Key point 6-04.01. Churches may have a number of reporting requirements under state law. One of the most important is the filing of an annual corporate report with the office of secretary of state. This requirement applies to incorporated churches in many states. Failure to comply with this requirement can cause the church's corporate status to lapse.
1. ANNUAL CORPORATE REPORT
Many state nonprofit corporation laws require the filing of an annual report with the office of secretary of state. Generally, this report calls for the name of the corporation, the address of its registered office in the state of incorporation and the name of its registered agent at such address, a brief statement of the nature of the affairs that the corporation is actually conducting, and the names and addresses of the current directors and officers. A nominal fee usually must accompany the report.
Annual reports are prepared on forms provided by the secretary of state's office. Failure to file the annual reports may result in a small monetary fine, or in some states to loss of corporate status.
The corporate status of many churches has been terminated through inadvertent disregard of the annual reporting requirements, though such churches and their members typically are unaware of their unincorporated status. This obviously can lead to unfortunate consequences, including the potential personal legal liability of members for the obligations of the church—the very risk that most churches seek to avoid through incorporation.  Shakra v. Benedictine Sisters of Bedford, 553 A.2d 1327 (N.H. 1989). Churches should periodically check with the secretary of state's office to ensure that they are "in good standing." Most states issue certificates of good standing to corporations for a nominal fee.
- The Supreme Judicial Court of Massachusetts upheld an action by the secretary of state revoking the corporate status of 11,000 nonprofit corporations that failed to file their annual corporate reports as required by state law. Massachusetts nonprofit corporation law specifies: "If the corporation fails to submit its [annual report] for two successive years, the state secretary shall give notice thereof by mail, postage prepaid, to such corporation in default. Failure of such corporation to submit the required [report] within ninety days after the notice of default has been given shall be sufficient cause for the revocation of its charter by the state secretary." Pursuant to this statute, the secretary of state revoked the corporate status of 11,000 nonprofit corporations in Massachusetts that failed to file their annual reports for two consecutive years. These revocations were all preceded by the required notice to the lapsed corporations. The president of a nonprofit corporation whose charter had been revoked filed a lawsuit challenging the actions of the secretary of state. The court ruled in favor of the secretary of state, noting that "it is undisputed that there was sufficient cause to revoke the charters of the corporations since they did not file acceptable annual reports for two consecutive years."  Brattman v. Secretary of the Commonwealth, 658 N.E.2d 159 (Mass. 1995).
- The Montana Supreme Court ruled that a church corporation that was reinstated after having been dissolved for failure to submit an annual corporate report to the secretary of state should be treated as a corporation back to the time of its dissolution. A church's corporate status was dissolved by the secretary of state for failure to file its annual reports. A couple donated property to the church three years later. Following this donation, the church discovered that its corporate status had lapsed, and it applied for reinstatement as a corporation. The couple later attempted to revoke their donation on the ground that the church was not a corporation at the time the donation was made. The court ruled that the lapse of the church's corporate status did not affect donations. It relied on the following provision in the state nonprofit corporation law: "Any restoration of corporate rights pursuant to this chapter relates back to the date the corporation was involuntarily dissolved, and the corporation shall be considered to have been an existing legal entity from the date of its original incorporation."  Valley Victory Church v. Sandon, 109 P.3d 273 (Mont. 2005).
- A New Mexico appeals court ruled that a charitable organization's corporate status lapsed when it failed to submit an annual corporate report to the secretary of state, and that the organization's property automatically passed to the organization described in its dissolution clause  Matter of the Will of Coe, 826 P.2d 576 (N.M. App. 1992).
2. NEW HIRE REPORTING
Churches are required to report information about "new hires" to a designated state agency pursuant to the Personal Responsibility and Work Opportunity Reconciliation Act, which was enacted by Congress in 1996.
3. OTHER STATE REPORTS
Many states have attempted to regulate charitable solicitations by requiring charitable organizations to register with a state agency prior to soliciting donations. Many states require, in addition to the initial registration, the filing of annual reports. Churches and other religious organizations are exempted from the registration and reporting requirements of most charitable solicitation laws. This subject is addressed in chapter 9.
Some states impose additional reporting requirements on churches. For example, New York requires some churches to seek court approval before selling, mortgaging, or leasing property, and to notify the state attorney general prior to any such transaction.
Case study. A New York court upheld the validity of a state law imposing requirements on the sale, mortgage, or lease of church property. New York law specifies that "a religious corporation shall not sell, mortgage or lease for a term exceeding five years any of its real property without applying for and obtaining leave of the court. …" New York law also requires several "congregational" (and some hierarchical) churches to notify the state attorney general prior to the sale, mortgage, or lease of their property. A church that violated these requirements argued that they not only violated the First Amendment's ban on the establishment of religion but also violated the First Amendment's guaranty of religious freedom by involving the government in the internal decisions of churches. The court acknowledged that the New York law discriminated among religions by only requiring "congregational" churches, and some hierarchical churches, to notify the attorney general while exempting most hierarchical churches. However, it concluded that this discriminatory treatment did not violate the establishment clause since it was based on a compelling government interest ("protecting members of religious corporations by safeguarding the potentially substantial proceeds from sales of property, and ensuring that the proceeds are properly disbursed"). The court noted that the hierarchical churches that are exempted from the notice requirement are required to obtain the consent of their top executive officer before seeking court approval. It concluded that the notice requirement applied to those churches, whether congregational or hierarchical, whose structure "does not assure that its members have an opportunity to review the sale of real property." The court also rejected the church's claim that the law in question violated the First Amendment's guaranty of religious freedom, noting that "any inquiry by the attorney general involves only the terms of a real estate transaction; it involves no inquiry into religious beliefs nor does it involve the regulation or prohibition of conduct undertaken for religious reasons." Greek Orthodox Archdiocese v. Abrams, 618 N.Y.S.2d 504 (Sup. 1994). The court's conclusion is questionable, since it was attempting (without a shred of supporting evidence) to distinguish between churches on the basis of whether their membership has an opportunity to review property transactions.