Business Administrator

Continuing education for ministry leaders
Business Administrator
Weekly Lessons, created and written by Richard R. Hammar, J.D., LL.M., CPA, give you a basic legal overview of essential topics based on staff or volunteer positions within a church.

This Week's LessonWeek of February 9

Loans to Pastors

Introduction

This week we turn our attention to loans made to pastors. Start by completing the following quiz. Then review the Executive Summary for the key points on this topic, or read the Weekly Lesson for a complete discussion of this topic.

Pastor John is the senior pastor of his church. He would like to purchase a new home, but needs help with a down payment. The church board agrees to loan him $50,000 at no interest, payable on demand. What are the legal and tax consequences, if any, of this transaction?

Weekly Quiz

Instructions Click on the correct answer for each of the following questions.

Executive Summary

Many churches have made loans to a pastor. But few church leaders understand the legal and tax implications associated with such loans. For example, the nonprofit corporation laws of many states prohibit incorporated churches from making loans to an officer or director. Church leaders also need to be familiar with the tax implications of these loans. Most importantly, if a loan is "interest free" or at a "below market" rate of interest, then the pastor to whom the loan was made may realize taxable income from the transaction that must be properly reported by the church. No-interest or low-interest loans also may constitute prohibited "inurement" of a church's assets to a private individual, thereby jeopardizing the church's tax-exempt status. This week's lesson provides church leaders with the information they need to evaluate such loans.

Log In For Full Access

Interested in becoming a member? Learn more.

Related Topics:
View All
from our store
Planning the Pastor’s Retirement Package

Planning the Pastor’s Retirement Package

Use this guide to develop your pastor's retirement plan for all stages of life.
12 Law & Tax Guidelines for New Ministers

12 Law & Tax Guidelines for New Ministers

Essential knowledge to ensure legal and financial clarity and integrity in ministry.
Church Compensation

Church Compensation

Learn the many pieces of employee compensation.
20 Finance Questions Churches Ask

20 Finance Questions Churches Ask

Richard Hammar answers relevant tax and finance questions for church leaders.

ChurchSalary

ChurchSalary

Let ChurchSalary do the work. Get personalized compensation reports for staff and pastors.