax assessor’s multiple, written requests for information related to the church’s March 2020 application for a property tax exemption on its leased space.

After sending two letters regarding the incomplete application, the tax assessor sent another letter on November 24, 2020, asking the church:
  • To clarify the years for which the application was being sought.
  • To provide square footage of the church’s lease.
  • To provide a contact email address for the church.

The assessor gave the church a final deadline of December 9, 2020, to respond. The church failed to do so, and the county denied the church’s application on December 22, 2020.

The church appealed the denial to the Oregon Tax Court, claiming that church services, postal mail activities, and email communications all were affected by the COVID-19 pandemic during 2020.

Clerical errors derailed the process

The Oregon Tax Court began its opinion by recognizing the exemption from property taxation available to religious organizations in the state. The court also noted the application process a religious organization must follow to receive an exemption.

The court then noted that properties that are leased can be eligible for an exemption if certain requirements are met:

The application for exemption must provide … a complete description of the property claimed exempt; facts regarding the use of the property proving exempt purposes; a copy of the lease; and “any other information required by the claim form.” The claim form asks the question ‘is any portion of the property you lease used by others?” Next, the form asks, “if yes, what is the square footage of the area used by others?” Only the portion of the property which is “exclusively occupied and used” for an exempt purpose is eligible for exemption. … A county may request additional documentation or information if a taxpayer’s application is incomplete (emphasis added).

Clerical errors could have been ‘easily fixed’

The court concluded:

The court understands the hardships surrounding COVID-19 during 2020.

Employees in many businesses, as well as this court and many county offices, were limited in working from the office during 2020.

This likely was the cause of the county’s delay in asking the church for more information.

However [the pastor] received actual notice of the county’s request for information to correct the application’s defects in November 2020 … . The application could have been easily fixed, but for unknown reasons, the church did not do so.

Even still, the church could have filed a late application for exemption until December 31, 2020, and did not do so. The result here is unfortunate, but it is correct under the law… (emphasis added).

[The pastor] filed a timely application for a property tax exemption. The application was defective, and the county gave proper notice of the defects and requested [the church] to provide missing information. The church did not provide the missing information, and thus the county was correct in denying the exemption for the 2020-21 tax year.

What this means for churches

There are many reasons why church property may not qualify for exemption under state law, including:
  • Failure to file an application. State law requires churches to file an application for exemption. Churches should not assume they are automatically exempt.
  • Defects in a church’s application for exemption.
  • A church’s property does not satisfy all the conditions for exemption.
  • A church lost its property tax exemption because of commercial or rental activities.
  • Failure to renew the exemption if required by state law.

Church leaders should not assume that church property is exempt from tax, but instead should periodically confirm the exemption. This is a simple task that can be performed in a few minutes online.

Bible Believers Church v. Washington County Assessor, 2022 WL 1447388 (Or. App. 2022).

Legal Developments

Clarifying When Churches Are and Aren’t Liable for the Actions of Volunteers

Church Law and Tax Report Clarifying When Churches Are and Aren’t Liable for the Actions

Church Law and Tax Report

Clarifying When Churches Are and Aren’t Liable for the Actions of Volunteers

Key point 10-02. The doctrine of respondeat superior imposes vicarious liability on employers for the negligent acts of their employees committed within the scope of their employment.

Key point 10-18.2. Most courts have refused to hold denominational agencies liable for the acts of affiliated ministers and churches, either because of First Amendment considerations or because the relationship between the denominational agency and affiliated church or minister is too remote to support liability.

Key point 10-17.1. Punitive damages are monetary damages awarded by a jury “in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer.” They are awarded when a person’s conduct is reprehensible and outrageous. Most church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents an uninsured risk.

A federal district court in Oregon ruled that national and regional denominational agencies were not liable for the sexual molestation of a minor by a volunteer youth worker in an affiliated church. In 1993, a church assigned a 14-year-old girl (the “victim”) to a “small group” overseen by a lay volunteer (“Carl”). The victim claims that at this time Carl began a process of “grooming” her that culminated in sexual abuse. The grooming behavior included paying special attention to her and telling her that he had a special bond with her, inviting her to his home and spending long periods of time alone with her, soliciting her opinion as to questions of theology and pedagogy, undertaking to provide her with Christian counseling, and cultivating the gratitude and loyalty of her parents.

Beginning the following year, when the victim was 15 years old, he began kissing and fondling her, and within a year was having sexual intercourse with her. The two engaged in sex acts as frequently as three times per week, in cars, in the victim’s home, in Carl’s home, and at church events. These acts continued for a period of years, until the victim was 20 years old.

There is evidence that other church small group leaders developed suspicions that the victim and Carl were involved in a sexual relationship during this period, and that one such small group leader reported his suspicions to two church leaders, but no investigation followed and no action was taken.

The church the victim attended is affiliated with the Evangelical Lutheran Church of America (ELCA). The ELCA’s governing documents state it is organized into three expressions: the ELCA national organization, the synods or assemblies of congregations, and the individual congregations or churches that make up the synods. Eventually the victim terminated her relationship with Carl, and sued her church, a local synod, and the ELCA on several grounds, including negligent supervision and negligent retention. She sought damages in the amount of $6 million for pain and suffering, and $10 million for punitive damages.

Church Polity

The court made the following findings regarding church polity in the ELCA:

• The ELCA constitution sets forth certain terms and conditions with which the synods and congregations must comply in order to remain within the national denomination.

• The ELCA constitution specifies that affiliated churches are subject to the “oversight, direction, control, and discipline” of the ELCA and regional synod.

• The ELCA constitution specifies that each church of the denomination is required to be run by an ordained pastor, and that every such pastor must be selected and hired from a “roster” of “approved” pastors maintained by ELCA.

• The ELCA maintains similar “rosters” of approved persons for some lay leadership positions within congregations.

• Churches may select “non-rostered” lay leaders for positions within certain categories, including the youth leadership positions filled by Carl (a “non-rostered” lay leader).

• Each congregation is required to adopt the ELCA’s model constitution, and adhere to a specific set of theological doctrines.

• If a congregation were to hire a lay leader who promulgated a different theological doctrine to persons in his or her charge, ELCA and synod would treat such hiring as a violation of the ELCA constitution.

• Congregations are under the direct control of the synods in connection with all doctrinal and theological matters, and synods have the power to discipline congregations for deviations from the approved ECLA theology.

• Under the ELCA constitution, “youth ministry” is a part of the “evangelical mission” of all three “expressions” of the denomination; responsibility for fostering youth organizations is entrusted by ELCA to the synods; and the Oregon Synod relies upon the congregations within its territory to fulfill the denomination’s youth-ministry mission.

• In the 1980s and 1990s, the local church operated a youth ministry it referred to as the “Great Commission Subcommittee” or “GCS.” The express purpose of GCS was to “share” ECLA theology with young persons, and there is evidence that church leaders viewed the program as a vehicle both for theological education and for recruitment of youth into the denomination. Children involved in the GCS program were divided into “small groups” of approximately ten children each, and each such group was assigned to a “small group leader.” Small group leader responsibilities included conducting bible-study meetings; modeling “Christian leadership;” mentoring children within the group and “presenting the Gospel” to them; conducting group activities; and providing personal attention to the needs of the children within the group.

• In 1993, Carl was elected to chairman of his church’s youth committee, at which time he also began serving as a GCS small group leader.

Respondeat Superior

The victim claimed that the church defendants were liable for Carl’s acts on the basis of respondeat superior. The court noted that under the respondeat superior doctrine, “an employer is liable for an employee’s acts when the employee acts within the scope of employment.” It further observed: “Three requirements must be met to conclude that an employee was acting within the scope of employment. These requirements traditionally have been stated as: (1) whether the act occurred substantially within the time and space limits authorized by the employment; (2) whether the employee was motivated, at least partially, by a purpose to serve the employer; and (3) whether the act is of a kind which the employee was hired to perform.”

The court concluded that neither the ELCA nor Oregon Synod could be liable for Carl’s acts on the basis of respondeat superior:

I find that neither entity had the requisite right to control at any material time … . It is clear that ELCA and the synod retained and from time to time actually exercised the right to control the content of the theological and ecclesiastical teachings of the servants or employees of the church. By contrast, there is no evidence that either ELCA or the synod ever asserted or attempted to exercise any right to control the manner or place in which those teachings were carried out, or in any other sense to control Carl’s actions in connection with his provision of volunteer services to the church. Moreover, although it is reasonable to infer … that ELCA and/or the synod had, in consequence of those entities’ authority to enforce the “covenant” of the ELCA constitution (including through expulsion of congregations that may deviate from approved doctrines and practices), the ability as a practical matter to exert further and broader-reaching influence over congregational supervision and oversight of lay volunteers, such de facto influence (or potential influence) over the church’s relationship with Carl is insufficient to satisfy the right-to-control element of the respondeat superior analysis, which requires the right to control his actions in the course of his provision of services. I therefore agree with the parties that ELCA and the Synod cannot be liable in connection with Carl’s conduct on a respondeat superior theory.

General and Apparent Agency

The court rejected the victim’s claim that the church defendants were liable for Carl’s acts on the basis of agency. The court noted that an agency relationship results from “the manifestation of consent by one person to another that the other shall act on behalf and subject to his control, and consent by the other so to act.” An agency relationship can arise “either from actual consent (express or implied) or from the appearance of such consent.” In either case, “the principal is bound by or otherwise responsible for the actual or apparent agent’s acts only if the acts are within the scope of what the agent is actually or apparently authorized to do.”

“Apparent authority” to do any particular act “can be created only by some conduct of the principal which, when reasonably interpreted, causes a third party to believe that the principal consents to have the apparent agent act for him on that matter. There accordingly are two keys to the analysis: (1) the principal’s representations; and (2) a third party’s reasonable reliance on those representations.” The court further explained apparent agency as follows:

As to the first requirement—the representation by a putative principal—an agent’s actions, standing alone and without some action by the principal, will not give rise to apparent authority. Rather, the principal must take some affirmative step in creating the appearance of authority, one that the principal either intended to cause or “should realize” likely would cause a third party to believe that the putative agent has authority to act on the principal’s behalf. The principal’s words, conduct, or other representation need not be witnessed directly by or made directly to the third party, but the representation of authority must be traceable to the principal for the principal to be liable on a theory of apparent authority.

As to the second key element—reliance—the third party, in deciding to deal with the apparent agent, must in fact rely on the principal’s representation, and that reliance must be objectively reasonable. In assessing the reasonableness of the reliance, the analysis is influenced by what is customary and usual for certain positions or within certain professions.

The court stressed that a principal “is vicariously liable for an act of its nonemployee agent only if the principal ‘intended’ or ‘authorized the result or the manner of performance’ of that act.” It concluded:

Although a principal can be vicariously liable for the negligence of an agent who is not an employee, such liability arises only if the principal actually or apparently had a right of control over the agent’s injury-causing actions “similar to the control that an employer exercises over an employee.” The fact that a nonemployee is actually or apparently authorized in some general way to act on a principal’s behalf is not a sufficient basis to impose vicarious liability on the principal for the actual or apparent agent’s tortious conduct. Rather, to impose vicarious liability for a nonemployee agent’s physical conduct, the principal must have—or appear to have—a right to control how the act is performed—that is, “the physical details of the manner of performance”—that is characteristic of an employee-employer relationship. (emphasis in original)

The court concluded that it was possible that Carl “was in an agency relationship with both ELCA and the synod.” It observed:

From the evidence discussed above—including in particular evidence that, under the ELCA national organization’s constitution, “youth ministry” is a part of the “evangelical mission” of all three “expressions” of the ELCA denomination, that responsibility for fostering youth organizations is entrusted by ELCA to the regional synods, and that the Oregon Synod relies upon the congregations within its territory to fulfill the denomination’s youth-ministry mission—a finder of fact could reasonably conclude that the church was the synod’s agent for purposes of fulfilling the ELCA youth-ministry mandate, and that the synod was ELCA’s agent for those same purposes. Similarly, the evidence of record tends to establish that the church retained Carl on a volunteer basis to act as its agent for purposes of performing GCS small group leader and youth ministry services. The Oregon courts have consistently held that an agent of a second agent is an agent of the second agent’s principal, so long as the first agent is charged with assisting the second agent in performing its duties to the ultimate principal. Carl’s undisputed agency relationship with the church is thus imputable to both the synod and to ELCA.

However, the court stressed that “the fatal flaw” in the victim’s agency theory

lies not in her failure to establish that Carl can properly be characterized as the agent of each of those entities for material purposes, but rather in her failure to adduce evidence from which a jury could reasonably conclude that either ELCA or the synod had any right to control the physical details of the performance of Carl’s volunteer duties. ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.

Punitive Damages

The victim’s lawsuit asked for $10 million in punitive damages. The court determined that punitive damages were not available. Punitive damages are damages that can be assessed against a defendant for reckless or intentional acts. They are designed to both punish and deter. They generally are not covered by liability insurance policies as a matter of public policy.

Can punitive damages be assessed against a principal for the intentional or reckless acts of an agent? Yes, the court concluded, but only if the agent’s conduct giving rise to exposure to punitive damages occurred within the scope of the agent’s agency. It concluded:

While [the victim] takes the position here that the abuse she suffered was caused by or resulted from conduct undertaken within the scope of Carl’s duties to the congregation, it is emphatically not the case that any evidence of record suggests that the congregation, ELCA, or the synod intended or authorized the tortious abuse itself, or indeed that any of those entities should have understood that sexual abuse was likely to result from Carl’s provision of youth-ministry services. In the absence of any such evidence, imposition of vicarious punitive damages on the congregation, ELCA, or the synod would not have the effect of deterring further such misconduct by any agent thereof or of punishing a principal for authorizing an agent’s torts. For that reason, and because no Oregon court has ever suggested that a master could be vicariously liable for punitive damages on the basis of intentional conduct by the master’s servant of a kind the servant was not hired or instructed to perform, I recommend that the victim’s prayer for punitive damages be stricken to the extent it seeks award of punitive damages against ELCA, the Synod, and/or the congregation.

What This Means For Churches:

Most incidents of child abuse in churches are committed by volunteers. This is not surprising. Consider the numbers. There are far more volunteers than paid employees who work with minors in churches, and so it is more likely that volunteers will abuse children than employees.

Many persons who were molested as minors by a church volunteer sue the local church, and denominational agencies with which the church is affiliated, on the basis of agency. But as this case demonstrates, this is often a difficult, if not impossible, task. As a result, this case will be of assistance to churches and denominational agencies in the defense of sexual abuse claims involving volunteers. The key points are summarized below.

1. respondeat superior
The court dismissed the victim’s claim that the church defendants were liable for Carl’s acts on the basis of respondeat superior. As the court noted, liability on this basis requires that an employee’s wrongful acts were committed in the “scope of employment.” The court rejected the victim’s argument that the authority exerted by the ELCA and synod over the theological teachings of the local church the victim attended was sufficient “control” to make the ELCA and synod liable for Carl’s acts. It noted that there was no evidence that either the ELCA or synod ever “asserted or attempted to exercise any right to control the manner or place in which those teachings were carried out, or in any other sense to control Carl’s actions in connection with his provision of volunteer services to the church.”

2. agency
The doctrine of agency is often cited as a basis of liability for churches and denominational agencies in cases of child abuse. Victims may claim that the offender is an agent of the church and a denominational agency, or that the church is an agent of a parent denomination.

The court concluded that Carl was an agent of the church, synod, and ELCA based on provisions in the ELCA constitution. But, this did not make the church defendants liable for his wrongful acts because he acted as their agent “only for purposes of performing GCS small group leader and youth ministry services.” The court concluded:

ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.

This part of the court’s decision is important, for two reasons. First, it correctly distinguishes between ecclesiastical and temporal control. While a denominational agency may exert some level of control over ecclesiastical functions of affiliated churches or clergy, this limited authority is not sufficient to make the agency liable for the temporal or non-ecclesiastical acts. Second, this aspect of the court’s decision suggests that denominational leaders review their governing documents to ensure that they contain no language that could inadvertently convert local church employees and volunteers into general agents of the denomination.

The most significant part of the court’s decision was that while it recognized that Carl may have been an agent (express or apparent) of his church, synod, and the ELCA, this did not establish that those entities were liable for his wrongful acts since the agency relationship failed to confer upon him the right to control the manner in which he performed his duties. The “fatal flaw” in the victim’s agency theory was

her failure to adduce evidence from which a jury could reasonably conclude that either ELCA or the synod had any right to control the physical details of the performance of Carl’s volunteer duties. ELCA and the synod retained the express rights to control the content of his theological and ecclesiastical teachings and to impose discipline for any deviation from ELCA-approved doctrine, but the record contains no evidence tending to suggest that either had the right to control the manner of his service. Because such control over the physical details of an agent’s service is a sine qua non of vicarious principal liability, I agree with ELCA and the synod that neither of those entities can be held liable for Carl’s complained-of intentional torts on a theory of general agency liability.”

3. punitive damages
The court dismissed the victim’s $10 million punitive damages claim on the ground that punitive damages can be assessed against a principal for the intentional or reckless acts of an agent “only if the agent’s conduct giving rise to exposure to punitive damages occurred within the scope of the agent’s agency.” That is, the church defendants could not be liable for punitive damages based on the intentional conduct of its agent that he “was not hired or instructed to perform.” This reasoning makes it more difficult for churches to be assessed punitive damages in sexual misconduct cases since the perpetrator obviously was not hired or directed to perform such wrongful acts. This is significant because punitive damages generally are not a covered loss under general liability insurance policies. Prasnikar v. Our Savior’s Lutheran Church, 2014 WL 7499377 (D. Or. 2014).

Legal Developments

Failure to File for Property Tax Exemption

Property tax exemptions can’t be granted retroactively.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Failure to File for Property Tax Exemption

Property tax exemptions can’t be granted retroactively.

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

Key point. Failure to comply with the legal requirements for obtaining a tax exemption for newly acquired church property may lead to loss of exemption.

An Oregon court ruled that a church was not entitled to a property tax exemption because of its failure to file a timely exemption application, despite the fact that its failure to file was due to the fact that the assessor sent the application to the wrong address. In 2007 a church sold its property to another church (the “church”). The warranty deed, which was prepared by the title company, incorrectly listed the church’s address. When the property was conveyed in 2007, it was exempt from taxation based on the prior owner’s use of the property. The church failed to file an exemption application at the time of the change of ownership in 2007. The use of the property did not change when ownership changed; the property was used for religious services by both the old and the new owners.

On November 20, 2007, the tax assessor mailed a “Notification of Status Change” to the church for the 2008-09 tax year, which was sent to the incorrect address listed on the warranty deed. The notice stated: “An application is enclosed with this notice for you to file for a tax exemption on the above referenced location.” The church did not receive the November 20, 2007, notice. The notice was returned unopened to the assessor by the post office with the notation “NMR,” (no mail receptacle) on the envelope. The assessor put the unopened notice in the church’s file, and did not search its records or other sources to locate a different address for the church.

On December 3, 2010, the church filed an application for property tax exemption for the subject property for tax years 2008- 09 and 2009-10. The assessor denied this application for both tax years because it was not timely filed. The 2008-09 and 2009-10 tax statements for the property were also sent to the church at the address listed on the warranty deed. The church did not receive those tax statements. The 2008-09 and 2009-10 statements were returned unopened to the assessor by the post office. No payments were made when the taxes became due.

In November 2010, the church discovered that the property was being taxed. The pastor spoke with the assessor’s office regarding the exemption application and was “instructed by the assessor’s office to file two separate requests for exemption for late filing’.” The church immediately filed applications for exemption. Its application for a property tax exemption was granted for tax year 2010-11 and for future years, but its applications for tax years 2008-09 and 2009-10 were denied on the basis that they were not timely filed. The church appealed.

A state court began its opinion by quoting the exemption statute: “Before any real or personal property may be exempted from taxation … for any tax year, the institution or organization claiming the exemption shall file with the county assessor, on or before April 1 of the assessment year, a statement … listing all real or personal property claimed to be exempt and showing the purpose for which such property is used.”

An exemption application may be filed as late as December 31 of the assessment year for which an exemption is desired upon payment of a late filing fee. The exemption statute does not permit an exemption to be retroactively granted, subject to one exception: “The only time an exemption may be retroactively granted is when there is an addition or new improvements to an already exempt property.” The court reasoned that “had the legislature chosen to make exemption requests retroactive it would have expressly stated its intent as it did in [the case of additions and new improvements].”

The court concluded that the last date for filing an exemption application for the 2008-09 tax year was December 31, 2008, and December 31, 2009, for the 2009- 10 tax year. “The church did not file an application for exemption for tax years 2008-09 and 2009-10 until December 3, 2010. Accordingly, it failed to timely file exemption applications for those years.”

Improper Address

The church asserted that it did not receive notice of the exemption status change or the tax statements because the assessor sent those notices to an incorrect address, and accordingly it did not discover that the property was being taxed until November or early December 2010. The church argued that the assessor was obligated to determine its true and correct address through a search of its internal records or of other available sources (including the Internet), once it was put on notice that the church’s address of record was incorrect. The church sought a property tax exemption based on the assessor’s failure to send notices to the correct address.

“The only time an exemption may be retroactively granted is when there is an addition or new improvements to an already exempt property.”

In rejecting the church’s entitlement to exemption based on the assessor’s use of an incorrect address, the court observed:

While it is definitely a good idea for the assessor to examine its returned mail, arguing about whether the assessor might have found the [taxpayer] earlier overlooks the point that the assessor ought not to have had to look for the [taxpayer] at all. It is not the assessor’s obligation to search for the taxpayer. Instead, it is the taxpayer’s responsibility to make sure [the assessor’s] records are correct. The legislature has placed the burden on taxpayers to notify county assessors of their true and correct address. The assessor did not have a duty to locate any other address for the church either by searching its internal records or by searching some other source.

Due Process

The church also argued that the imposition of tax violated the constitutional requirement of due process because it was not aware that it needed to file for an exemption as it assumed that the exempt status of the subject property would continue because the use did not change. The court disagreed: “[The statute] states that the tax is valid even if the taxpayer does not receive the tax statement. The church assumed that the exempt status would continue because the use of the subject property did not change. However, it was required by [law] to file an exemption application when the ownership of the subject property changed; when no application was filed, the property became taxable. The court is without authority to waive the church’s property taxes based on its lack of knowledge of the application requirement.”

The court concluded:

[The property tax exemption statute] requires that an application for exemption be filed when the ownership of exempt property changes. The exemption application may be filed as late as December 31 of the assessment year. The church’s 2008-09 and 2009-10 exemption applications were not filed until December 3, 2010, and were not, therefore, timely filed. The church claims that, had it known the property was subject to taxation, it would have quickly remedied the situation, as it did for the 2010-11 tax year when it discovered that an exemption application had not been filed. Typically, the error would be revealed upon receipt of a tax statement in the fall. Unfortunately, the church never received the tax statements for the 2008-09 and 2009-10 tax years. The situation is unfortunate and regrettable.

What This Means For Churches:

This case illustrates an important point. Whenever a church acquires property it should review the applicable requirements under state law for obtaining a property tax exemption, be sure that it strictly complies with these requirements, and ensure that the warranty deed and assessor’s office records contain the correct address for the church. Byzantine Catholic Bishop v. Assessor, 2011 WL 4444186 (Or. Tax 2011).

This Recent Development first appeared in Church Law and Tax Report, March/April 2012.

Legal Developments

Pastor Sues Former Church for Defamation

Some courts will resolve certain employment disputes between churches and clergy.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Pastor Sues Former Church for Defamation

Some courts will resolve certain employment disputes between churches and clergy.

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

Key point 4-02.03. A number of defenses are available to one accused of defamation. These include truth, statements made in the course of judicial proceedings, consent, and self-defense. In addition, statements made to church members about a matter of common interest to members are protected by a “qualified privilege,” meaning that they cannot be defamatory unless they are made with malice. In this context, malice means that the person making the statements knew that they were false or made them with a reckless disregard as to their truth or falsity. This privilege will not apply if the statements are made to nonmembers.

An Oregon court ruled that the First Amendment did not prevent it from resolving a defamation claim brought by a pastor against his former church and denominational officers. A church laid off an associate pastor (the “plaintiff”) due to financial difficulties. A denominational officer offered the plaintiff a position as pastor of a church in a nearby small town. The plaintiff was unenthusiastic about this position and explained that he had concerns about the salary, health insurance coverage, and lack of opportunities to supplement his income in such a small town. The denominational officer offered the plaintiff a monthly salary of $1,500; a subsidy of an additional $1,100 per month for plaintiff’s first three months (totaling $3,300) to match the salary that the outgoing pastor had received; and health care coverage for up to six months.

The plaintiff eventually accepted the position, but emphasized to denominational officers that he wished to be considered an interim pastor. A denominational officer sent the plaintiff a letter stating that he would send him a check for $3,300 to subsidize his first three months of salary, and that these checks would not have to be repaid. A short time later, the plaintiff, with the knowledge of the church board, withdrew $3,000 from the church’s bank account. He discussed the transaction with the board, explaining that the money had been earmarked for him as a gift by a denominational officer. The board accepted that explanation and issued the check in accordance with its normal procedures, including having two individuals (in this instance, plaintiff and a board member) sign the check. The expenditure was further documented in expense reports that were sent to a denominational office. The plaintiff deposited the check into a personal checking account and wrote four checks against that amount to cover health insurance premiums.

A few months later the pastor informed the congregation that he would be leaving. As part of this transition a denominational officer reviewed the church’s accounting records. The church bookkeeper asked the denominational officer to take a look at the $3,000 withdrawal from the church’s bank account. The officer looked at the transaction, and later informed the pastor that he was being charged with “misappropriation of church funds” as a result of the withdrawal since “that money was intended for the subsidy of the church for your salary for the first three months of employment there and not to be taken over and above your salary.” The pastor expressed shock at the accusation. He elected not to pay back the $3,000 because he believed that, by doing so, he would be admitting that he was guilty of misconduct.

A denominational officer drafted a letter that he later read aloud to the congregation. He later testified that he wanted to inform the congregation about the circumstances of plaintiff’s departure because it “had a right to know what was happening” and because he wanted to avoid speculation and rumors regarding plaintiff and the $3,000 transaction. In the letter, the officer explained that “based on a review of the church books and board minutes, it is now evident that there has been, to some extent, a financial misappropriation by [the plaintiff].” Another denominational officer sent an e-mail to his superior’s secretary stating that the plaintiff “has already demonstrated a willingness to lie and steal, and to purposely sow discord and the division.”

After resigning his position, the plaintiff was unable to find employment as a pastor. He sold his home and moved into a trailer with his wife.

The plaintiff sued his former church, along with the denominational officer who composed the letter that was read to the congregation and the other officer who sent the e-mail in which he referred to the plaintiff’s “willingness to lie and steal.” He asserted that these communications defamed him.

A jury returned a verdict in favor of the plaintiff and awarded monetary damages. The trial judge issued a “judgment notwithstanding the verdict,” meaning that he overrode the jury’s decision because he concluded that the First Amendment guaranty of religious freedom deprived the court of jurisdiction to resolve an internal church dispute over the status of a pastor. The plaintiff appealed.

A state appeals court defined defamation as “a false statement that would subject the plaintiff to hatred, contempt or ridicule or tend to diminish the esteem, respect, goodwill or confidence in which [the plaintiff] is held or to excite adverse, derogatory or unpleasant feelings or opinions against [the plaintiff].”

Qualified Privilege

The defendants insisted that the letter and e-mail could not be defamatory since they were protected by a qualified privilege. The court noted that a qualified privilege generally “exists to protect statements made on a subject of mutual concern to the defendant and the persons to whom the statement was made.” Such statements generally cannot be defamatory (they are “privileged”). However, the privilege is not absolute. It is “qualified” in the sense that statements concerning matters of mutual concern may be defamatory if the person making them abused the privilege. Abuse occurs and the privilege is lost “if the publisher disbelieves or lacks reasonable grounds to believe that the defamatory statement is true, if the statement is made for purposes outside the scope of the privilege, if the statement is made to someone who is not reasonably believed to be necessary to accomplish the purpose of the privilege, or if the statement includes defamatory matter that is not reasonably believed to be necessary to accomplish the purpose of the privilege.”

The court acknowledged that the First Amendment guaranty of religious freedom “severely restricts the authority of civil courts to adjudicate disputes on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law,” and that the courts have understood this principle “to include church decisions involving the employment of ministers.”

However, “the First Amendment does not completely bar relief sought by a plaintiff against a church in a civil lawsuit.” The court “failed to understand how a defamatory statement accusing a pastor of theft is any more (or less) a matter of church discipline, faith, internal organization, or ecclesiastical rule, custom, or law than is a defamatory statement accusing a pastor of child molestation.” The court laid down the following two rules:

If the organization is of a religious character, and the alleged defamatory statements relate to the organization’s religious beliefs and practices and are of a kind that can only be classified as religious, then the statements are purely religious as a matter of law, and the [First Amendment] bars the plaintiff’s claim. In defamation law terms, those statements enjoy an absolute privilege.

If, however, the statements—although made by a religious organization—do not concern the religious beliefs and practices of the religious organization, or are made for a nonreligious purpose—that is, if they would not always and in every context be considered religious in nature—then the First Amendment does not necessarily prevent adjudication of the defamation claim, but the statements may nonetheless be qualifiedly privileged.

The court concluded that in this case, the allegedly defamatory statements—that the pastor had misappropriated money and had demonstrated a willingness to lie—would not “always and in every context” be religious in nature. As a result, even though the statements related to the plaintiff’s conduct as a pastor of the church, that “did not render those statements absolutely privileged as a matter of law under the [First Amendment]. Rather, that fact gives rise to a qualified privilege,” meaning that “the burden falls on the plaintiff to prove that the qualified privilege was abused—that is, that the defendant did not believe the statement to be true or lacked reasonable grounds for believing that it was true, or that the statement was made for a purpose outside the scope of the privilege.” The court concluded that “determining whether defendants had reasonable grounds for believing the defamatory statements or whether the statements were made for purposes outside the purpose of the privilege can be resolved without requiring the court to delve into the ecclesiastical concerns of the church.” As a result, the court rejected the defendants’ claim that the First Amendment provided an absolute bar to plaintiff’s defamation claim and ordered the jury verdict in favor of the plaintiff to be reinstated.

Application. This ruling deviates from the general rule that the First Amendment guaranty of religious freedom bars the civil courts from resolving employment disputes between churches and clergy. While many courts would reject this court’s reasoning, the case will provide ministers with a precedent, making a defamation claim more viable. Tubra v. Cooke, 225 P.3d 862 (Or. App. 2010).

This Recent Development first appeared in Church Law & Tax Report, March/April 2011.

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Legal Developments

Sexual Harassment: Church Could Be Liable for Youth Pastor’s Actions

A sexual harassment policy is essential for any church.

Richard R. Hammar, Attorney, CPA
Bio


Key Point 8-12.5. Sexual harassment is a form of sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. It consists of both "quid pro quo" harassment and "hostile environment" harassment. Religious organizations that are subject to Title VII are covered by this prohibition. An employer is automatically liable for supervisory employees' acts of harassment, but a defense is available to claims of hostile environment harassment if they have adopted a written harassment policy and an alleged victim fails to pursue remedies available under the policy. In some cases, an employer may be liable for acts of sexual harassment committed by nonsupervisory employees, and even nonemployees.

New study on sexual harassment in the Christian workplace: Learn about the extent of this troubling problem in churches and parachurch ministries.

A federal court in Oregon ruled that a church could be liable for a youth pastor's acts of sexual harassment. A church selected a recent high school graduate (the "plaintiff") to work as an intern in its youth ministry. The plaintiff worked under the direct supervision of the youth pastor (Pastor Ted). A few years later, the plaintiff was employed as Pastor Ted's assistant. At this time, the plaintiff signed a document acknowledging that she had received, reviewed and understood the church's Sexual Misconduct Policy. She did not receive any additional training or instruction on the policy.

The plaintiff began to view Pastor Ted as a mentor, close friend and father figure. After working together for four years, Pastor Ted informed the plaintiff that his feelings for her had developed into romantic feelings. This was the first time Pastor Ted made statements of this kind. Plaintiff was 22 years old. Pastor Ted continued to express these feelings in conversations, letters and emails. Plaintiff never responded in kind. The extent of the physical contact between the two was limited to hand-holding, hugging, and a kiss on plaintiff's forehead. Pastor Ted also told the plaintiff that if anyone found out about his advances, the plaintiff's job and future in youth ministry could be at risk.

The church's senior pastor met with Pastor Ted on three occasions to discuss the need to maintain appropriate boundaries in his relationship with the plaintiff.

The plaintiff did not report Pastor Ted's conduct to the church for another two years. The day that she, accompanied by her mother, informed the senior pastor what had happened, Pastor Ted was given the opportunity to resign. He agreed to do so. The plaintiff continued her employment with the church, but conflicts arose between her and the senior pastor. The plaintiff eventually quit working at the church, and sued the church for damages resulting from Pastor Ted's behavior. Specifically, she sought recovery based on emotional distress, "hostile environment" sexual harassment, and "quid pro quo" sexual harassment.

Emotional distress

The plaintiff claimed that Pastor Ted's "outrageous actions, in manipulating his confidential relationship" with her in order to coerce her into having sexual relations with him and threatening her with termination for disclosing this conduct, constituted "an extraordinary transgression of the bounds of socially tolerable conduct." The court disagreed: "Plaintiff and Pastor Ted, as employee and supervisor, had a relationship that potentially heightened the outrageousness of the conduct. Even so, the specific conduct plaintiff alleges is insufficient to establish a prima facie claim for emotional distress …. Pastor Ted's conduct, while clearly inappropriate for a supervisor, does not rise to the level of outrageousness required to support an emotional distress claim."

Sexual harassment (hostile work environment)

Title VII of the Civil Rights Act of 1964 prohibits covered employers from discriminating against any employee or applicant "with respect to compensation, terms, conditions or privileges of employment, because of such individual's sex." Sexual harassment is a form of sex discrimination prohibited by Title VII. The courts have identified two types of sexual harassment—"quid pro quo" and hostile environment. "Quid pro quo" harassment refers to conditioning employment opportunities on submission to a sexual or social relationship, while "hostile environment" harassment refers to the creation of an intimidating, hostile, or offensive working environment through unwelcome verbal or physical conduct of a sexual nature. In general, an employer is liable for a supervisory employee's hostile environment sexual harassment.

If a supervisor engages in hostile environment sexual harassment but takes no "tangible employment decision" against a victim, the employer may assert an "affirmative defense" to liability. This defense consists of two elements:

(i) The employer "exercised reasonable care to prevent and correct promptly any sexually harassing behavior." This generally means that the employer adopted a written sexual harassment policy that was communicated to employees, and that contains a complaint procedure.

(ii) The victim "unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise." This generally means that the victim failed to follow the complaint procedure described in the employer's sexual harassment policy.

The plaintiff insisted that Pastor Ted's behavior created a hostile work environment, and therefore, since he was the plaintiff's supervisor, the church was responsible for this form of sexual harassment. The church asked the court to dismiss this claim on the basis of the affirmative defense since it had exercised reasonable care to promptly correct the harassment and the plaintiff failed to avail herself of the "preventive or corrective opportunities" provided under the church's Sexual Misconduct Policy.

The court concluded that there was insufficient evidence to dismiss the hostile environment claim on the basis of the affirmative defense:

First, a genuine issue of material fact exists as to whether the church failed to exercise reasonable care or failed to correct Pastor Ted's sexually harassing behavior. The church saw fi t, on three separate occasions, to meet with Pastor Ted and caution him about boundaries in his relationship with the plaintiff. Second, a genuine issue of material fact exists as to whether the plaintiff acted unreasonably in failing to take advantage of the preventative and corrective mechanisms provided by the church. Pastor Ted insinuated that the plaintiff's job was at risk if she reported the harassment. Also, plaintiff reported the behavior after only four months, while she attempted to avoid the harm by managing her complex relationship with Pastor Ted.

Sexual harassment (quid pro quo)

The court noted that to establish a claim for quid pro quo sexual harassment under Title VII, a plaintiff must show that the harassment resulted in an adverse tangible employment action. In other words, that a supervisor "explicitly or implicitly conditioned a job, a job benefit or the absence of a job detriment, upon an employee's acceptance of sexual conduct." In addition, the plaintiff must show that a tangible employment action actually resulted—that either that plaintiff refused to comply with the demand and was punished, or that plaintiff complied with the demand and avoided punishment. If an adverse tangible employment action is taken, liability attaches to the employer.

The court dismissed the plaintiff's quid pro quo sexual harassment claim since "the plaintiff neither participated in sexual activity to avoid punishment nor was she punished for refusing to participate in sexual activity."

Application. It is essential for any church having employees to adopt a sexual harassment policy, since this will serve as a defense to liability for a supervisor's acts of "hostile environment" sexual harassment to the extent that a victim of such harassment does not follow the policy. A written sexual harassment policy does not insulate a church from all sexual harassment liability. It will not serve as a defense in any of these situations: (1) a "tangible employment decision" has been taken against an employee; (2) incidents of quid pro quo sexual harassment; or (3) a victim of a supervisor's hostile environment sexual harassment pursues his or her remedies under the employer's sexual harassment policy.

A sexual harassment policy also will reduce the likelihood of such claims because a properly drafted policy will provide employees and employers with a definition of sexual harassment. Unfortunately, sexual harassment is more likely to flourish where employees and employers lack a clear understanding of what it means. By clearly defining the term in a policy, employees will be effectively warned against behaviors, however "innocent," that cross the line. And, employers will be better informed about behavior that is inappropriate. In summary, a properly drafted sexual harassment policy can be an effective tool in reducing the risk of sexual harassment, and the turmoil that often is associated with such claims. And, a sexual harassment policy may provide a church with a legal defense in the event of a sexual harassment claim. 2007 WL 3170999 (D. Or. 2007).

This Recent Development first appeared in Church Law & Tax Report, November/December 2008.

Legal Developments

Zoning and Substantial Burden

An Oregon court ruled that a county did not violate RLUIPA by denying a church permission to construct a parochial school on its premises.

Richard R. Hammar, Attorney, CPA
Bio

Church Law & Tax Report

Zoning and Substantial Burden

An Oregon court ruled that a county did not violate RLUIPA by denying a church permission to construct a parochial school on its premises.

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

Key point. The federal Religious Land Use and Institutionalized Persons Act prohibits state and local governments from imposing a land use regulation in a manner that imposes a substantial burden on the exercise of religion unless the regulation is in furtherance of a compelling governmental interest and is the least restrictive means of furthering that compelling governmental interest.

* An Oregon court ruled that a county did not violate RLUIPA by denying a church permission to construct a parochial school on its premises. A Baptist church was founded in 2001. The church used a converted single-family dwelling for its offices and for small meetings and rented space in the local high school and in other churches for Sunday and midweek services. In 2005, the church began operating a school for the congregation’s children in a separate leased facility; the school had 19 students.

In 2004, the church purchased seven acres of property for $500,000. The property is zoned AF-5 (Agriculture-Forest, 5-acre minimum lot size). The following year the church sought approval to build a 20,000-square-foot, single-story building that would serve as a combined church sanctuary, day care facility, and school. The church represented that the school would serve 50 children from kindergarten through grade 12, would have five staff members, would be housed in a large multipurpose room within the proposed church building, and would operate from Monday through Friday, from 8:00 a.m. to 4:00 p.m. A county zoning board (the “county”) recommended approval of special uses of the property for a church and a day care facility. However, it recommended denial of the school use since the students did not come predominantly from rural areas as required by the zoning ordinance. The county concluded that its decision did not violate the Religious Land Use and Institutionalized Persons Act (RLUIPA) since it did not impose a “substantial burden” on the church’s religious practice. The county based this conclusion on the fact that the church had not made a “sufficiently diligent effort” to locate suitable property within the area where school use would be permitted. The county also concluded that the church failed to show that operating the school on a site separate from the church imposed a substantial burden on its religious practice, because evidence in the record showed that the church and the school currently were operating in separate locations.

The church appealed, claiming that the county’s refusal to allow the school violated RLUIPA, which provides: “No government shall impose or implement a land use regulation in a manner that imposes a substantial burden on the religious exercise of a … religious assembly or institution, unless the government demonstrates that imposition of the burden … (A) is in furtherance of a compelling governmental interest; and (B) is the least restrictive means of furthering that compelling governmental interest.”

“Substantial burden on religious exercise”

The court concluded that the central question was whether the county’s refusal to allow the church to use its property for school purposes imposed a “substantial burden on religious exercise.” It reviewed several of the leading definitions of “substantial burden,” and concluded that the courts have reached two conclusions: “On the one hand, courts routinely find substantial burdens where compliance with a statute itself violates the individual’s religious beliefs and noncompliance may subject him or her to criminal sanctions or the loss of a significant government privilege or benefit. On the other hand, courts often have been more reluctant to find a violation where compliance with the challenged regulation makes the practice of one’s religion more difficult or expensive, but the regulation is not inherently inconsistent with the litigant’s beliefs.” The court summarized several prior cases defining this important term in the context of zoning laws:

  • Westchester Day v. Village of Mamaroneck, 386 F.3d 183 (2d Cir. 2004). A religiously affiliated school challenged, on RLUIPA grounds, a city’s denial of a permit that would allow the school to construct a new building and renovate others. A federal appeals court found that the denial did not create a substantial burden on the school’s religious exercise because the village “did not purport to pronounce the death knell of the school’s proposed renovations in their entirety, but rather to deny only the application submitted, leaving open the possibility that a modification of the proposal, coupled with the submission of satisfactory data found to have been lacking in the earlier proceedings, would result in approval.” The court conceded that the denial of a specific proposal may constitute a substantial burden when curing the problems that formed the basis for the denial “would impose so great an economic burden as to make amendment unworkable,” or when the cure itself directly affected religious exercise. However, the court found that in that case a mere denial, without more, did not constitute a substantial burden.
  • Corporation of Presiding Bishop v. City of West Linn, 111 P.3d 1123 (Ore. 2005). The Oregon Supreme Court ruled that “a government regulation imposes a substantial burden on religious exercise only if it pressures or forces a choice between following religious precepts and forfeiting certain benefits, on the one hand, and abandoning one or more of those precepts in order to obtain the benefits, on the other. The court determined that further applications for special use permits were not foreclosed but were, indeed, encouraged by the city. However, the court’s formulation of the substantial burden standard suggests that, at the least, it would require a church to demonstrate that it could not reasonably locate and acquire an alternative site for its desired uses.
  • Lakewood, Ohio Cong. of Jehovah’s Witnesses, Inc. v. City of Lakewood, 699 F.2d 303, 306 (6th Cir. 1983). A federal appeals court addressed a congregation’s challenge to its city’s comprehensive zoning plan, which prohibited the congregation from constructing a place of worship on land owned by the congregation. Under the zoning plan, only 10 percent of the city’s property was designated as land on which a church could be built. The court observed that the zoning ordinance did not prohibit the congregation, or any other faith, from worshiping in the city altogether. The congregation remained free to practice its faith through worship “whether the worship be in homes, schools, other churches, or meeting halls throughout the city.” The court also rejected the congregation’s claim that the zoning ordinance imposed a substantial burden because land in commercial zoning districts (in which churches were permitted uses) was more expensive and less conducive to worship than the lot owned by the church. Although the “lots available to the congregation may not meet its budget or satisfy its tastes,” the court held that the First Amendment “does not require the city to make all land or even the cheapest or most beautiful land available to churches.” The court summarized its conclusion that the zoning ordinance did not impose a substantial burden on the congregation’s free exercise by stating: “[The ordinance] does not pressure the congregation to abandon its religious beliefs through financial or criminal penalties. Neither does the ordinance tax the congregation’s exercise of its religion. Despite the ordinance’s financial and aesthetical imposition on the congregation, we hold that the congregation’s freedom of religion … has not been infringed.”
  • Christian Methodist Episcopal Church v. Montgomery, 2007 WL 172496 (D.S.C. 2007). A federal court in South Carolina held that a municipal zoning ordinance that required a property owner or its tenant assignee to apply for a special land use approval did not impose a substantial burden under RLUIPA. In reaching its conclusion, the court relied on a Fourth Circuit decision that was decided under the First Amendment before the passage of RLUIPA. Christ College, Inc. v. Board of Supervisors, 944 F.2d 901 (4th Cir. 1991). The court in the Christ College case acknowledged that the county zoning laws made it more difficult for a religious college “to be located on the property of its choice; however the fact that local regulations limit the geographical options of a religious school … does not prove that any party’s right to free exercise is thereby burdened. There must at least be some nexus between the government regulation (here, a zoning law) and impairment of ability to carry out a religious mission. It is not enough that an entity conducting a religious program of mission would prefer to be located on residential property. That preference must be linked to religious imperative. No such link was proven here and the court was correct in concluding the zoning regulations did not burden appellants’ free exercise of religion.”
  • Civil Lib. for Urban Believers v. City of Chicago, 342 F.3d 752, 761 (7th Cir. 2003). An association of area churches challenged a city ordinance, alleging that it violated RLUIPA. The court decided that the plaintiffs had not met the requirement of showing a substantial burden and held that a regulation must bear “direct, primary, and fundamental responsibility for rendering religious exercise … effectively impracticable” in order to impose a substantial burden.
  • Petra Presbyterian Church v. Village of Northbrook, 409 F.Supp.2d 1001 (N.D. Ill. 2006). A church was not permitted to open in an industrial area because that was prohibited by the zoning laws of the city. The church sued the city under RLUIPA. A federal district court in Illinois, in concluding that the city had not violated RLUIPA, noted that the church had failed to “account for other areas [in the city] where churches are allowed,” including the “availability of land in … commercial districts where churches are allowed with a permit.”
  • Lighthouse for Evangelism v. City of Long Branch, 406 F.Supp.2d 507 (D.N.J. 2005). A federal district court in New Jersey ruled that there is no substantial burden on religious exercise if a church is not completely excluded from a city and could have operated in other districts within the city by right, such as in a commercially zoned district.

The court concluded that the availability of other land in the area was a significant factor in determining whether a substantial burden exists. However, addressing this issue was difficult in this case because the church “made little effort to clearly define its property selection criteria or to explain how the failure to satisfy those criteria would require it to forgo its religious precepts.” For example, there was no evidence that, in the absence of access to particular property the church “would be required to forgo its religious precepts. Said another way, there was insufficient evidence that the church’s religious exercise would have been substantially burdened by buying one of the 29 properties on the market.”

The court acknowledged that requiring a church to find and purchase alternative property would constitute a substantial burden on religious exercise if doing so would create an “unreasonable economic burden.” It cited the following cases for this conclusion: (1) Living Water Church v. Charter Township, 384 F.Supp.2d 1123 (W.D. Mich. 2005) (substantial burden found where the church was “a small church with limited funds”); (2) Greater Bible Way Temple v. Jackson, 708 N.W.2d 756 (Mich. 2005) (substantial burden found where a church submitted evidence showing that it could not afford to purchase different property).

The court concluded that the church had taken the position that “the need to look for and acquire other property is itself a substantial burden, because such a search would be time consuming and costly.” The court rejected this argument since there was no evidence that “a reasonable search and acquisition would have required the interruption or cessation of the church’s present activities; it merely would have required a delay and some unknown expense.”

The court concluded, “Because the church failed to demonstrate that upholding the county’s land use decision would force it to forgo its religious precepts, we conclude that it failed to show that the county has imposed a substantial burden under RLUIPA.”

Application. In many communities churches are required to obtain a special use permit in order to purchase and use property for religious purposes. When a local zoning board denies a church’s request for a special use permit, the church may be able to challenge the denial on the basis of RLUIPA if it is able to demonstrate that the denial imposed a substantial burden on its religious exercise that was not justified by a compelling governmental interest. In such cases, the key question often is whether the burden on the church’s religious exercise was “substantial.” This case contains an extensive discussion of this important issue. Note the following points:

1. This case represents a narrow interpretation of RLUIPA’s protections. The court relied on several cases for the proposition that zoning ordinances that restrict a church’s use of property do not violate RLUIPA if the church could reasonably locate and acquire an alternative site for its desired purposes. The court noted, for example, that there were 29 other properties available for sale that could have served as a location for the church’s school.

2. The court acknowledged that requiring a church to find and purchase alternative property would constitute a substantial burden on religious exercise if doing so would create an “unreasonable economic burden.”

3. The court stressed that the church “made little effort to clearly define its property selection criteria or to explain how the failure to satisfy those criteria would require it to forgo its religious precepts.” In other words, the church’s legal position would have been strengthened had it presented evidence that the county’s actions forced it to “forgo its religious precepts.”

4. One judge dissented from the court’s ruling. The dissenting judge argued that the county violated RLUIPA since the church was being “pressured” to give up the church and day care facility on the property it owns, or “abandon its religious precept of operating a church and religious school on the same property.” Timberline Baptist Church v. Washington County, 154 P.3d 759 (Ore. App. 2007).

Legal Developments

Disruptive Church Members

An adult male who exhibited bizarre behavior in his church and community could not be involuntarily committed to a psychiatric hospital since he was not a danger to himself.

Richard R. Hammar, Attorney, CPA
Bio


Key point 7-17. Churches do not have to tolerate persons who disrupt religious services. Church leaders can ask a court to issue an order barring the disruptive person from the church’s premises. If the person violates the order, he or she may be removed from church premises by the police, and may be found to be in contempt of court.

An Oregon court ruled that an adult male who exhibited bizarre behavior in his church and community could not be involuntarily committed to a psychiatric hospital since he was not a danger to himself.

A man (Don) went to church wearing underwear on the outside of his pants and either shirts or underwear wrapped around his head. He initially believed that he was to marry the pastor’s daughter that day, but after arriving at the church, he asked a number of other women to marry him. He became angry in response to church members’ reactions to him. He was taken to the hospital by members of the church. At the hospital, Don became belligerent and had to be forcibly taken to the floor by security guards and placed in restraints.

Don had a history of difficulties arising from his mental disorder. After having been stable for a number of years, his condition began to deteriorate after he stopped taking several medications that had been prescribed. Just prior to the incident at church, Don was involuntarily committed after he physically intimidated and threatened to kill his father and proclaimed that he was the savior and that he planned to be crucified in public.

Don was committed to a psychiatric hospital pursuant to a state law authorizing the civil commitment of persons who either cannot meet their basic needs or are a danger to themselves. A state court ruled that Don had been improperly committed since there was insufficient evidence that he met either ground for involuntary commitment. It concluded: “The record establishes at most a pattern of odd behavior suggesting that, unless Don received appropriate medical care, he was likely to engage in similar behavior again in the future. But there is no evidence that any of the events that made up that pattern of behavior actually led to or even were likely to lead to him being harmed in any way. Consequently, there is no reason to believe that, if he continued to behave in similar ways, his behavior was likely to result in harm to him.” 135 P.3d 397 (Ore. App. 2006).

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Legal Developments

Unemployment

An Oregon court ruled that a church was required to pay state unemployment taxes on its pastor since he was an employee.

Richard R. Hammar, Attorney, CPA
Bio

Key point. Churches are exempt from paying unemployment taxes on their employees, except in Oregon.

An Oregon court ruled that a church was required to pay state unemployment taxes on its pastor since he was an employee.

Oregon is the only state that currently requires churches to pay unemployment taxes on their pastors. The church in this case argued that they were not required to pay unemployment taxes on their pastor since he was an independent contractor rather than an employee.

The court acknowledged that employers are not required to pay unemployment taxes on independent contractors, but it concluded that the pastor was not an independent contractor. In support of this conclusion, the court noted that the pastor was subject to dismissal by the church for failing to carry out his duties consistently with what the church regarded as biblical doctrine.

The court also rejected the church's argument that requiring it to pay unemployment taxes violated its constitutional right of religious freedom. The church had argued that requiring it to acknowledge that it was the pastor's "employer" conflicted with its religious belief that his employer was God, not the church.

The court concluded, "The state's unemployment taxation law applies to all employers, regardless of the religious beliefs of the employers or their employees, and is intended to protect the economic security of the state's residents, not to inhibit or promote any particular religious beliefs. Any effect on the religious beliefs of the church are purely incidental. Requiring the church to report to the department as an employer, therefore, is not prohibited by [the first amendment guaranty of religious freedom]." Church at 295 S. 18th Street v. Employment Department, 28 P.3d 1185 (Or. App. 2001).

Legal Developments

Personal Injuries on Church Property or During Church Activities

An Oregon court affirmed the criminal conviction of a man for “stalking” a woman on church property.

Richard R. Hammar, Attorney, CPA
Bio

• Key point 7-17. Churches do not have to tolerate persons who disrupt religious services. Church leaders can ask a court to issue an order barring the disruptive person from the church's premises. If the person violates the order, he or she may be removed from church premises by the police, and may be found to be in contempt of court. Removing Disruptive Individuals

An Oregon court affirmed the criminal conviction of a man for "stalking" a woman on church property. Many pastors and lay church leaders have been confronted with the problem of stalkers attending church services. In many cases the stalker is a former spouse or a jilted boyfriend. A recent case illustrates the impact such incidents can have on a church. A man ("Bob") met a woman ("Lydia") while she was working at a store. Bob visited the store often, and began asking Lydia to "go out" with him. Lydia always rebuffed his advances, but Bob persisted in asking her for dates. On one occasion he told her that "God has told me that you are going to marry me." Bob became increasingly "impatient" and "agitated" and screamed at Lydia because she refused to go out with him. Lydia was alarmed and frightened by this behavior, and she went to the police and filed a "stalking complaint." Oregon law specifies that a person commits the crime of stalking by repeated and unwanted contact with another person that causes reasonable apprehension regarding the personal safety of the victim or a member of the victim's immediate family or household. After a hearing, a court issued a stalking protective order prohibiting Bob from "knowingly having contact" with Lydia. "Contact" is defined by state law to include following the other person; waiting outside the home, property, place of work, or school of the other person or of a member of that person's family or household; sending or making written communications in any form to the other person; speaking with the other person by any means; communicating with the other person through a third person; committing a crime against the other person; communicating with a third person who has some relationship to the other person with the intent of affecting the third person's relationship with the other person; or delivering directly or through a third person any object to the home, property, place of work, or school of the other person.

Shortly after this protective order was issued, Bob showed up at a worship service at the church that Lydia attended. The pastor saw Bob enter the sanctuary during the service and sit down. The pastor was alarmed because he was aware of Bob's previous conduct and considered him to be "unpredictable." The pastor had never seen Bob attend services before that date. Lydia was seated near the front of the sanctuary and did not know that Bob was in the building until the pastor informed her after the service. Bob stayed for about 10 minutes after the service had ended and then left. After the service, the pastor found a handwritten note on the church bulletin board. The note stated, among other things, that "the resurrected Christ was Here!" It also asked: "Are there any Real Believers here? How about you pastor?"

A few days later Bob showed up at Lydia's place of employment. Her supervisor was working alone that day, and was familiar with Bob's behavior and the protective order. As Bob approached the door of the building, the supervisor picked up a knife and told Bob not to come any closer. When the supervisor urged Bob to seek psychological help, Bob replied by exclaiming that "I am the risen Jesus Christ, the Messiah" and that "I have come to offer you salvation for your sins." These statements further frightened the supervisor. Bob left soon after making these statements, and the supervisor called the police. Bob was immediately arrested and charged with violations of the protective order at Lydia's church and place of employment. He was convicted and sentenced to prison.

Application. Pastors and lay church leaders should be familiar with stalking legislation in their state. Many states have enacted stalking laws similar to Oregon's, and such laws can provide effective protection against intimidating behavior (active or passive) on church property, as this case illustrates. State v. Maxwell, 998 P.2d 680 (Ore. App. 2000).

Posted:

Legal Developments

Sexual Misconduct by Clergy and Church Workers

The Oregon Supreme Court ruled that a church can be liable for the sexual misconduct of an employee on the basis of “respondeat superior.”

Richard R. Hammar, Attorney, CPA
Bio

Key point 10-02.3. Churches can be legally responsible on the basis of the respondeat superior doctrine for the actions of their employees only if those actions are committed within the course of employment and further the mission and functions of the church. Intentional and self-serving acts of church employees often will not satisfy this standard.

The Oregon Supreme Court ruled that a church can be liable for the sexual misconduct of an employee on the basis of "respondeat superior," so long as the misconduct was a direct outgrowth of actions by the employee that were within the scope of his or her employment.

An adult male (the "victim") alleged that from 1970 through 1972, when he was an adolescent, the priest served as youth pastor, friend, and confessor to the victim and his family. The victim's family became close to the priest, who was a frequent guest in their home. Over time, the priest gained the trust and confidence of the victim's family, and obtained permission to spend substantial periods of time alone with the victim. The priest eventually used this position of trust to commit a series of sexual assaults on the victim.

The victim sued the priest and his archdiocese, claiming that the archdiocese was responsible for the priest's acts on the basis of respondeat superior (a legal doctrine that imposes liability on an employer for the acts of its employees in the course of their employment). The archdiocese claimed that all of the victim's claims were brought after the statute of limitations had expired, and therefore the lawsuit had to be dismissed. It also argued that even if the statute of limitations did not bar the victim's claims, it could not be liable for the priest's acts on the basis of respondeat superior since the priest was not acting within the scope of his employment when he molested the victim.

The victim insisted that the priest was an employee of the archdiocese and that the abuse was committed in connection with his employment as youth pastor and priest. A trial court rejected the victim's claims, and dismissed the lawsuit. The victim appealed.

The state supreme court noted that under the doctrine of respondeat superior, "an employer is liable for an employee's torts, including intentional torts, if the employee was acting within the scope of employment." In order for an employee's acts to be within the scope of employment, the following factors must be present: (1) the conduct occurred within the time and space limits authorized by the employment; (2) the employee was motivated, at least partially, by a purpose to serve the employer; and (3) the act must have been of a kind that the employee was hired to perform.

The court conceded that the priest's alleged sexual assaults on the victim clearly were outside the scope of his employment, but it concluded that the archdiocese could still be liable on the basis of respondeat superior if "acts that were within [the priest's] scope of employment resulted in the acts which led to injury to plaintiff." The court noted that it would be extraordinary to find an act of intentional misconduct, such as sexual molestation, to be within the scope of an employee's employment. But, it insisted that this is not necessary. Rather, the question is whether the priest was performing any acts that were within the scope of his employment that ultimately caused the victim's injuries. The court concluded that this test was met:

The complaint alleges that [the priest] used his position as youth pastor, spiritual guide, confessor, and priest to [the victim] and his family to gain their trust and confidence, and thereby to gain the permission of [the victim's] family to spend large periods of time alone with [him]. By virtue of that relationship, [the priest] gained the opportunity to be alone with [the victim], to touch him physically, and then to assault him sexually. The complaint further alleges that those activities were committed in connection with [the priest's] employment as youth pastor and priest, that they were committed within the time and space limitations of [his] employment, that they were committed out of a desire, at least partially and initially, to fulfill [his] employment duties as youth pastor and priest, and that they generally were of a kind and nature that he was required to perform as youth pastor and priest.

The court conceded that a jury might conclude that all the priest's activities preceding the sexual abuse were motivated solely to further his own interests, not those of the archdiocese. On the other hand, it could just as easily conclude that the sexual assaults "were the culmination of a progressive series of actions that began with and continued to involve [the priest's] performance of the ordinary and authorized duties of a priest." In the latter case, a jury might also infer that, "in cultivating a relationship with victim and his family, the priest, at least initially, was motivated by a desire to fulfill his priestly duties and that, over time, his motives became mixed."

The archdiocese argued that if an employer can be liable for an employee's sexual assaults simply because it provided the employee with an "opportunity" to commit the assaults, then any employer that provides their employees with an opportunity to be alone with third parties can be held liable for the intentional torts of those employees. The court disagreed, noting that an employment relationship will not in itself support employer liability. Rather, the wrongful acts of an employee must be "a direct outgrowth" of specific acts that are within the scope of the employee's employment. This test was met in this case, because of the priest's extensive efforts to cultivate a relationship with the victim and his family as a result of the performance of his pastoral duties.

Application. This case is an unfortunate departure from the vast majority of cases that have concluded that churches and denominational agencies cannot be liable for the wrongful conduct of employees on the basis of respondeat superior since such conduct cannot be within the scope of the wrongdoer's employment. This case opens the door to greater liability on the part of churches and denominational agencies in Oregon, and in any other state that follows this ruling. Respondeat superior is a far more undesirable basis of liability than negligent selection, negligent retention, or negligent supervision, since it imposes liability "automatically" on an employer without any proof of negligence. All that is required is proof that an employee injured someone while acting within the scope of his employment. This court conceded acts of sexual misconduct are not within the scope of employment, but it concluded that this does not end the analysis. Rather, an employer can be liable if an act of sexual misconduct is a "direct outgrowth" of other acts that are within the scope of employment. Fearing v. Bucher, 977 P.2d 1163 (Ore. 1999).

Legal Developments

Recent Developments in Oregon Regarding Defamation

An Oregon court ruled that statements made by a pastor were not protected by a qualified privilege, and as a result the pastor could be sued for defamation as a result of statements he made publicly about a member of the congregation.

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax1999-09-01

Defamation

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

• Key point. Statements in church meetings are protected by a qualified privilege. This means that they cannot be defamatory, even if false, unless the person making the statement did so with malice. In this context, malice means a knowledge that the statement was false, or a reckless disregard as to its truth or falsity.

An Oregon court ruled that statements made by a pastor were not protected by a qualified privilege, and as a result the pastor could be sued for defamation as a result of statements he made publicly about a member of the congregation. A church member’s three children were injured when the car they were driving was struck by the daughter of another church member. The pastor informed the church board, and the congregation itself, that the father whose children were injured was having his children pretend to be injured in order to obtain a larger settlement from the other driver’s insurance company. Neither the pastor, nor any other church member, ever investigated the facts to ascertain the extent of damage done to the car or the injuries suffered by the passengers. The pastor did not know whether the children, in fact, were injured by the accident. The children’s parents sued the pastor, claiming that he had defamed them and invaded their privacy. They also sued the church as the pastor’s employer. The pastor and church argued that they were protected by a “qualified privilege” that prevented the pastor’s comments to be defamatory. A jury disagreed, and awarded the parents $200,000 in damages.

Qualified Privilege

The court assumed, without deciding, that Oregon law recognizes a qualified privilege in the context of statements made in the course of church proceedings. This means that statements made during such proceedings cannot be defamatory. However, the court cautioned that the qualified privilege may be lost in two ways: (1) “if a plaintiff demonstrates that the individual making the defamatory statement either lacked objectively reasonable grounds for the statement or did not, in fact, believe the statement to be true”; or (2) “upon proof that it was uttered for a motive unrelated to the purpose of the privilege.” The court concluded that the pastor “lacked a reasonable basis for his statements and that he made those statements for other than a religious purpose.” The court explained:

He testified that he did not know, and made no effort to determine, whether the children, in fact, were injured, even though he told others repeatedly that they were not. He testified that he did not know, and made no effort to determine, whether, in fact, plaintiffs encouraged their children to submit false insurance claims, even though he told others repeatedly that plaintiffs did precisely that. Moreover, there was evidence of a personal grudge against plaintiffs, arising out of [the father’s] challenge to [the pastor’s] authority regarding the construction and ownership of the new church building, and that [the pastor] made the defamatory statements because of that grudge, not for a religious purpose.

Invasion of Privacy

The jury also determined that the pastor had invaded the privacy of the children’s parents. There are many varieties of invasion of privacy, including acts that place another in a “false light” in the public eye. The jury determined that the pastor’s statements placed the parents in a false light by repeatedly accusing them of falsifying their children’s condition to obtain a larger insurance settlement. The appeals court defined “false light” invasion of privacy as follows:

One who gives publicity to a matter concerning another that places the other before the public in a false light is subject to liability to the other for invasion of his privacy, if (a) the false light in which the other was placed would be highly offensive to a reasonable person, and (b) the actor had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the other would be placed. Restatement (Second) of Torts § 652E.

The pastor insisted that he could not be liable for “false light” invasion of privacy for a couple of reasons. First, he claimed that the parents failed to prove the element of publication. According to the pastor, to prevail on a false light invasion of privacy claim, the parents had to establish that he published false information about them “to the public at large.” The court disagreed, noting that publication is established by proof that “the false information reached or was sure to reach either the public generally or a large number of persons in [the parents’] work community.” In this case, “there was evidence that plaintiffs’ entire community of friends, relatives and acquaintances were members of the church and that [the pastor] made false statements about [them] in church meetings of hundreds of members at a time. We conclude that the evidence was sufficient as to the element of publication.”

The pastor also claimed that the parents failed to prove the element of malice, which he insisted requires evidence of actual intent to harm. Once again, the court disagreed. It noted that “in this case, there is evidence that [the pastor] repeatedly made false statements with no regard for their truth or falsity.”

Application. This case is important, because it illustrates that statements made to church boards and congregations may result in liability if they are false and made with malice. While in many states comments made in the course of church meetings are protected by a qualified privilege, this privilege is not absolute. Rather, it is “qualified,” or limited, as the pastor and church discovered in this case. Muresan v. Philadelphia Romanian Pentecostal Church, 962 P.2d 711 (Or. App. 1998).[ Defamation, Defamation]

© Copyright 1999 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: m53 m29 c0599

Legal Developments

Recent Developments in Oregon Regarding the Taxation of Church Property

An Oregon court ruled that a church’s property was subject to tax because the church failed to timely appeal an assessor’s decision to place it on the tax roll.

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax1998-03-01

Taxation-Church Property

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

• Key point. A church may lose its property tax exemption if it does not file a timely appeal of a tax assessor’s decision to place it on the tax rolls-even if the property has been exempt for many years and clearly qualifies for exemption.

• Key point. This case is of extraordinary importance to church leaders, and should be reviewed carefully.

An Oregon court ruled that a church’s property was subject to tax because the church failed to timely appeal an assessor’s decision to place it on the tax roll. Church leaders should carefully study this case to be sure that they do not inadvertently expose their church property to taxation. The facts of this case are unfortunate. A church for over fifty years owned property that was exempt from property taxation. Its 1.747 acres of land contains a church, parsonage, and parking lot. From 1963 to 1983 only the .23 acres containing the parsonage was taxable. In 1983 the tax assessor added 1.42 acres of the church’s property to the tax rolls, resulting in a total of 1.65 acres on the tax rolls. The assessor did not give the church notice of this action and the church did not become aware of it until 1994. In 1995, the assessor added another .10 acre to the tax roll, again without giving the church notice. The church alleged that this raised the total taxable acreage to 1.75 acres-which was more than it owned! The church insisted that there had been no change in the use or ownership of the property during the years in question, so the property should have remained exempt. When the church discovered that most of its exempt property had been placed on the tax roll, it attempted to bring this matter to the attention of the assessor. The church also filed a new application for exemption. The assessor granted the exemption as to .63 acres of land and the church for the 1995—96 tax year, but denied exemption for the parsonage and 1.12 acres of land. The assessor also refused relief for any tax years prior to 1995—96. The church appealed this decision to the department of revenue, which dismissed the appeal with regard to the 1983—84 through 1994—95 tax years on the ground that the church’s appeal was not timely. Also, the department found it had no jurisdiction because those years were beyond its supervisory authority. The church appealed this ruling to a state court.

The church’s primary argument was that the assessor’s failure to give notice of intent to place the church’s exempt property on the tax roll “suspended” the statute of limitations on appeals. A state appeals court disagreed. It noted that the only written notice required to be given to the church of the assessor’s actions was “the usual tax statement issued in October of every year.” The court added that “the law presumes taxpayers carefully read their tax statements and will appeal from any action of the assessor which is not correct.”

The church insisted that this was not a dispute about procedures. It emphasized that its property had been exempt for over 50 years and the issue was whether it continued to be exempt, not whether it had filed a timely appeal. The court disagreed:

[The church] errs in this respect. If an assessor places exempt property on the tax roll, the owner is obligated to appeal from that action within the time period allowed. If the owner fails to timely appeal, the property will be subjected to taxation. Where the owner is late in filing an appeal, as here, it becomes a procedural issue. The department dismissed taxpayer’s administrative appeal on procedural grounds and therefore the issue before this court is procedural …. If the assessor does not give the notice or perform any other act required by statute, the time limits on appeals under ORS 305.280(1) control. [The church] did not establish good reason for its failure to appeal within that appeal period, therefore the department correctly denied [its] appeal.

The court concluded its opinion with the following advice:

This situation highlights the need for property owners to audit the government’s property tax records. Most taxpayers are familiar with our income tax systems under which taxpayers keep the records and assess the tax, and the government audits for accuracy and correctness. In contrast, the property tax system requires the government to keep the records and assess the tax, and the taxpayer audits for accuracy and correctness. Both systems impose time limits on the right to audit. A failure to audit and challenge the assessment within the time limit will result in a loss by the party responsible for the audit.

Application. The importance of this case to church leaders cannot be overstated. As incredible as it may seem, a church’s property that was exempt from tax for over 50 years was put on the tax rolls by an overly aggressive tax assessor. The church, by failing to discover this development and pursue a timely appeal, lost its legal right to challenge it. How about your church? Could the same result occur? What steps have you taken to prevent it? As the court cautioned, the property tax system “requires the government to keep the records and assess the tax, and the taxpayer audits for accuracy and correctness.” Church leaders must recognize that they have a duty to ensure that the actions of tax assessors are correct, and to promptly appeal any decision they consider to be inappropriate. One way that this can be done is to retain an attorney to inspect the tax status of all church properties once each year. Such a review is easy to accomplish, and some church leaders may want to do it themselves. This “annual update” will protect the church against actions by a local tax assessor that for whatever reason were not properly communicated or understood. Taft Church v. Department of Revenue, 14 Or. Tax 119 (1997). [ State Property Taxes]

© Copyright 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: m70 m21 c0298

Legal Developments

Employer Guilty of “Religious Harassment”

Man had witnessed to an employee.

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1994-03-01 Recent Developments

Freedom of Religion

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

• Key point: Most states prohibit discrimination by employers against employees on the basis of an employee’s religion (religious organizations generally are exempted from such a ban). Some states interpret religious discrimination to include religious harassment.

• An Oregon court reversed a state agency’s conclusion that a business owner who “witnessed” to an employee and invited him to church was guilty of “religious harassment”. An evangelical Christian (the employer) owned his own painting business. He believes that he has a duty to tell others, especially nonbelievers, about God and sinful conduct. This includes informing others that on the basis of their lifestyles they are sinners. The employer hired another worker. He invited the worker to church at least twice each week, told the worker that he was a sinner and was going to hell because he lived with his girlfriend and did not go to church, and said that a person had to be a good Christian to be a good painter. The employer also witnessed to members of the worker’s family and to his girlfriend. The worker was later fired for poor performance, and he filed a complaint with a state civil rights agency alleging that his former employer had committed an unlawful employment practice by discriminating against him on the basis of religion. Specifically, he alleged that his former employer’s “religious advances” constituted religious harassment. Oregon law specifies that it is unlawful “for an employer, because of an individual’s religion, to discriminate against such individual in compensation or in terms, conditions or privileges of employment.” The courts have ruled that religious harassment is a form of religious discrimination. Religious harassment is defined as “making religious advances when such conduct has the purpose or effect of creating an intimidating, hostile or offensive working environment.” The state civil rights agency ruled that the employer had committed religious harassment as a result of his witnessing to the worker and fined him $3,000. The agency concluded that the employer’s religious conduct was “sufficiently pervasive to alter the conditions or the employee’s working environment, and had the effect of creating an intimidating and offensive working environment.” The employer appealed this ruling, insisting that his constitutional rights to religious freedom and free speech were violated by the agency’s ruling. A state appeals court acknowledged that the agency’s ruling (finding the employer guilty of religious harassment for witnessing to an employee) burdened the free exercise of his religious beliefs, but it noted that the exercise of religious beliefs can be burdened under the state constitution by a government action so long as it is the “least restrictive means” of advancing an “overriding government interest.” The court concluded that the agency’s ruling did not satisfy this test. It observed that “”Oregon’s guarantees of religious freedom are intended to permit minorities to engage in religious practices that the majority might find objectionable. Those guarantees would be meaningless if religious conduct could be prohibited whenever a reasonable person would consider that conduct inappropriate.” A concurring judge observed:

[A]lthough the expression of beliefs by an employer may require some accommodation for the beliefs of employees, there is no generalized constitutional right to be free from religious expression in the workplace. Apparently, the [agency] would sanitize all religious expression from the workplace if the expression annoyed a worker. That proposition cannot be constitutional. [The ban on religious harassment] does not protect an employee from religious but rather from discrimination based on the employee’s religious beliefs. The focus of the statute is on discrimination because of those beliefs. In contrast, the focus of the [agency’s ruling] is on the nature and extent of the employer’s expression. The statute does not prohibit an employer from expressing religious opinions. Meltebeke v. Bureau of Labor and Industries, 852 P.2d 859 (Or. App. 1993).

See Also: The Civil Rights Act of 1964

© Copyright 1994, 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: m47 c0294

Legal Developments

Churches’ Exemption from State Unemployment Taxes

This issue may be reviewed in Oregon.

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1992-07-01 Recent Developments

Unemployment Taxes

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

• The Archdiocese of Portland has asked the United States Supreme Court to review a decision of the Oregon Supreme Court that abolished the exemption of churches from state unemployment taxes. The highly controversial ruling of the Oregon Supreme Court was fully explained under the topic “unemployment taxes” in the November-December 1989 edition of this newsletter. In urging review by the United States Supreme Court, the Archdiocese noted that forcing churches to pay unemployment taxes “will cause governmental intrusion into the religious affairs of church employers through [Oregon’s] eligibility and benefits charging scheme which requires the state to adjudicate, in disputed cases, the doctrinal justifications of a church in discharging an employee for cause.” Review by the United States Supreme Court is purely discretionary (it agrees to hear only about 3% of all appeals). This case may interest the Court, however, because of its imposition of a direct tax on churches. Any further developments will be reported in this newsletter.

See Also: Unemployment Taxes

© Copyright 1992, 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: m76 0492

Legal Developments

Removal of Children from Their Homes

A Children’s Services worker was sued for negligence.

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1991-03-01 Recent Developments

Child Abuse

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

• An Oregon state appeals court ruled that the state Children’s Services Division could be sued by the parents of a child who was removed from his home by a state worker who acted in a negligent manner. The Children’s Services Division (CSD) received a report that two children had been physically abused by their step-mother. Pursuant to state law, a CSD employee and a police officer investigated the report, and concluded that the children may have been abused. The CSD employee immediately took the children into protective custody. However, she did not first review CSD files, which would have revealed that one of the children had earlier made false accusations of abuse against her step-mother. A few days later, after examining the children in his chambers during a hearing, a judge concluded that there was insufficient evidence of actual or threatened physical injury, and he ordered the children returned to their home. The children’s father and step-mother sued the CSD (and its employee) for “negligent interference with the parental relationship.” They claimed that the CSD investigation had been negligent in that (1) the CSD employee took the children into protective custody without examining CSD files, (2) no doctor’s opinion had been obtained, and (3) CSD failed to discuss the matter with the parents prior to removing the children from their home. A trial court ruled in favor of the parents, and the state appealed. A state appeals court also ruled in favor of the parents. The court rejected CSD’s claim that it and its employees are “immune” from liability for their acts. The court also rejected CSD’s contention that holding it liable would be inconsistent with the state policy of encouraging the protection of children. This case could be very significant. Many ministers have had members whose children have been removed from their home on the basis of unsubstantiated allegations of abuse. This case suggests that such persons may now have a legal remedy in some cases. Mendive v. Children’s Services Division, 794 P.2d 807 (Ore. App. 1990).

© Copyright 1991, 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: m10 c0291

Legal Developments

Wills, Trusts and Estates – Part 2

Church Law and Tax 1990-05-01 Recent Developments Wills, Trusts, and Estates Richard R. Hammar, J.D.,

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1990-05-01 Recent Developments

Wills, Trusts, and Estates

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

• An Oregon state court ruled that the personal representatives of an estate improperly distributed estate assets to a minister. A decedent’s will left a portion of his estate to the “Eastside Community Church” of a designated address in Portland, Oregon. However, since the church occupying the designated address was actually known as the “Eastside Free Methodist Church,” the personal representatives of the estate concluded that the will was “ambiguous” and they accordingly decided to divide the estate equally between the Eastside Free Methodist Church and the minister who served the church in the 1970’s when the church was known as “Eastside Community Church” (despite the fact that the will was signed three years after the previous minister had left the church). The church challenged this distribution in court. A trial court ruled that the will was not ambiguous, and that “Eastside Community Church” clearly referred to “Eastside Free Methodist Church.” It concluded that the personal representatives had improperly distributed the estate. A state appeals court agreed, noting that “the personal representatives’ understanding of the meaning of the will is preposterous. The designated beneficiary is a church at a specified location, which the decedent had attended, even if it was under a different name. There is no intelligible way to read the will as intending to benefit an individual who had ceased being the minister at that church three years before the will was executed.” Burris v. Eastside Free Methodist Church, 784 P.2d 109 (Or. App. 1989).

© Copyright 1990, 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: m80 c0390

Related Topics: Posted:

Legal Developments

Personal Injuries – Part 1

On Church Property or During Church Activities

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1990-03-01 Recent Developments

Personal Injuries – On Church Property or During Church Activities

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

• Can a woman who is sexually seduced by her Lutheran minister during counseling sessions sue the minister, her church, and her denomination? That was the issue before an Oregon state appeals court in a recent decision. The woman sued the minister for “intentional infliction of emotional distress” and “breach of confidential relationship”. She sued her church on the grounds that it was legally responsible for the acts of its minister and for “negligent supervision” of its minister. She also sued the regional office (North Pacific District) of the American Lutheran Church, arguing that it was also liable for alleged negligent supervision of its churches and clergy, and also that its procedure for removing the minister from office involved her in a confrontational process that caused her emotional harm. The woman alleged that her minister abused his pastoral and counseling relationships with her by “manipulating” her into have sexual relations with him. She claimed to have suffered sexual abuse, extreme emotional distress, physical illness, loss of sleep and memory, clinical depression, and loss of her “ability to trust other adults, to trust authority, and to deal with religion and faith in God.” A trial court dismissed the entire lawsuit, and the woman appealed to a state appeals court. The appeals court began its opinion by emphasizing that dismissing a lawsuit is an extraordinary act of a trial court and requires that the plaintiff’s petition state no facts that could give rise to legal liability. The court concluded that the woman’s lawsuit did state facts, which if proven true, could possibly result in legal liability. As a result, it reversed the trial court’s dismissal of the case, and ordered the case to proceed to trial. The court concluded that the facts alleged in the lawsuit stated a claim for breach of confidential relationship and intentional infliction of emotional distress by the minister. It rejected the minister’s argument that the claims against him were really an attempt to sue him for “seduction”—a legal theory that had been eliminated by the Oregon legislature in 1973. The fact that the minister allegedly used seduction as a means of breaching his confidential relationship with the woman, and to intentionally cause her emotional distress, did “not convert her claim into one for seduction.” The court also rejected the minister’s claim that the lawsuit violated his constitutional guaranty of religious freedom. The court also found that the lawsuit stated facts that, if proven true, would create legal liability for the church on the basis of both “negligent supervision” and “respondeat superior.” Under the respondeat superior doctrine, an employer is legally responsible for the acts of an employee committed within the scope of employment. The court conceded that the church may well be able to prove at trial that the minister’s acts were not committed within the scope of his employment. But it could not agree with the trial court that the lawsuit failed to state facts that might establish legal liability. Similarly, it concluded that the lawsuit stated facts that could give rise to church liability for “negligent supervision.” Specifically, the lawsuit alleged that the church “knew or should have known that [the minister] was not adequately trained as a counselor and that it knew or should have known that he had misused his position in the past to take advantage or parishioners and counseled persons … [and] failed to investigate claims of his sexual misconduct [or] warn parishioners of his misuse of his position ….” The court stressed that it was not finding the church responsible. Rather, it simply was rejecting the trial court’s conclusion that the lawsuit failed to state facts for which the law provides a remedy. Finally, the court found that the trial court improperly dismissed the claims against the North Pacific District of the American Lutheran Church, since the lawsuit stated facts which (if true) could result in legal liability. The court again emphasized that it was not finding the District liable. On the contrary, it acknowledged that the constitutional guaranty of religious freedom “may provide the [District] with an affirmative defense at some later stage of the proceeding.” What is the relevance of this case to other churches and denominations? Consider the following: (1) It suggests that churches can be sued for the sexual improprieties of their ministers. While it is doubtful that a church will be liable under the respondeat superior doctrine (seduction is not within the “scope of employment”), it is conceivable that a church could be legally liable for “negligent supervision” if it knew (or should have known) of previous sexual improprieties of a minister but failed to limit further counseling opportunities, closely supervise the minister, or warn counselees. (2) It suggests that denominations can be sued for negligently supervising clergy who are known to have engaged in sexual improprieties. Of course, if a church or denomination is unaware of any information that would cause it to believe that a particular minister is a potential threat, then it is very unlikely that it would ever be found liable for negligent supervision. Further, the potential liability of a denomination will depend largely on the degree of control and supervision that it retains over the day-to-day activities of its clergy. The less authority that a denomination has to supervise clergy, the less likely a claim of negligent supervision becomes. Erickson v. Christenson, 781 P.2d 383 (Or. App. 1989).

© Copyright 1990, 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: m58 m67 m86 m29 m40 c0290

Legal Developments

Unemployment Tax

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

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1989-11-01 Recent Developments

Unemployment Taxes

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

• In a highly controversial decision that eventually may affect churches in other states, the Oregon Supreme Court ruled that all religious organizations, including churches, are subject to state unemployment taxes. Here are the facts. The Federal Unemployment Tax Act (FUTA) contains a set of guidelines that a state’s unemployment tax program must meet in order to avoid federal unemployment taxes. Although compliance with the federal guidelines is optional, states normally comply in order to avoid subjecting local employers to double taxation (under both federal and state law). One of the federal guidelines with which states must comply exempts services performed in the employ of a church, a convention or association of churches, or certain church-controlled organizations from unemployment tax. There is no exemption for religious organizations not affiliated with a church or convention or association of churches. Accordingly, under FUTA, states must subject non-church-affiliated religious organizations to state unemployment tax or risk losing their exemption from federal unemployment tax. However, the Oregon Supreme Court previously had ruled that the state could not make distinctions between church-affiliated and non-church-affiliated religious organizations, since such a distinction “contravenes the equality among pluralistic faiths and kinds of religious organizations embodied in the Oregon constitution’s guarantees of religious freedom.” How should these conflicting provisions be reconciled? The Employment Division of the Oregon Department of Human Resources (the agency responsible for enforcing the Oregon unemployment law) took the position that it had to assess unemployment taxes against all religious organizations—including churches—in order to keep Oregon in compliance with the FUTA guidelines and the Oregon constitution. The Oregon Supreme Court agreed. It emphasized that in order to satisfy the state constitution’s requirement of “treating all religious organizations similarly” it had two options: (1) completely exempt all religious organizations (whether or not church-affiliated), or (2) eliminate the exemption of all religious organizations (including churches). The court elected the second alternative, since the other option would have led to a broader exemption then permitted by FUTA and accordingly would have subjected Oregon employers to double unemployment tax under both state and federal law. The court acknowledged that taxing all religious organizations “creates potential constitutional problems involving the free exercise of religion.” However, it concluded that its decision did not violate the constitutional guaranty of religious freedom. It observed: “When governmental action is challenged as a violation of the free exercise clause of the first amendment it must first be shown that the governmental action imposes a burden on the party’s religion. Assuming that imposing unemployment payroll taxes on all religious organizations will burden at least some of those groups (although not necessarily their freedom of belief or worship), that assumption is only the beginning, however, rather than the end of the inquiry. Not all burdens on religious liberty are unconstitutional. The state may justify a limitation on religion by showing that it is essential to accomplish an overriding governmental interest. In the present case the state of Oregon has two governmental interests which, when taken together, are sufficiently important to support the burden on religion represented by unemployment payroll taxes. There are few governmental tasks as important as providing for the economic security of its citizens. A strong unemployment compensation system plays a significant role in providing this security. Given the existence of FUTA, any state’s unemployment tax must, as a practical matter, comply with FUTA’s requirements or the state’s employers would face a double tax. Such a double tax would, in turn, create a very undesirable business climate in the state. This, combined with Oregon’s constitutional interest in treating all religious organizations equally, creates an overriding state interest in applying the unemployment payroll taxes to all religious organizations. Our construction of the coverage of Oregon’s unemployment compensation taxation scheme does not offend the first amendment’s free exercise clause or … the Oregon constitution.” Perhaps most disturbing is the court’s insensitivity to the imposition of a direct tax upon churches. For example, the court observed that the state “can draw its tax line anywhere it desires” and “may require the Catholic church to pay unemployment taxes for the work performed by nuns and monks.” The court’s ruling is sufficiently flawed that one can hope for a reversal by the United States Supreme Court or the Oregon legislature, or at the least a repudiation by the courts of other states. Employment Division v. Rogue Valley Youth for Christ, 770 P.2d 588 (Ore. 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: m76 c0689

Legal Developments

Child Abuse

Church Law and Tax 1989-09-01 Recent Developments Child Abuse Richard R. Hammar, J.D., LL.M., CPA

Richard R. Hammar, Attorney, CPA
Bio

Church Law and Tax 1989-09-01 Recent Developments

Child Abuse

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

• In a case that will be of relevance to churches and denominations that conduct scouting programs, an Oregon court ruled that the Boy Scouts of America was not legally responsible for the alleged misconduct of a female scout leader who had engaged in frequent sexual activity with a 12-year-old boy. The boy later sued the scout leader as well as the national and local scouting organizations, claiming that the organizations were accountable on the basis of the “respondeat superior” doctrine (i.e., an organization generally is legally accountable for the misconduct of its agents committed within the scope of their employment) and not because of any independent negligence on their part. Whether or not the female scout leader was an agent of the Boy Scouts, the court concluded that her misconduct had not occurred within the scope of any employment relationship with the Boy Scouts since “the record conclusively shows that, if [she was an] agent, [her] activities were not motivated, even partially, by a purpose to serve the Boy Scouts.” The court emphasized that the boy had not claimed that the Boy Scouts had negligently supervised the scout leader. This case illustrates that females, as well as males, may engage in acts of sexual molestation of minors. It also demonstrates that liability by scouting organizations for molestation of minors by scouting leaders ordinarily cannot be based on the respondeat superior doctrine. However, the court did hint that the boy might have stated a valid claim had he argued that the scouting organizations had negligently supervised the scout leaders. Of course, such a claim assumes that the organization has the authority to supervise the scout leader (which was an issue that the court did not resolve). Dunn v. Gracia, 768 P.2d 419 (Ore. App. 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: m10 m39 c0589

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