• Key point: Denominations often use terminology in their organizational documents that attorneys point to in attempting to establish sufficient “control” over the activities of affiliated clergy or churches to result in legal liability for their actions. However, some courts recognize that ecclesiastical terminology should not necessarily be used to establish legal control and liability.
• In a significant ruling, the Tax Court vigorously rejected an attempt by the IRS to construe language in a denominational constitution to support a finding of legal control. Many attorneys, in an effort to locate the “deepest pockets,” have sued denominational agencies for the negligence or misconduct of affiliated churches or clergy. These cases generally attempt to demonstrate that the denomination exercised sufficient “control” over the church or minister to make it liable for the negligence or misconduct. The denomination’s own constitution or other organizational document typically becomes “exhibit A,” as the attorneys look for any clause or provision that suggests control. Unfortunately, in many cases they find such language, even though the intent of the document was to create only ecclesiastical rather than legal or temporal control. Fortunately, a number of courts have recognized that some denominations have authority to exercise only ecclesiastical control over affiliated clergy and churches, and that this form of control is not enough to warrant the imposition of legal liability upon the denomination for the activities of clergy and churches. This was the conclusion reached by the Tax Court in a recent case. The case, which was discussed in a feature article in the January-February 1995 issue of this newsletter, addressed the question of whether a Pentecostal Holiness minister was an employee or self-employed for federal income tax reporting purposes. The IRS insisted that the minister was an employee for income tax reporting purposes, and relied in part on a statement in the denomination’s official Manual that described pastors as “amenable to the quadrennial conference and the conference board”. Not so, concluded the Tax Court. In language that will be relevant to any denomination that is sued on the basis of the acts of affiliated clergy or churches, the Court observed:
[The IRS] also contends that the fact that [the minister] was expected to comply with the provisions of the Manual indicates that he was an employee. While the Manual imposed certain requirements on [the minister], they were more in the nature of an outline of his responsibilities than directions on the manner in which he was to perform his duties. We do not find the Manual or its contents to be determinative of an employer-employee relationship. The Manual describes pastors as “amenable to the quadrennial conference and the conference board”. Webster’s Third New International Dictionary (1981) defines “amenable” as “liable to be brought to account or judgment; liable to the legal authority of; answerable, accountable … liable to a claim or charge … capable of submission (as to a judgment or test) … readily brought to yield or submit; responsive, tractable ….” While this language suggests an employee-employer relationship, we are not persuaded that it fully defines the relationships between the parties. The Manual provides little guidance as to how this amenability is exercised so as to give this description significance. In addition, testimony and other evidence indicate that the relationships between the parties are more complicated than the statement suggests. A chart included in the Manual depicts the local church board as amenable or accountable to the pastor. But, similarly, an examination of the record reveals that the relationship between those parties is less hierarchical and more interwoven than the chart indicates. While [the minister] had a place in the structure of the [the denomination], that structure was a looser affiliation than the strict hierarchy suggested by the term “amenable”.
After considering all the facts and circumstances affecting the issue of control, we are persuaded that [the minister] was “subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result”. [The minister’s] primary responsibility was to help the church thrive. The record does not reflect that the church or the Sonshine Conference retained any significant rights to control petitioner’s efforts to accomplish this goal.
Such cases are significant. They recognize that the mere presence of authority to exercise control over some ecclesiastical activities of a minister or church is not enough of a relationship to impose legal liability on the denomination. Unfortunately, the bylaws or other internal rules of many denominations define the relationship with local churches and clergy in a way that suggests far more “control” than actually exists. As the Tax Court recognized, this language cannot be read in isolation, but must be viewed in its ecclesiastical context. This is an extremely important conclusion, that will be a useful precedent in many future cases. Shelley v. Commissioner, T.C. Memo. Dec. 50,090(M) (1994).
See Also: Cases Finding Denominations Not Liable
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