Image: golero | Getty Images

What Churches Should Know About State-Mandated Sexual Harassment Training Laws

Some states now require employers to train annually on harassment, and don’t exempt churches. More states may follow suit.

Myron Steeves, Attorney

Bio

Since 2018, the majority of states have enacted legislation either mandating or recommending that employers train employees on sexual harassment avoidance. This happened at great speed. It can often take decades for legal changes at the state level to become a national trend.

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

The speed of this development can be traced to the great cultural shift arising from the #MeToo movement, which became a high-profile cultural marker following heavily publicized Hollywood sexual harassment scandals in 2017. With sexual harassment in the workplace as a major focal point, a program to reduce the incidence of harassment at work through education became a significant objective of the #MeToo movement. Legislation to mandate such workplace training ensued.

Varying requirements by state

Most states have enacted laws that address workplace sexual harassment in some fashion. Nearly all of these have been enacted within the last two years, and many took effect just in 2020.

One impact of this rapidly evolving development has been in the widely varied approaches from state to state. No two states have statutes that follow any type of uniform approach.

Also on this topic: Attorney Richard R. Hammar explains why every church needs a sexual harassment policy.

Mandatory education for adults as a condition for employment was one dramatic shift in the law, but most states that have legislated in this area have done so cautiously. A number of states require only that public employees obtain some training in avoiding sexual harassment, and other states recommend training. At least seven states, however, mandate some form of training requiring private employers to provide training for their employees on creating a work environment that is informed about how to identify and avoid sexual harassment (see “How Seven States Mandate Employers to Train on Sexual Harassment” for more details).

Because the enactment of these state laws has not led to a significant public backlash, it can be expected that more states will pass these types of laws, and those that merely encourage training may follow the lead of those who have mandated such training.

How churches are affected

While #ChurchToo, a church-focused variation of #MeToo, began in 2018, mandatory harassment training in church offices has not been a visible part of that movement. Churches nonetheless may fall under these emerging state laws, since the laws are aimed directly at the employer-employee relationship, and none of the state laws carve out exceptions for churches.

While the claim of a religious liberty exception to any government-mandated training program may someday prove to have merit, these laws have not yet been challenged in court. Churches should be prepared for federal courts to take the position that workplace protection statutes are laws of general application that are not subject to a free exercise of religion exemption.

Inevitably, a church’s response to these government-mandated training programs will impact the defense of a sexual harassment claim within the church. Any church without a training program in place may be at a disadvantage in defending such a case because the church may appear to have been insensitive to the risks faced by the alleged victim. Considering this rapidly emerging trend, churches may reduce the risk of sexual harassment if they stay ahead of this issue by providing helpful training to employees to foster a healthy workplace environment.

Training requirements states have set

State laws that mandate training possess some common traits. Among them:

There are generally minimum thresholds in the size of the workplace before the training obligation is triggered (ranging from any employer of any size to employers with 50 or more employees);
Specific time periods are mandated within which the training must take place for new hires;
Training for supervisors is more comprehensive than for other employees;
In most instances, the training must be regularly repeated (such as annually); and
Most of the statutes are vague about what specific content the training should contain, although California and New York give substantial detail. Some states provide model training materials, although none are specifically required.

The states that do provide guidance on the content follow a general pattern that includes the following points:

Sexual harassment should be defined with reference to state and federal law, and include examples of harassment;
Employees should receive an explanation regarding their rights on how to make a harassment claim against their employer and remedies they may seek from their employer;
Employees should receive a description of state and federal remedies also available to victims; and
Employees should receive an explanation regarding how employers are legally prohibited from retaliating against employees who raise a harassment claim.

Shaping useful training for church offices

Several human resources education vendors offer products meeting the requirements of all states, including those few that give specific details regarding the content of the instruction. However, these generalized programs are provided for a wide range of businesses, not specifically religious organizations.

As a result, some of these materials might strike a tone that church leaders and other religious employers find unsuitable, even if the principles taught in these programs are generally agreeable. For example, a church that wants scripturally based instruction may find the secular foundation of the commercial materials to be out of touch with the church’s moral positions.

The best approach for many churches may be to take the general content outline suggested by their state’s law (or another state’s, if their respective state offers none) and then develop a program that can be rooted in the church’s general approach to ministry. To satisfy the emerging pattern of legal requirements for workplace training, the training should be comprehensive and run at least two hours. It should cover:

The broad definition of sexual harassment, including how the church’s home state defines it, as well as how it is defined as a form of sex discrimination under federal law (both “quid pro quo” harassment and “hostile environment” harassment);
Examples of what constitutes sexual harassment (not just reliance upon simple definitions); and
A description of remedies and how to obtain them.

One good model for a church’s training is the “State of Illinois Sexual Harassment Prevention Training” program prepared by the state’s Department of Human Rights. These materials need to be adapted to the law of the church’s home state. But the general outline laid out in this 35-slide PowerPoint presentation is comprehensive and offers a good template for the scope and depth of adequate training. Notably, it provides a lengthy list of behaviors that constitute sexual harassment, including gestures, the use of nicknames, and the making of certain sounds.

Caution. Every church preparing its training program will need to consider how it will approach gender identity and sexual orientation issues. While states may differ in their treatments of these issues, several states consider these issues to be subject to the same approaches used in addressing any other harassment. Since these statutes are very new, the full implications of these laws to churches have not been developed by courts. Christian churches with orthodox views of human sexuality and marriage should consult further with qualified local legal counsel regarding how they handle these specific topics.

Make preparations now

While some churches may bristle at the idea of government-mandated messages of instruction within churches, the liability exposure to churches that are unprepared for sexual harassment training is significant. Even in those states that do not expressly mandate training, the absence of a training program may be used as evidence of negligence by a church. Ascertaining the church’s best approach to risk assessment will increasingly include a full discussion of the best way to reduce the incidence of sexual harassment, which unfortunately remains an issue in churches.

Myron Steeves is founder and senior attorney at the Church Law Center of California, and dean emeritus of Trinity Law School. He is an active member of the nonprofit committees of both the California Bar Association and the American Bar Association (ABA), and chairs the ABA's Religious Organizations Subcommittee.

How Seven States Mandate Employers to Train on Sexual Harassment

The similarities—and distinctives—of these training laws that churches in each state should understand.

Myron Steeves, Attorney

Bio

Editor’s note: The original version of this article, published in June of 2020, reached an initial conclusion for California and its statute’s applicability to religious organizations. However, based upon new developments and additional time to interpret the statute, this article was revised in July of 2020 to reflect a new conclusion.

Further, on July 1, 2020, Illinios changed its minimum threshold for training to one employee. This change is reflected below.

The seven states mandating employers to provide sexual harassment training require several common topics to be covered, but also vary in several significant ways.

To better understand the common traits of state training laws and what they mean for churches, see “What Churches Should Know About State-Mandated Sexual Harassment Training Laws.”

Courts will likely apply these statutes to claims against church employers, unless the courts recognize a religious exception.

Here, then, are key highlights for each state’s statutes.

California

Beginning in 2021, all California employers with five or more employees must provide two hours of training regarding sexual harassment to all supervisorial employees, and one hour of training to other employees. California exempts nonprofit religious corporations from its fair employment laws generally. However, to the extent that religious organizations employ five or more people in taxable unrelated business, the exemption from this regulation does not apply. Thus, most churches do not need to conduct mandatory sexual harassment prevention training.

For those churches and other religious organizations that employ five or more individuals in taxable unrelated business activities, and thus must provide training, the training must take place at least once every two years. The training must be provided within six months of hire, or promotion to a supervisorial position. For those who are to be employed less than six months, the training must take place within 30 days or 100 hours of work. In determining whether the employer has five employees, all persons under the direction and control of the employer are counted, including out-of-state employees, volunteers, and unpaid interns, even though the actual training is only provided to California-based paid employees. Notably, sexual harassment training must include training that includes harassment based on gender identity, gender expression, and sexual orientation as part of the training. Cal. Gov. Code §§12950-12950.1.

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

Connecticut

All employers in Connecticut with three or more employees must post a notice regarding the illegality of sexual harassment, as well as remedies, in a prominent location in the workplace, and provide written materials on the subject within three months of hiring. Two hours of training are required within six months of hire. The training must be supplemented every three years. Connecticut’s law requires that employers of fewer than three employees provide the same training within six months to employees who take on supervisorial roles. Conn. Gen.Stat. Ann. §46a-54.

Delaware

Employers with 50 or more employees must provide training in sexual harassment prevention within one year of hiring, and every two years thereafter. The statute provides specific topics that must be covered in the training. Additional training is required for supervisors. However, the statute does not provide a specific length of time for the training. Del. Code Ann. title 19§711A(g).

Hawaii

All employers are subject to the state’s statute, which borders on a recommendation for training, but nonetheless reads as a requirement. The law states:

Employers should affirmatively raise the subject [of sexual harassment], express strong disapproval, develop appropriate sanctions, inform employees of their right to raise and how to raise the issue of sexual harassment, and take any other steps necessary to prevent sexual harassment from occurring. Haw. Code R. §12-46-109(g).

Illinois

Employers of one or more employees are required to provide annual training that equals or exceeds information provided by the Department of Human Rights in a model sexual discrimination prevention training program. 775 ILCS 5/2-109.

Maine

All employers of 15 or more employees are required to provide training within one year of hiring any employee, including supervisors. While the statute addressing the form of training is not specific about the duration or method of training, it provides a lengthy description of what must be covered, including a description of sexual harassment with examples, the complaint process, and prohibitions on retaliation. Me. Rev. Stat. Ann. title 26 § 807.

New York

Every employer must adopt a sexual harassment prevention policy. It must be a policy that prohibits sexual harassment, gives examples of harassment, discusses remedies, provides a complaint form, features a procedure for investigation of complaints, informs employees of their rights of redress, clearly states that sexual harassment is a form of misconduct and that supervisors who knowingly allow such behaviors to continue are subject to sanction, and prohibits retaliation.

The training must be given annually. Notably, under New York’s model policy—which must be met or exceeded by the employer through a separately drafted policy—states that sexual harassment includes harassment based on sexual orientation, self-identified or perceived gender, gender identity, and transgender status. Gender stereotyping, which is prohibited under the model policy, occurs when personality traits “are considered inappropriate because they do not conform to other people’s ideas.” N.Y. Labor Law § 201-g.

Image: getty/kingWu

Downloadable Checklist: Understand the Effects of Your Church’s Political Activity

Use this checklist to understand the potential effects of your church’s political activity.

The Editors

Bio

When it comes to political activity, churches need to understand their constitutional protections, as well as the Internal Revenue Code’s restrictions for 501(c)(3) tax-exempt organizations. Take the following quiz to test your knowledge. The answer key is at the end of the article.

Download a PDF version of this assessment.

There are two distinct limitations in the tax code. First, churches may not engage in substantial efforts to influence legislation. Second, churches may not participate or intervene in any political campaign, even to an insubstantial degree. The first limitation is referred to as the “lobbying” limitation. The second limitation is referred to as the “campaign” limitation.

The income tax regulations interpreting the limitation on political campaign intervention provide that neither a church nor any other organization can be exempt from federal income taxation if its charter empowers it “directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.” The regulations further provide that:

The term “candidate for public office” means an individual who offers himself/herself, or is proposed by others, as a contestant for an elective public office, whether national, state, or local. Activities that constitute participation or intervention include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.

Consequences of Church Political Activity

None of the political activities described above are “illegal.” The primary legal consequence of church political activity is that the church’s exemption from federal income taxation may be jeopardized.

Loss of a church’s federal income tax exemption would have several potential penalties, including the following: (1) the church’s net income would be subject to federal income taxation; (2) the church’s net income would be subject to state income taxation (except in those few states not having an income tax); (3) donors no longer could deduct charitable contributions they make to the church; (4) the church would be ineligible to establish or maintain “403(b)” tax-sheltered annuities; (5) possible loss of property tax exemption under state law; (6) possible loss of sales tax exemption under state law; (7) possible loss of exemption from unemployment tax under state and federal law; (8) loss of preferential mailing rates; (9) a minister’s housing allowance might be affected; (10) the significant protections available to a church under the Church Audit Procedures Act may no longer apply; and (11) the exemption of the church from the ban on religious discrimination under various federal and state civil rights laws may be affected.

These consequences should be considered when deciding whether or not to engage in political activities that may jeopardize the church’s tax-exempt status.

Answer Key: (1) F (2) F (3) F (4) F (5) T (6) T

The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.

Can Churches Dismiss an Employee Without Cause?

Understanding the limitations of “employment at will,” and the idea that an employee can leave a job without cause, too.

Donn Meindertsma

While “employment at will” is a phrase most church leaders have heard, not everyone knows what it truly means.

The employment at-will rule means an employment relationship is indefinite. It also means it can be ended by the employee or employer at any time.

The rule is a presumption courts use that employment may be ended without notice and without consequences. Unless, of course, the employer and employee have agreed to a different type of arrangement.

We often think of the rule from the perspective of the employer’s right to discharge a worker at will. It may be helpful to understand it from the employee’s perspective. A worker may walk away from a job at any time, for any reason or no reason.

Perhaps, at one time or another, most of us have felt like doing just that. If so, we had no reason to worry whether our employer would try to sue us for quitting.

So, is everyone employed “at will”? Again, the law presumes so, but the parties can voluntarily change that. The simplest way to do that is in a contract. In addition, federal and state laws that protect employee rights undercut the strength of the at-will rule, as discussed below.

Explicit contract limitations

A candidate might accept a job offer on the condition that it will last at least two years.

If the employer agrees and makes that promise, the parties will have negated the at-will presumption.

Consequently, if the employer releases the employee after just six months, the employee could bring a claim for damages.

Other types of contract provisions also limit the at-will arrangement.

Contracts with high-ranking employees (in the ministry context, say, a senior pastor) often contain a “just cause” provision. This means the employer can release the employee for “just cause.”

“Just cause” is sometimes left undefined. Other times it refers to specific types of misconduct or other events.

In the context of contracts, a just cause provision often simply helps determine if severance benefits are owed.

If any employee is discharged for “just cause,” it means they may not be entitled to severance benefits.

As another example, a deferred compensation agreement between a church and pastor might include a provision under which compensation is forfeited if the pastor engages in specified misconduct. Ultimately, the parties’ obligations depend on the language of the contract they negotiate.

As a caution, it is important that contract provisions regarding “cause” for termination are carefully drafted to avoid unnecessary conflict that might arise from ambiguities. For such provisions, employers should seek guidance from an attorney with expertise in labor and employment law.

Implied contract limitations

Contracts that abrogate the at-will presumption might not always look like formal, written agreements bearing official signatures. Though many might not realize it, employment policies and handbooks can create contracts between an employer and its workers. If so, the employer must abide by the agreement.

Policies that describe an employer’s procedures in unambiguous, mandatory language (e.g., “shall” or “will”) may be deemed binding, and deviation from the promise can be a breach of contract. For that reason, policies and handbooks should explicitly disclaim that they constitute a promise of employment for any certain period of time or restrict the bases for discharge. They should also state—up front and in bold language—that employment is at will and that the policy/handbook does not alter that relationship.

Legal limitations

Federal and state laws have significantly eroded the force, if not the letter, of the at-will rule. Countless statutes prohibit the discharge of an employee (at will or not) if the employer acted for an illegal reason.

For example, while a church employer may discharge a 65 year-old worker at the employer’s will (assuming it did not enter a contract with the worker), it usually may not do so if the reason is the worker’s age. (Small employers, however, may not be covered by age discrimination laws.)

The same is true for other protected characteristics (e.g., race, gender, disability) or protected conduct (e.g., blowing the whistle on fraud, filing a claim for workers’ comp, refusing to engage in illegal conduct, or opposing discrimination). Those protections differ from one state to the next. Church leaders should check their state’s law in these matters.

Keep in mind that religious groups may have a defense to statutory and other employment claims by virtue of the ministerial exception.

Practicalities

Assume that a recently discharged at-will worker sues over the termination. Logically, the employer should be able to argue that it does not need to give any reason for discharging the worker because he or she was employed at will. But here is where the at-will rule is sometimes misunderstood.

At-will employment does not mean that the employee is barred from pursuing a lawsuit against the employer. It only means that the employer and employee haven’t agreed between themselves to limit either party’s right to end the job relationship.

Indeed, in practical terms, employers must always be prepared to articulate a legitimate reason for discharging a worker. In a sense, that is not an undue burden: there always will be a reason for the employer’s decision—say, the employee isn’t performing well or the employer didn’t need or couldn’t afford to keep the worker.

On the other hand, because there are so many employee protections under federal and state laws, nearly any employee who believes he or she was unfairly discharged has a basis for filing a complaint. The moral of the story here is that at-will workers have every right to contest their discharge in court.

Note that some states liberally allow employees to file lawsuits challenging disciplinary actions less severe than a discharge, such as a demotion. Again, church leaders should check their state’s law in these matters.

All in all, an employee’s at-will status provides limited protection for employers. Accordingly, employers should not expect the at-will rule, although a highly touted staple of American employment law, to offer a reliable defense if an employment claim arises.

Adapted from an article that first appeared in the Employment Law for Ministries newsletter from Conner & Winters. Used with permission.

Donn Meindertsma is a partner in the Washington, D.C., office of Conner & Winters, LLP, and specializes in employment law.

Image: AdobeStock/Hepta

Downloadable Checklist: Do We Follow Sound Employment Practices?

A 12-question checklist to find out.

The Editors

Use the following checklist to gauge how your church is doing at following good employment practices.

Download a PDF version of this checklist.

The federal government oversees a complex array of laws designed to protect employees from being taken advantage of by employers. These regulations affect about 10 million employers, including many churches.

Whether your ministry employs one person or one hundred, it may need to comply with many of the federal, state, or common law provisions that apply to employers.

Here are just some of the areas that labor laws regulate:

Wages and hours
Wage garnishment
Workplace safety and health
Workers’ compensation
Employee benefits
Family and medical leave
Veterans’ employment rights
Discrimination (age, race, gender, genetic information, disability, national origin, religion)
Sexual Harassment
Accommodation for employees with disabilities
Wrongful termination
Invasion of privacy

That is why it’s important for you to be aware of current labor laws and create policies and procedures that help your ministry to abide by them.

Image: AdobeStock/Monkey Business

Download and Use This Lay Counseling Checklist for Churches

Have you created a safe, secure environment for your spiritual care ministry?

The Editors

Use the following checklist to gauge how your church’s lay counseling ministry is doing.

Creating a safe, secure environment for a spiritual care ministry calls for specific policies and procedures that protect your church, lay caregivers, and those who receive care. The effectiveness of any church program begins with the understanding and support of church leadership. That’s especially true of lay counseling and spiritual care ministries.

For this reason, include church leaders in your planning process. Ensure that the governing body of your church not only understands the rationale for your ministry, but also fully supports and approves of spiritual care ministry policies and procedures before you implement a new program. It’s also important to confirm that the policies and procedures you develop do not conflict with the church’s by-laws or other governing documents.

Download a PDF version of this checklist.

Evaluate Risk Management Aspects of Any Spiritual Care Ministry

It’s important that you consult with an attorney as you prepare a lay counseling policy and any related forms. Your attorney should give you a legal evaluation of the risk management issues of any spiritual care ministry program that your church develops. With the help of legal counsel, church leaders should consider how lay counseling policy elements discussed in this publication may apply to other spiritual care ministries that the church sponsors.

The attorney your church selects should be familiar with various federal and state laws that have an impact on churches with spiritual care ministries. Very few attorneys concentrate in “church law,” so you may want to seek attorney recommendations from other churches or trusted sources.

Check with Your Insurance Provider

There are several insurance policy liability coverages that are potentially relevant to your church’s lay counseling ministry and other spiritual care ministries. There are church specialty insurers that design insurance programs specifically for churches and other ministries.

Review Your Plan Regularly; Follow It Carefully

Laws change, as do the makeup and needs of a church. Review and update your lay counseling policy and forms annually, together with any other relevant spiritual care ministry policies and procedures. Church leaders should actively apply the church’s lay counseling and spiritual care ministry policies and procedures.

Image: AdobeStock/Elżbieta Kaps

Are We Prepared for Disaster? A Checklist for Churches.

A 10-question checklist to determine steps to take.

Use the following checklist to gauge how your church is doing at preparing for a disaster.

Download a PDF version of this checklist.

When churches plan for disasters, it’s always with the hope that the plans will be unnecessary. But if a disaster—be it a hurricane, a tornado, a fire, flooding, or something else—does strike your church, you’ll be glad you’ve taken the following things into account.

Take inventory.

Having a record of the church’s possessions is extremely helpful in the event of a disaster. But this needs to be done prior to the disaster. A post-disaster inventory undoubtedly will be incomplete—and it will lack the photos (or video) that can streamline the post-disaster process.

Think “when” not “if.”

When discussing the potential for disasters, it’s easy to focus on the unlikelihood of each scenario. Focusing on what to do when it happens, however, forces church leaders to take the risks seriously—no matter how slim the chances are. And if the unlikely becomes a reality, your church community will be grateful that its leaders took the planning process seriously.

Creating a crisis response team.

A crisis response team should be well-trained and authorized to act when necessary. Most importantly, this team needs to be familiar with the necessary procedures in the event of a variety of different disasters—because the immediate needs will vary depending on the type of emergency.

A crisis response team should also be prepared to see the church through the crisis—not just immediately, but also following up on any needs that emerge after the initial phase of the crisis.

Focus on the people—not just the problem.

When a disaster strikes, people are going to be impacted. The more traumatic the disaster is, the more people will need spiritual and emotional support. Focusing on physical needs (such as rebuilding, cleaning up, replacing destroyed or damaged property, etc.) often is easier than ministering to those who might be reeling—emotionally and physically.

As you help with the practical needs that surface in the wake of a disaster, be constantly looking for people who need a word of encouragement or someone willing to process things with them. Plan to ask the questions, “How are you doing?” and “Do you want to talk about it?” And be sure to listen—to really listen—to their responses.

Stay disciplined.

In the aftermath of a disaster, people are often eager to lend a hand—willing to do anything necessary. But in these times, one’s spiritual disciplines are often put on hold. Ignoring spiritual disciplines is a recipe for another type of disaster. When things are difficult, relief workers need to make their spiritual lives a priority—even when it seems like there are more pressing needs.

Image: getty/steve cicero

A 12-Point Checklist for Setting Church Fundraising Guidelines

This downloadable 12-point checklist is created for those wondering how to establish church fundraising guidelines.

Jeff Hanna

Last Reviewed: November 1, 2023

Download a PDF version of the 12-point checklist below, and use it to gauge how your church is doing at setting church fundraising guidelines.

Before you launch your next fundraising effort, be sure to consider some aspects that may be putting your church and your members at risk. Use the simple tips below help ensure that your next fundraiser is safe.

Physical Safety

Outside Vendors. Most vendors are reputable. However, some may be inexperienced or unprofessional. Be sure to select vendors who have references. Utilize a written contract outlining their duties and get proof that they have adequate insurance.

Equipment. All equipment, whether owned by the church, rented, or brought in by a vendor should be safe. The only way to insure this is to have it inspected by a certified inspector. Further, all equipment should be run by a trained, responsible person who has safety in mind.

Food Sales. Anytime you are selling food, extra care should be provided. Adults should make sure the food is kept at the proper temperatures and safe to sell.

Financial Safety

Cash. Every effort should be made to secure the funds as soon as possible, even as it accumulates during the event. A responsible security team (of two or more) should take cash to a secure room, and lock it up until it can be counted. Once the money is secured, it should be handled in the same way as the church collection. Use two or more people to count the money, document it, and ensure its safe deposit. Never allow cash to be taken home or counted by just one person.

Tax-Deductible Donations. Some churches raise funds by asking people to donate items to the church. The church then sells or uses these donations, and the donor can receive a tax deduction. Take care to follow proper IRS guidelines for accepting donations and reporting them. Churches should consult a competent tax person who knows the law regarding nonprofits.

Image: AdobeStock/New Africa

Downloadable Copyright Law Checklist for Churches

Take this quiz to make sure you’re staying within the guidelines.

Jeff Hanna

Worship music and websites are two places were churches may infringe on copyright law if they’re not careful. Use this checklist to gauge how your church is doing at following good guidelines.

Download a PDF version of this checklist.

There are two primary areas churches may need to consider when it comes to intellectual property and copyright issues.

Music

The first and most common relates to music usage. Many churches like to record their worship services, project words on an overhead, or create their own songbook. Without the proper license, all of these activities are illegal.

Most of us have heard of or are members of CCLI, Christian Copyright Licensing International. As a member, you have permission to use over 150,000 songs in the context of ministry. A license will allow you to:

Record worship services
Project words on a projector or overhead
Print words in the bulletin or on a handout
Create a songbook
Create a database of songs on a computer
Audio or videotape a wedding or special service

Therefore, without the license, participating in any the above is a copyright violation.

The bottom line is ownership. Those who write and own the songs have a right to benefit from their use. The cost of license is based on the size of the church. For more information, go to us.ccli.com.

Videos

The second primary area involves video use. In essence, the FBI warning at the beginning of a rented video states that it is for home use. Showing a complete video outside of the home is considered a violation of the law.

Some have challenged this law citing the “Fair Use Clause” allowing nonprofits to use the video for educational purposes. However, it is smart to look into purchasing an annual license from Christian Video Licensing International (CVLI) and following their guidelines for usage (cvli.org).

Image: AdobeStock/ Rawpixel.com

A Downloadable Checklist for Church Board Members

Nine questions to help you understand your role and responsibilities.

James Cobble and Tyler Charles

Your role as a church board member is incredibly important for the church. There are also liabilities and responsibilities that you should know about that come with this role. Use this assessment to determine how prepared you are to serve in this way.

Stay Informed to Prevent Church Lawsuits

Years ago church leaders didn’t have to worry about litigation. Churches simply were not likely to be sued. Times have changed. With today’s churches facing huge verdicts on high-profile lawsuits, board members cannot afford to be uninformed about the legal liabilities facing the church. Consider these litigation trends among churches:

Lawsuits involving churches cover almost every area of church life. The most common lawsuits stem from personal injury cases. Other common areas include employee disputes, membership disputes, employment problems with clergy, lawsuits over title to property, litigation with zoning boards, tax and IRS disputes, and violations of securities law. In recent years, church board members have also been named as defendants in cases. For example, church board members have been called on in cases relating to the negligent selection of church workers who later molested a child.

Lawsuits involving children require particular attention. Past studies have shown that nearly 1 church in 100 reported responding to an allegation of child molestation in a church-sponsored program. Research indicates that when child molestation occurs, 10 to 20 percent of the time, there are multiple victims. Churches are at great risk of a lawsuit when an allegation of child sexual abuse is made.

Embezzlement is on the rise. Past studies have shown that as many as 15 percent of churches reported having had problems with theft among volunteers and paid staff members. This percentage is rapidly increasing.

Unfortunately, in many churches nothing is being done to reduce these major legal liabilities. Research has shown that:

Approximately 75 percent of churches do nothing to assess liability risks.
Most churches use no formal employment application and less than one-fourth screen staff members who work with children.
Almost 90 percent of churches surveyed had no sexual harassment policy.
Less than 1 in 3 churches had an employee handbook, and of those that did, only 10 percent had been reviewed by an attorney. The vast majority of church leaders don’t even know of an attorney that can help them with respect to the unique legal needs of churches.

As a board member, make it your mission to stay informed. Your vigilance will become your church’s greatest protection from legal entanglements.

Download a PDF version of this checklist.

Image: AdobeStock/ArtFamily

Advantage Member Exclusive

Do Your Church’s Governing Documents Allow Virtual Business Meetings?

Answering this crucial question can help legally validate decisions made during the coronavirus outbreak—and beyond.

Sarah E. Merkle, Attorney

Bio

Editor’s Note. This article is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

The law governing business meetings for churches is state-specific, meaning that whether your church can hold a virtual business meeting through a video conference or other technological means is ultimately governed by the law of the state where your church is incorporated. Once you have gained an understanding of what applicable state laws say about virtual business meetings for your board or membership, you then need to check your bylaws and any other organization-specific rules applicable to business meetings.

Step one: Find bylaw language relevant to board and membership meetings

First, look at the section in your bylaws that discusses the church board and its meetings. Find language that discusses when and how the church leaders or officers may meet.

Next, look for language in your bylaws that discusses membership meetings. That language might be in the section titled “Members,” or it could be in a section titled “Meetings” or “Annual Meeting.”

As you look at the bylaws language regarding board meetings and member meetings, you are looking for language that indicates “yes, you may have a virtual meeting”—wording that addresses whether the board or membership may meet other than when the members are physically present in the same room.

If the bylaws allow virtual meetings, the language describing this permission could take various forms:

An explicit provision allowing participation via communication equipment that allows for simultaneous participation; or,
Language that states a quorum is present either through the physical presence of a specific number of members, or presence through remote communication technology.

Alternatively, the bylaws may not address virtual or remote meetings at all. They might simply say something general, such as, “Meetings may be held at a place determined by the board.”

Step two: Evaluate how the relevant bylaw language relates to applicable state law

Once you have identified the bylaw language that is relevant to how your board and membership may meet, you need to fit that language together with the applicable state law.

Five questions churches should answer to make sure their decisions are valid if they can hold an in-person meetings.

Understanding how the law and your governing documents fit together on the issue of virtual meetings is one of the most important parts of my virtual church meetings toolkit. The section below explains three possible—and common—scenarios. The toolkit also contains a useful decision tree that can provide you with a visual guide. If you are unsure of how to proceed, consider contacting qualified legal counsel for help.

Three common scenarios

These are the three most common scenarios churches encounter when interpreting state law and bylaws to determine whether they can validly conduct business or membership meetings through virtual technology:

If applicable state law expressly allows virtual business meetings but only if your bylaws also allow virtual business meetings, your board or membership cannot meet virtually unless your bylaws include language that expressly allows virtual business meetings.
If applicable state law expressly allows virtual business meetings unless your bylaws expressly disallow them, your board or membership can meet virtually unless your bylaws expressly disallow virtual business meetings.
If applicable state law is silent about virtual business meetings, your board or membership cannot meet virtually unless your bylaws include language that expressly allows virtual business meetings.

Excerpted from Your Complete Guide to Virtual Church Meetings: A toolkit for legal and compliant business meetings, by Sarah Merkle. Used with permission.

The downloadable, step-by-step toolkit helps churches determine whether virtual business meetings are permitted, make decisions when virtual business meetings are not an option, and prepare to hold a legal and compliant virtual business meeting. It also offers easy-to-reference resources, such as a guide to state laws addressing virtual meetings and a detailed list of the special rules necessary for holding a compliant virtual meeting. Get your copy today at ChurchLawAndTaxStore.com.

Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.

Image: Andriy Onufriyenko | Getty

Church Loan Modifications in a Crisis

Restructuring your church’s debt when full payment, or any payment, becomes difficult.

Vonna Laue and Michelle Sanchez

Last Reviewed: January 16, 2025

The COVID-19 pandemic changed the way churches operate both logistically and from a ministry perspective.

For example, more people may be participating in worship online than before the pandemic. And online giving—once a novelty to many churches—is becoming commonplace.

Church administration is just as impacted by the changes as frontline ministry.

We want to focus on a specific related topic that is relevant for many, but not all, churches: loan modifications.

If your church is struggling with debt payments, have you considered whether the payment plan offers any leeway? If not, it may be time to have a conversation with your lender.

This leeway can provide some temporary relief as your church weathers a financial hardship and needs time to regroup.

Wondering whether your church is carrying too much debt? Use these calculations to chart your church’s financial health.

Prudent loan modifications

During the pandemic, the FDIC (Federal Deposit Insurance Corporation) posted highlights from the Interagency Statement on Loan Modifications and Reporting by Financial Institutions Working With Customers Affected by the Coronavirus.

Some of the ideas the FDIC discussed are still relevant in a post-pandemic world.

One of the highlights, “prudent loan modifications,” explored how borrowers can work with lenders if they find themselves out of compliance with loan covenants or unable to make payments.

Borrowers will need to undergo some type of underwriting, and each bank will have its own set of requirements. But a church facing a hardship should be prepared to submit a continuance plan to outline the specific steps it will take as it works to meet future obligations.

These steps may include:

Engaging the growing online community to participate financially and expectations for that to continue.
Developing online ministry options for men’s, women’s and children’s, youth and community group ministries.
Communicating better about giving opportunities and methods.
Proactively monitoring weekly giving trends and adjusting accordingly.
Developing a Financial Advisory Standing Team (FAST) to identify trigger points for decisions, obtain perspective from various departments, and adjust budgets.
Developing plans for any ongoing remote work, laying out expectations for this arrangement, and analyzing its operational impact.
Cash projection reporting.
Spending reductions.

Loan modifications can come in the form of temporary payment deferral, an interest-only duration, a reduced interest rate, an extension of the amortization term, and waiver of loan covenants. Which option you choose should be based on your church’s needs.

Depending on when your loan originated, understand that interest rate hikes in the past year are likely to affect any modification you may desire.

Communication is key

Communicating proactively with your lender may include language like this:

In response to the [cause of current economic difficulty resulting in request for modification], we have initiated our ministry continuance plan which includes formally requesting a loan modification. [Expand on the results of the cause here.] Therefore, we are requesting a loan modification to defer payments on our loan for 90 days. A summary of our ministry continuance plan is attached for your review and reference.

Tip: If you have a good rapport with the relationship manager at your financial institution, certainly check with this individual first to see what specific information should be included in the request. The better the information you provide early in the process, the less time it should take to receive a response or approval.

Remember, a loan modification is not loan forgiveness. It may only be a temporary reprieve from your normal debt service obligation.

You will need to continue to actively monitor the situation and determine how to prepare for payments when the modification period expires.

We recognize the strain that is put on both churches as well as individuals within the church during the current inflation and potential recession environment. However, not everyone is being financially impacted at this point and some individuals may be able to assist more when they understand the extensive measures your church is taking to be financially responsible.

We all learned “Stop, drop, roll!” as children. Hopefully, it’s a command very few of us have had to act upon. But, we still remember it well and can recite it easily.

Let’s change that slightly and apply it to our churches as “Stop, pray, communicate!”

With those keys, we can weather a financial storm. We may even find that ministry has been impacted in positive ways that will serve the church for decades.

Vonna Laue, CPA, is a senior editorial advisor for Church Law & Tax. In 2010, she was inducted into The Church Network’s Church Management Hall of Fame.

Michelle Sanchez, CPA, serves as a CFO consultant. She is on the board of directors for mission focused non-profits, churches, and higher education institutions. She is also the CFO at Horizon Christian Fellowship .

Editor’s Note: This content was last reviewed and updated in March 2023.

Image: Ariel Skelley | Getty

5 Questions Churches Should Ask Before Holding a Virtual Business Meeting

How church leaders can ensure their decisions are valid if an in-person meeting isn’t possible.

Sarah E. Merkle, Attorney

Bio

Editor’s note: Attorney Sarah Merkle’s newly released resource, Your Complete Guide to Virtual Church Meetings: A toolkit for legal and compliant business meetings, is now available on ChurchLawAndTaxStore.com.

COVID-19 (coronavirus) may have required social distancing, but it did not mean an end to church business decisions. In fact, if anything, the coronavirus may have increased the number of decisions that need to be made and accelerated the timeline for making them.

Church business decisions are made at board and membership meetings, which means in a virtual world, we have to ask, “How?”

Technology makes the answer seem easy. Surely a business meeting can be held on GoToMeeting or Zoom, right? Unfortunately, not necessarily. The availability of technology does not necessarily mean that a business meeting using that technology is permitted by your church’s state law or governing documents. And even if virtual business meetings are permissible, special rules are necessary to ensure that each member’s rights are preserved.

Before you decide to hold your next board or membership meeting online, answer these five questions.

1. Does our state law allow virtual business meetings?

The law governing business meetings for churches is state-specific, meaning that whether your church can hold a virtual business meeting is ultimately governed by the law of the state where your church is incorporated. For many churches, that is the law of the state where your church is physically located. For others, that is the law of the state where your denomination is incorporated. If your church is independent and not incorporated at all, check the law of the state where your church is physically located to see if it has provisions for unincorporated non-profit entities or religious entities. Regardless of your church’s status, look for provisions that discuss board and membership meetings.

Tip: If delving into the law sounds overwhelming, start by doing an online search for your state name and the word “statutes.” Choose a link that takes you to an official site for the state legislature to find the law. Look for a section titled “Corporations” or “Business Corporations” or “Non-Profit Corporations.” Then look for the subsections that address board and membership meetings. Alternatively, once you locate the right website for the statutes, you can search on the word “meeting.”

Before you make plans for a virtual business meeting of any kind—board or membership—you should read the relevant sections of applicable state law and determine whether virtual meetings are permitted. Some states allow for virtual board meetings but not virtual membership meetings. Other states are more permissive. Still others point churches back to their governing documents, allowing virtual meetings only if an organization’s bylaws permit.

The takeaway here is to avoid assumptions about what the law allows. Find the applicable law and be sure you understand what blanket permissions (or prohibitions) it includes about virtual meetings. Also, understand to what extent the law leans on your church’s governing documents to determine whether virtual meetings are allowed.

2. Do our governing documents allow virtual business meetings?

Once you understand applicable state law on virtual business meetings, next look to your church’s governing documents. Whether you are denominationally affiliated or independent, your church’s bylaws should speak to board meetings and membership meetings.

You are looking for language that specifies whether meetings must be in person, or at a place determined by the board of directors. You are also looking for language that says meetings can be held virtually, or by any means that allows for simultaneous communication. For example, there may be a provision that expressly allows for meeting scenarios where members communicate virtually or electronically instead of being physically present in the same room. If that’s the case, you can move forward with plans for a virtual business meeting.

On the other hand, if your bylaws do not expressly allow for virtual meetings, and applicable state law doesn’t provide any options either, then the general rule is that you may only conduct business when members are physically present in the same room. Robert’s Rules of Order Newly Revised (11th ed.), 95–97.

3. What actions can we take if a virtual business meeting is not allowed?

If neither state law nor your bylaws permit virtual business meetings, do not despair. There may be other ways that you can still conduct business, and they are listed below. Either of these options likely needs its own explanation, but the list is a starting point for brainstorming solutions in this difficult situation with COVID19:

Explore whether your church’s bylaws give the board or leadership latitude to make decisions during an emergency or in between church business meetings; and/or
Consider whether there are any decisions to be made that could result in a unanimous vote. Many states have laws that allow decisions to be made if unanimity among the voting body exists and can be determined through a written or mail-in ballot.

4. How will we know whether a quorum is present?

If virtual meetings are a permissible option for your church, make sure you take time to think through more than just the technical capabilities of your chosen software. A quorum—that is, the minimum number of people needed to transact business—is a baseline requirement for a compliant business meeting of any kind. Meeting virtually doesn’t eliminate or relax that requirement.

Before you send out the meeting notice, take time to review your church roll and ensure that each member receives proper notice of the meeting and the details of how to participate. Then decide how you’re going to determine the number of people that have joined the meeting and the number that are in attendance at any time. If only your board is meeting, or if your church is small, you may be able to do a roll call at the start and then monitor the number of attendees. Larger groups will likely need to provide a separate login code for each participant. There are several good options here. The bottom line: make sure you think through the process ahead of time.

5. What special rules will we follow for discussion and voting?

Finally, before you hold a virtual meeting, decide on a set of rules that, at minimum, addresses how you will recognize members and take votes. Avoid putting members in a situation where one member has to yell over others to be recognized and heard. Instead, write rules that make good use of the software you’ve chosen and instruct members to “raise their hand” by selecting a specific button. Tell them how you will choose who to recognize, and how they can raise a point of order if there is a procedural error. Understand the ways in which you can use the software to take a vote (e.g., virtual hand clapping, or polling).

There’s no need to write rules that are extreme or unnatural for your church’s culture. That said, thinking through the process, writing it out, and communicating it to members ahead of time will set everyone at ease. Note, too, that any special rules (e.g., rules that modify your bylaws or your parliamentary procedure rulebook) must be adopted by the membership before they become applicable and enforceable. My advice is to distribute them ahead of any meeting and then take a vote to adopt them (hopefully by general consent) at the outset.

Concluding thought: Be risk averse

Reading this article might make you conclude that complying with the law and your governing documents is too much trouble. I sympathize. Compliance is wearisome and often seems pointless in the short-term. But I encourage you to re-run the cost/benefit analysis before you make a final decision. Consider the long-term dissention and distraction that could come if members question decisions because they were made in a manner that exceeds what the law or your governance structure allows. Keep unity and your church’s mission in your sight and let them be your motivators. Be willing to take extra steps now—even if laborious—to avoid unnecessary distractions later.

Related article: “When Church Business Meetings Go Electronic”

Video

Image: Canva/Kaelyn Brooks

Advantage Member Exclusive

Webinar: Rich Hammar’s 15 Must-Knows for Pastors

On-Demand Webinar: Attorney Richard R. Hammar identifies 15 topics that frequently trip up pastors and church administrators.

Richard R. Hammar, Attorney, CPA

Bio

Editor’s Note. This video is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.

Your training to serve as a pastor prepared you to write sermons and guide the spiritual life of a congregation. But what about the administrative side of ministry? Attorney and CPA Richard R. Hammar knows only too well that pastors struggle with budgeting, understanding housing allowances, or running a business meeting.

Loading the player...

In this one-hour Advantage Member webinar, Hammar shares 15 things that frequently trip up new and seasoned pastors. This webinar will provide awareness, education, and inspiration to help get pastors pointed in the right direction.

Take me back to “Rich’s 15 Must-Knows for Pastors” to choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Image: Piotrekswat | Getty

What We Know: Tax Payments and Filings for Churches and Individuals

How the coronavirus is affecting the current tax season—and beyond.

The Editors

The US Department of Treasury, the Internal Revenue Service (IRS), and state agencies continue to issue new instructions and guidance regarding tax-related matters for the country in response to the COVID-19 (coronavirus) outbreak. Church Law & Tax continues to update this page as relevant new advisories and information become available.

Income tax-filing

The Treasury Department has pushed back the deadline for Americans to file their income tax returns in response to the COVID-19 (coronavirus) outbreak.

All taxpayers and businesses now have through July 15, 2020, to file their returns—and the IRS will waive all interest and penalties. As a result, the extension now applies to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020.

Separately, in Notice 2020-23, the IRS expanded this relief to include quarterly estimated tax payments (Form 1040-ES) that would have been due before July 15, 2020, including the first two estimated tax payments due on April 15 and June 15 of 2020. This means that any individual who has a quarterly estimated tax payment due on or after April 1, 2020, and before July 15, 2020, can wait until July 15 to make that payment, without penalty.

Estimated Quarterly Tax Payments for 2020

Quarter	Original Due Date	Revised Due Date
Jan-Mar	April 15, 2020	July 15, 2020
Apr-Jun	June 15, 2020	July 15, 2020
July-Sept	Sept. 15, 2020	Sept. 15, 2020
Oct-Dec	Jan. 15, 2021	Jan. 15, 2021

Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to October 15, 2020, by filing Form 4868 through their tax professional, tax software, or using the Free File link on irs.gov. An extension to file is not an extension to pay any taxes owed. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by the July 15, 2020, deadline to avoid additional interest and penalties.

Key point. This provision is especially relevant to pastors who typically use the estimated tax procedure to prepay their federal taxes since they are exempt by law from income tax withholding.

Treasury Secretary Steven Mnuchin still encourages taxpayers to file income taxes as soon as possible, especially those who are expecting refunds, the Wall Street Journalreported.

The IRS also encourages people who have failed to file returns from previous years to do so now. The agency says “[m]ore than 1 million households that haven’t filed tax returns during the last three years are actually owed refunds; they still have time to claim these refunds.” For taxpayers with a tax liability, the IRS says they “should consider taking the opportunity to [enter] into an Installment Agreement or an Offer in Compromise.”

At the state level, the American Institute of Certified Public Accountants has assembled this chart tracking state income tax-filing deadlines. California has already pushed its filing and payment deadline to June 15, and the state waived interest, late-filing, and late-payment penalties. Connecticut and Maryland have extended their deadlines for business returns (June 15 for Connecticut and June 1 for Maryland). Oregon and Washington have issued guidance offering certain provisions and accommodations as well.

Church reporting requirements

Separately, in Notice 2020-23, the IRS said its deadline extensions also apply to tax-exempt organizations required to file an annual Form 990, Form 990-N, and/or Form 990-T; Form 4720; or other commonly required reports used under certain circumstances. Section 6033 of the Internal Revenue Code exempts churches from filing annual Form 990s or Form 990-Ns, however, if a church generates $1,000 or more annually in unrelated business income from a church-run business or the renting of its space to outside groups, it is required to file a Form 990-T.

Installment Agreements

The IRS says individuals with outstanding tax liabilities are still able to enter into new Installment Agreements (a monthly payment arrangement set in advance with the IRS). For existing Installment Agreements, the agency says payments that would have been due between April 1 and July 15, 2020, are now suspended. Taxpayers who cannot comply with the terms of an Installment Payment Agreement (including a Direct Deposit Installment Agreement) may also suspend payments during this timeframe if they wish, the IRS says.

The IRS will not default on Installment Agreements through July 15, 2020. However, interest will continue to accrue on unpaid balances.

Offers in Compromise

The IRS says taxpayers with a pending Offer in Compromise application will now have until July 15, 2020, to provide any requested additional information. The agency also will accept new applications for Offers in Compromise.

Regarding existing Offers in Compromise:

Taxpayers may suspend all payments until July 15, 2020. However, interest will continue to accrue on unpaid balances.
The IRS will not default on an existing Offer in Compromise for a taxpayer that is delinquent on a 2018 return. But the agency says the taxpayer should file the delinquent 2018 return, along with their 2019 return, on or before July 15, 2020.

Audits

The IRS will not start new field, office and correspondence examinations until July 15, 2020, unless such an examination is “deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.”

Stay updated

Continue to follow ChurchLawAndTax.com and its free e-newsletters and social media for updates on this page as well as its coronavirus coverage. In the meantime, track ongoing tax-related deadlines through Church Law & Tax’s tax calendar.

Also get updates directly from the IRS and the Treasury Department.

Image: Classen Rafael/EyeEm | Getty Images

Top 3 Most Confusing Tax Issues for Clergy

Discover the top 3 confusing tax issues for clergy and practical tips to handle them effectively.

Richard R. Hammar, Attorney, CPA

Bio

Last Reviewed: January 2, 2025

Ministers and church treasurers must understand the tax rules that apply to clergy. Unfortunately, seminary training rarely covers these unique tax laws, and church treasurers often lack the necessary knowledge. This gap in information can lead to mistakes in handling clergy income, paying taxes, and missing out on valuable tax benefits.

Clergy are eligible for five special tax rules regarding services performed in the exercise of their ministry:

Housing Allowance: A portion of church compensation designated as a housing allowance is exempt from federal income tax (limitations apply).
Parsonage Value: The annual rental value of a church-provided parsonage is exempt from federal income tax.
Exemption from Self-Employment Taxes: Ministers may qualify for exemption from self-employment taxes under specific conditions.
Self-Employment for Social Security: Ministers are generally considered self-employed for Social Security purposes (if not exempt).
Income Tax Withholding Exemption: Ministers’ wages are exempt from income tax withholding unless they opt for voluntary withholding.

To qualify for these benefits, you must meet the IRS’s definition of a “minister” and be engaged in the exercise of ministry. The IRS applies a five-factor test to determine this status. If you meet these requirements, the next step is understanding how to properly file taxes to claim the benefits available to you.

Top 3 Tax Issues for Clergy

1. Reporting Income Taxes: Employee or Self-Employed?

Ministers must determine whether to report income taxes as employees or self-employed individuals. Most new ministers should report as employees because:

Fringe benefits, like employer-paid health insurance premiums, are excludable.
The risk of an IRS audit is lower for employees.
Employees avoid additional taxes and penalties that can result from being reclassified by the IRS during an audit.

Ministers are always treated as self-employed for Social Security purposes concerning their ministerial services, regardless of whether they report as employees for federal income tax. This dual tax status means:

Ministers pay the self-employment tax (15.3% of taxable earnings).
Churches must not withhold Social Security and Medicare taxes (FICA taxes).
Some churches help by paying half or all of the minister’s self-employment tax, but these payments must be reported as taxable income.

3. Paying Taxes: Quarterly Payments and Estimated Taxes

The federal income tax is a “pay as you go” system. Ministers must prepay their income and self-employment taxes using estimated tax payments. Here’s how:

Steps for Paying Estimated Taxes

Obtain IRS Form 1040-ES: Get this form before April 15 of the current year.
Compute Estimated Taxes: Calculate your estimated tax by considering adjusted gross income, deductions, and credits. Include housing allowance exclusions and self-employment taxes.
Pay Quarterly Installments: Make one-fourth of your total estimated tax payments by the following deadlines:
- April 15: For income earned January 1–March 31
- June 15: For income earned April 1–May 31
- September 15: For income earned June 1–August 31
- January 15: For income earned September 1–December 31
Adjust Quarterly Payments: Recalculate if your income, deductions, or credits change during the year.

Handling Overpayments and Underpayments

Overpayment: Apply overpaid taxes to the following year or request a refund.
Underpayment: Avoid penalties by using IRS Form 2210 to calculate and pay any owed penalties.

FAQs About Clergy Taxes

Can clergy opt out of Social Security? Yes, but only on religious grounds by filing IRS Form 4361. This decision is permanent unless Congress changes the law. What happens if a church withholds FICA taxes for a minister? This is incorrect. Ministers are always self-employed for Social Security regarding ministerial services. Do ministers need to pay quarterly estimated taxes? Yes, if their estimated tax liability exceeds $1,000 and withholding does not cover their total tax owed. What is the housing allowance exclusion? It allows ministers to exclude a portion of their income used for housing expenses from federal income tax, subject to limits.

Conclusion

Clergy face unique tax challenges, but understanding key issues like employment status, Social Security obligations, and estimated taxes can help ministers and church treasurers navigate these complexities. By staying informed and following IRS guidelines, ministers can ensure compliance and maximize their tax benefits.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Image: Canva/Kaelyn Brooks

Rich’s 15 Must-Knows for Pastors: Governing Documents

Understand the importance of church constitution and bylaws.

Richard R. Hammar, Attorney, CPA

Bio

A church’s governing documents include a corporate charter and a constitution or bylaws (sometimes both). The lead minister should be familiar with these documents and be able to identify the current version. There are several aspects of governing documents ministers should understand, including the following.

Bylaw basics: What are church bylaws?

The Model Nonprofit Corporations Act (3rd ed. 2008), which has been adopted by several states, defines bylaws as “the code or codes of rules (other than the articles of incorporation) adopted for the regulation and governance of the internal affairs of the nonprofit corporation, regardless of the name or names used to refer to those rules.”

One court defined bylaws as follows:

The bylaws of a corporation are the rules of law for its government. The term “bylaw” may be further defined according to its function, which is to prescribe the rights and duties of the members with reference to the internal government of the corporation, the management of its affairs, and the rights and duties existing among the members. Bylaws are self-imposed rules, resulting from an agreement or contract between the corporation and its members to conduct the corporate business in a particular way. Until repealed, bylaws are the continuing rule for the government of the corporation and its officers. Schraft v. Leis, 686 P.2d 865 (Kan. 1984).

Know your current version of your bylaws

In many churches, the bylaws were adopted long ago, and have been amended numerous times over the years. As a result, there may be various “editions” in circulation. Often, these editions are undated, making it difficult (if not impossible) to identify the current one. This can create confusion.

Going forward, here are two ways to prevent confusion over which set of bylaws is the current edition:

Identify copies of the church bylaws with a numeric designation. To illustrate, a church identifies its current bylaws as “version 1.0.” During the church’s membership meeting, two amendments are made to the bylaws. Following the meeting, the revised bylaws are printed, and designated as “version 1.1.”
Identify copies of the church bylaws by date. For example, designate the current bylaws “Current as of [date].”

In either case, be sure that all printed copies of the bylaws bear the appropriate designation, and dispose of undesignated versions.

Do churches need both a constitution and bylaws?

Some churches have both a constitution and bylaws. This was a common practice a century ago, and it persists to this day. But there is little justification for a church to have both a constitution and bylaws unless the constitution is made superior to the bylaws either by express provision or by a more restrictive amendment procedure.

To illustrate, some churches have:

(1) a constitution that can only be amended by providing members with advance notice of the proposed amendment prior to a membership meeting, and by a two-thirds vote of the membership at the meeting; and

(2) bylaws that can be amended at a membership meeting, without prior notice to the members, and by a simple majority vote. The church places provisions of greatest importance in the constitution, such as church doctrine and the purchase or sale of church assets, since these can be changed only through a more deliberative process involving advance notice and a super-majority vote. Routine provisions are assigned to the bylaws.

Churches that have both a constitution and bylaws typically address many of the same issues in both documents. Over time, this often leads to conflicts, since amendments in one document may not be made to similar provisions in the other.

Identifying a single body of rules as the “constitution and bylaws” without any attempt to distinguish between the two is a common but inappropriate practice.

Provisions you may want to include in your bylaws

There are a number of potentially helpful provisions that are often omitted from church bylaws, including:

Arbitration or mediation?

An arbitration or mediation provision requiring specified disputes to be resolved through mediation or binding arbitration.

Parliamentary procedure?

Choice of parliamentary law to govern membership meetings. Many church leaders assume that Robert’s Rules of Order Newly Revised governs church business meetings. But this is not the case. There are dozens of competing models of parliamentary procedure, and a church should formally select the model that will be applied. If your church intends to use Robert’s Rules of Order Newly Revised, then your bylaws should say so.

Church discipline

If your church bylaws contain a provision addressing the discipline of members who violate your standards of membership, they should clarify that members who have been charged with conduct in violation of the standards of membership waive their right to resign from membership in the church. Without such a provision, members can preempt a church’s disciplinary procedure by simply informing their pastor that they are resigning as members. Guinn v. Church of Christ, 775 P.2d 766 (Okla. 1989).

Contract approval

A clause specifying how contracts and other legal documents are to be approved.

Signatory authority

State who has the authority to sign church checks. It is a basic tenet of internal control that two persons sign checks, and a church’s bylaws should specify which two officers have this authority.

‘Bonding’ of church officers and employees

“Bonding” of officers and employees who handle church funds.

Annual audit

An annual audit by independent certified public accountants (CPAs). There are compelling reasons why a church should consider having an annual audit. Most importantly, an audit promotes an environment of accountability in which opportunities for embezzlement (and therefore the risk of embezzlement) are reduced. And, the CPAs who conduct the audit will provide the church leadership with a “management letter” that points out weaknesses and inefficiencies in the church’s accounting and financial procedures. This information can be invaluable to church leaders. Smaller churches that cannot afford a full audit may want to consider two other options: (1) Hire a CPA to conduct a review, which is a simpler and less expensive procedure. If the review detects irregularities, a full audit may be considered worth the price. (2) Create an internal audit committee if there are accountants or business leaders within the church who have the ability to review accounting procedures and practices and look for weaknesses. These people often are very familiar with sound internal control policies, and will quickly correct weaknesses in the church’s financial operations.

Indemnification

An indemnification clause providing for the indemnification of officers and directors who are sued as a result of actions or decisions made in the course of performing their duties on behalf of the church.

Defining the church fiscal year

Specification of the church’s fiscal year.

‘Staggered voting’

“Staggered voting” of directors (a portion of the board is elected each year to ensure year-to-year continuity of leadership).

Board authority to act

The bylaws should specify if the church board can act without conducting a formal meeting. To illustrate, section 8.21 of the Model Nonprofit Corporation Bylaws, which has been adopted by several states, specifies that “except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted to be taken by the board of directors may be taken without a meeting if each director signs a consent in the form of a record describing the action to be taken and delivers it to the nonprofit corporation. . . . A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.”

Virtual meeting

The bylaws should authorize the church board to conduct meetings by telephone or a video conference, or allow the “attendance” of an otherwise absent director through telephone connection or video conference, if desired.

Absentee voting

The bylaws should specify if absentee voting is permitted at membership meetings. Absentee voting is not ordinarily permitted unless expressly authorized by an organization’s bylaws. Robert’s Rules of Order Newly Revised specifies: “It is a fundamental principle of parliamentary law that the right to vote is limited to the members of an organization who are actually present at the time the vote is taken in a legal meeting. Exceptions to this rule must be expressly stated in the bylaws. . . . An organization should never adopt a bylaw permitting a question to be decided by a voting procedure in which the votes of persons who attend a meeting are counted together with ballots mailed in by absentees, since in practice such a procedure is likely to be unfair.”

Proxy voting

The bylaws should specify if proxy voting is permitted at membership meetings.

Minute management

State who is authorized to have custody of the minutes of church membership and board meetings.

Financial records management

State who is authorized to have custody of the church’s financial records. These documents are church records, and ordinarily should not be entrusted to the treasurer’s personal possession.

Open records

Most state nonprofit corporation laws give members a right to inspect specified corporate records at a proper time and for a proper purpose. Usually, these laws provide that this authority to inspect corporate records exists unless limited or abolished by the corporate bylaws. To illustrate, the Revised Model Nonprofit Corporation Act, which has been enacted by several states, gives a member a right to inspect the minutes of board meetings if the member’s demand is made in good faith and for a proper purpose; the member describes with “reasonable particularity” the purpose and the records the member desires to inspect; and the records are directly connected with this purpose. The Act specifies that a church’s articles of incorporation or bylaws “may limit or abolish the right of a member under this section to inspect and copy any corporate record.”

Spell out voting requirements

Clarify the meaning of all voting requirements specified in the bylaws. For example, a church’s bylaws may call for a “two-thirds vote” for certain actions. This can have various meanings, including a vote that is precisely two-thirds of the membership; at least two-thirds of the total voting membership, regardless of how many come to a business meeting; or, at least two-thirds of the members present at a duly called meeting at which a quorum is present. This kind of ambiguity has caused countless internal church disputes.

Board suspension/removal

Suspension or removal of board members who miss a specified number of board meetings. Board members owe various “fiduciary duties” to their church, and one of these is the duty to exercise “due care” in the performance of their responsibilities. Board members who miss most board meetings eventually will be in violation of this duty, and some churches have chosen to address this issue in their bylaws with a provision calling for the suspension or removal of such persons. The fiduciary duty of due care goes to the very heart of the status of a board member.

Board resignations

It is common for church board members to resign their position when they relocate or become incapacitated. However, church bylaws usually do not address when and how such resignations will occur. This is an important and frequently overlooked issue, since board members generally remain liable for the actions of the board until their resignation is effective. If the timing of a resignation is ambiguous, then this can create lingering exposure to liability. To avoid this, a church’s bylaws should clarify precisely how and when a board member’s resignation will be effective.

Seek legal assistance. The drafting of church bylaws is a complex task that should not be attempted without the assistance of an attorney. Knowing what to include and exclude from your bylaws are important tasks that require legal knowledge and experience.

Is it time to rewrite our bylaws?

Do church bylaws ever need to be rewritten? That depends on several factors, including the following:

How old are the bylaws? The older they are, the more likely they are in need of a legal review, and possibly revisions or a new and updated document.
Who drafted the bylaws? If the bylaws were drafted by one or more attorneys with experience in corporate governance, ideally involving churches or other nonprofit organization, there is less need to rewrite the bylaws. On the other hand, many churches have bylaws that were drafted by a committee of laypersons with little if any specialized knowledge in corporate governance. In such a case, there may be a greater need for revisions or a new document.
Some church bylaws are mandated by the denomination with which they are affiliated, and the church has little if any authority to make changes. Church leaders should be familiar with any such limitations.

The application of denominational governing documents

In many denominations, affiliated churches are limited in their ability to compose or revise their bylaws. In some cases, the church’s bylaws are entirely prescribed by the denomination’s governing documents. Meanwhile, in others, the church is free to compose its own bylaws, but must include terms mandated by the denomination’s governing document. As one court noted, “For religious nonprofit corporations, bylaws may partly be prescribed by, and may be an important tie to, a related superior or affiliated religious organization.” New v. Kroeger, 84 Cal.Rptr.3d 464 (Cal. App. 2008).

Church charters

The application for incorporation that is filed with the secretary of state generally is called the articles of incorporation or articles of agreement. This document, when approved and certified by the appropriate government official, is commonly referred to as the corporate charter.

Church charters typically set forth the following information:

corporate name
corporate address
period of duration
purposes of the corporation
names and addresses of incorporators and directors

Additional Reading

For deeper readings on bylaws, charters, and other areas related to governing a church, see the following:

Take me back to “Rich’s 15 Must-Knows for Pastors” to choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Rich’s 15 Must-Knows for Pastors: Parliamentary Procedure

Learn the basics of running church meetings.

Richard R. Hammar, Attorney, CPA

Bio

Ministers are not expected to be experts in parliamentary procedure, but familiarity with five common and recurring issues can help clear up confusion as they seek to conduct meetings in a proper and orderly way.

Which parliamentary authority applies to meetings of our board and membership?

Robert’s Rules of Order Newly Revised, or any other body of parliamentary procedure, is not applicable unless specifically adopted.

Churches can and should select a specific body of parliamentary procedure by an appropriate clause in the church’s governing document. If a particular system of parliamentary procedure has been used by common consent long enough to constitute a church practice or custom, then it probably would be considered as binding as if specifically adopted by a provision in the church’s governing document.

If no body of parliamentary procedure has been adopted, either by reference in a church’s governing document or by custom, then the ordinary or “common law” rules of parliamentary law should be observed in the conduct of a meeting.

Churches should not assume that Robert’s Rules of Order Newly Revised is the only parliamentary authority. It is not. On the contrary, there are alternative systems of parliamentary procedure, some of which are excellent (and some would say superior).

Caution. Many churches adopted the original Robert’s Rules of Order, or one of the early revisions. The original text was published in 1876, and it has been revised ten times. The current (12th) edition was released in 2020. Obviously, churches that select “Robert’s Rules” should be sure to identify this system of parliamentary procedure as “the most recent revision of Robert’s Rules of Order.” Otherwise, they may have to resort to obsolete rules to resolve parliamentary questions.

Can a church’s bylaws be “suspended”?

Can church members vote to “suspend” the church bylaws during a membership meeting? Consider the following scenario. A church’s bylaws state that board members serve a maximum of six years in office. The church is in the midst of a construction project, and a board member is a contractor who has provided invaluable assistance to the church during this project. Several church members want this person to remain on the board following the expiration of his term of office. A member made a motion at an annual church business meeting to “suspend the bylaws” to allow this to happen. Can church members, at a duly called business meeting, take action to suspend the bylaws?

In most cases, the answer is no. Consider the following ten points.

1. State nonprofit corporation laws under which many churches are incorporated generally make no provision for the suspension of bylaws.

2. Suspension of bylaws is an extraordinary action that is not found in most church bylaws, but it is important to confirm that this is the case.

3. If your church bylaws allow for their own suspension, then be sure to comply with any procedural requirements. For example, the bylaws of some public charities and for-profit corporations provide for their own suspension, but they typically require a supermajority vote, such as two-thirds or three-fourths of the members present.

4. Many churches have adopted the current version of Robert’s Rules of Order as their official body of parliamentary procedure governing church business meetings. Section 25 of Robert’s Rules of Order Newly Revised states:

Rules contained in the bylaws (or constitution) cannot be suspended no matter how large the vote in favor of doing so or how inconvenient the rule in question may be unless the particular rule specifically provides for its own suspension, or unless the rule properly is in the nature of a [procedural] rule of order.

For churches that have not formally adopted any body of parliamentary procedure, Robert’s Rules of Order Newly Revised is persuasive authority. Section 2 of Robert’s Rules of Order Newly Revised states:

Although it is unwise for an assembly or a society to attempt to function without formally adopted rules of order, a recognized parliamentary manual may be cited under such conditions as persuasive.

5. Some corporations have amended their bylaws to remove a provision authorizing their suspension. One common reason for doing so is that a provision authorizing bylaw suspension is antidemocratic. That is, the bylaws are adopted by the corporate membership following an intensive period of drafting and consideration. Permitting this fundamental legal document, or a provision therein, to be suspended by a specified percentage of members present at an annual or specially called meeting of the members typically will result in a relatively small minority of the total membership dictating a suspension of the bylaws.

6. Churches that choose to provide for the suspension of their bylaws can limit potential problems by requiring a supermajority vote and by limiting the suspension option to specific bylaw articles or sections.

7. In a famous case, Supreme Court Justice Oliver Wendell Holmes noted that “hard cases make bad law.” The point being that bad precedents often result from difficult circumstances. Churches that feel compelled to suspend their bylaws, even when legally authorized, may end up regretting doing so. At a minimum, they will be establishing a precedent that may be referenced on many future occasions whenever an emergency arises. The very concept of corporate bylaws being subject to suspension is at odds with the fundamental nature of bylaws as a set of rules governing corporate practice and administration. In one sense, the bylaws are the one document that protects a church against anarchy. Any compromise to the stability of a church’s bylaws raises the potential for future problems.

8. Proper drafting of bylaws often can avoid the clamor for their suspension that may arise out of temporary emergencies. Church leaders should periodically have their bylaws reviewed by legal counsel.

9. Suspending the bylaws, when not authorized, will result in a “cloud” over the integrity and legitimacy of whatever action is taken while the bylaws are suspended.

10. Bylaw amendment should be viewed as an alternative to bylaw suspension. Bylaws typically provide for their own amendment. In many cases, bylaw amendments take effect immediately.

Improper and dilatory motions

A number of parliamentary rules are designed to facilitate the efficient consideration of business. Two of these rules are the prohibitions against improper and dilatory motions. These rules limit the ability of church members to hijack church business meetings with bizarre and irrelevant motions.

Improper motions

Robert’s Rules of Order Newly Revised lists the following examples of improper motions:

Motions that conflict with the corporate charter, constitution, or bylaws.
Motions that conflict with procedural rules prescribed by national, state, or local laws.
In some cases, motions that conflict with a previously adopted motion that has not been rescinded, or considered and rejected.
Motions presenting practically the same question as one that is still under consideration.
Motions that are outside the objective of the organization as specified in its governing documents.

Dilatory motions

Robert’s Rules of Order Newly Revised defines a dilatory motion as one that “seeks to obstruct or thwart the will of the assembly.” It is the duty of the chair to rule that such motions are out of order as dilatory.

Section 10 of Robert’s Rules describes another kind of improper dilatory motion:

Motions to reaffirm a position previously taken by adopting a motion or resolution are not in order. Such a motion serves no useful purpose because the original motion is still in effect; also . . . if a motion to reaffirm failed, it would create an ambiguous situation.

What is meant by receiving, accepting, or adopting a report?

It is common for motions to be offered at church board and membership meetings to “accept,” “receive,” or “adopt” a report. For example, after the church treasurer makes a report to the church board at a monthly meeting, a board member moves that the report be “received.” Is this an appropriate motion, or would some other motion be more appropriate? Consider the following explanations.

“Receiving” a report

A report of an officer or committee is “received” by a board or assembly when it is presented or read. In other words, the person making the report presents it, while the listeners receive it. As a result, it is incorrect parliamentary practice for a motion to be made at a board or membership meeting to “receive” a report after it is presented, since the act of presenting it constitutes reception by the hearers.

Example. A church treasurer makes a report of the church’s finances at a monthly meeting of the church board. Following the presentation of the report, and the treasurer’s response to questions and requests for clarification, a board member moves “to receive the treasurer’s report with appreciation.” This motion is nonsensical, since the treasurer’s report was received when it was read.

Adopting or accepting a report

Robert’s Rules of Order Newly Revised states that motions to adopt or accept the report of an officer or committee are synonymous, and signify that the entire report becomes “the act or statement of the assembly.” Such motions are common in church board and membership meetings.

To illustrate, it is common for motions to be made and passed to accept a treasurer’s report or the minutes of the previous meeting. It is important to understand, however, that such motions have the effect of “the assembly’s endorsing every word of the report, including the indicated facts and reasoning, as its own statement.” This may not be a problem in some, or even most, cases. For example, a board may want to formally adopt the minutes of each meeting, since they reflect the actions of the board itself. But, there can be situations in which it would be more appropriate for a board or assembly to merely receive a report (by having it presented).

Some reports of officers or committees contain one or more recommendations for action. In such cases, it is appropriate and necessary for a motion to adopt the recommendation. Usually, such a motion is made by the person presenting the report.

No action

Many reports made by officers and committees to a board or assembly are for informational purposes and contain no recommendations or motions. For example, at a regularly scheduled meeting of a church board, a committee member reads a report that contains no proposed actions. It would be appropriate for the chairperson to thank the committee and request that the report be placed on file, and then move to the next item of business. A motion to accept or adopt the report is not necessary, since it is informational.

In this regard, Robert’s Rules of Order Newly Revised states: “Apart from filing such a report . . . no action on it is necessary and usually none should be taken.”

In some organizations, the treasurer’s periodic reports to the board of directors are not accepted or adopted (so long as they contain no specific recommendations for action). Instead, the chairperson requests the secretary to file these reports without action. At the end of the fiscal year the board adopts a motion to accept the report of the CPA firm that audits the organization’s books. This has the effect of relieving the treasurer of any personal culpability for his or her reports (excepting fraudulent or illegal activity). It also may minimize the board’s culpability that might otherwise exist if it adopted or accepted each report of its treasurer. The organization itself, at its annual business meeting, also adopts or accepts by motion the CPA’s audit report.

Special rules for small meetings

Robert’s Rules of Order Newly Revised permits certain parliamentary rules to be relaxed in “small boards and committees,” which it defines as those “consisting of not more than about a dozen members.” The reason for less formality in small boards and committees is to facilitate the conduct of business. Note that larger boards and committees (those with more than about a dozen members), are subject to the same parliamentary rules as a large deliberative assembly.

Here are the parliamentary rules that are relaxed in small boards and committees, according to Robert’s Rules of Order Newly Revised:

Members are not required to obtain the floor before making motions or speaking, which they can do while seated.
Motions need not be seconded.
There is no limit to the number of times a member can speak to a question, and motions to close or limit debate generally should not be entertained.
Informal discussion of a subject is permitted while no motion is pending.
Sometimes, when a proposal is perfectly clear to all present, a vote can be taken without a motion having been introduced. Unless agreed to by unanimous consent, however, all proposed actions of a board must be approved by vote under the same rules as in other assemblies, except that a vote can be taken initially by a show of hands, which is often a better method in such meetings.
The chairperson need not rise while putting questions to vote.
The chairperson can speak in discussion without rising or leaving the chair, and, subject to rule or custom within the particular board (which should be uniformly followed regardless of how many members are present), he or she usually can make motions and usually votes on all questions.

Additional reading

Take me back to “Rich’s 15 Must-Knows for Pastors” to choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Image: Canva/Kaelyn Brooks

Rich’s 15 Must-Knows for Pastors: Church Insurance

Determine if your church has the right insurance.

Richard R. Hammar, Attorney, CPA

Bio

There are few areas more important for a minister to master than those dealing with insurance coverages and exclusions. Consider the following.

What kinds of insurance should your church have?

Some insurance is essential, and should be obtained by every church. Other kinds of insurance coverage are desirable, meaning that they are not absolutely necessary but may be highly desirable depending upon a church’s circumstances. Most church leaders would consider property and liability insurance to be essential. Other forms of insurance should be regarded as essential depending on the circumstances. These include:

Property Insurance Coverage

Covers many major risks to church property, including fire, smoke, lightning, hurricane, and tornado.

Action points

Check to see if unique items such as stained glass windows, pipe organs, handbells, artwork, and sound equipment require special endorsements.
Obtain appraisals of unique items to be sure they are adequately insured.
Conduct periodic inventories of property to prove claims in the event of loss or destruction.
Check to see if coverage is limited to the market value of damaged or destroyed property. If so, consider obtaining replacement cost coverage.
Check on coverage for items of personal property owned by members or employees. Examples include expensive coats left in a coat room and an employee’s personal laptop computer.
Check to see if boilers require a special endorsement.
Check the exclusions under the policy. Some risks, such as earthquakes, mold, and sewer or drain backup, may be excluded and require special endorsements.
If your church is located in one of 22,000 communities that participate in the National Flood Insurance Program (NFIP), you can obtain flood insurance from insurers that participate in the NFIP. Coverage amounts are often inadequate.
Check to see if your policy contains a coinsurance clause. If so, you are required to insure your property for a specified percentage of its replacement value. If you don’t, you become a coinsurer, meaning that your policy will pay less than the stated limits in the event of a partial loss. These clauses make it essential for churches to have adequate coverage. This review should be done annually.

Liability Insurance Coverage

Covers many forms of personal injury and damage to the property of others. Common examples includes slips and falls, sexual misconduct (coverage may be limited to the church, and exclude the offender).

Action points

Check to see if sexual misconduct coverage is limited, and if higher amounts can be obtained by complying with specified procedures.
Check to see if liability insurance is provided on an “occurrence” or “claims made” basis.
Some policies provide minimal medical benefits to persons injured on church property. Additional coverage should be considered.

Church-owned Vehicles Insurance Coverage

Covers injuries and damages resulting from the use of church-owned vehicles.

Action point

Check to see if your property or general liability policy contains coverage for church-owned vehicles. If not, obtain a separate endorsement for this coverage.

Non-owned Vehicles Insurance Coverage

Covers injuries and damages caused by members who use their own vehicle while performing services for their church. The driver’s personal car insurance is also available, but if inadequate, the church will likely be sued. This coverage often must be obtained as a separate endorsement. Essential for churches that allow members or employees to drive personal vehicles on church business.

Action point

Check to see if non-owned vehicle coverage applies to rented vehicles.

Counseling Insurance Coverage

Covers injuries caused during counseling activities. Often must be obtained as a separate endorsement. Essential for churches that provide counseling services.

Action point

Check exclusions carefully. For example, some policies exclude sexual misconduct.

Employment Practices Insurance Coverage

Covers certain employment-related claims such as wrongful dismissal and some forms of discrimination. These are among the most common types of church litigation today. Many church leaders erroneously assume that their general liability policy covers these claims. In most cases it does not.

Action point

If your church has employees, you should consider this coverage. The more employees you have, the more essential this becomes.

For other important considerations, see “What You Need in an Employment Practices Liability Insurance (ELPI) Plan.”

Directors and Officers (D&O) Insurance Coverage

Covers several potential legal claims that can be brought against officers and directors directly. D&O policies also may cover claims not covered by general liability policies. While uncompensated directors of nonprofit organizations have “limited immunity” from personal liability under both state and federal law, this protection does not cover compensated directors and does not cover acts of “gross negligence.” Must be obtained as a separate endorsement or policy.

Action point

If your church lets children ride in fully-loaded 15-passenger vans, does not screen youth workers, or engages in other high-risk activities that may be deemed “grossly negligent,” then you need to purchase this coverage.

Theft Insurance Coverage

Covers embezzlement and other misappropriations of church funds and securities by employees and others having access to money or property. Often must be obtained as a separate endorsement. This form of insurance is also referred to as bonding.

Action point

Remember, the opportunity to steal, rather than a need for money, is often the primary reason for employee theft. Institute procedures to minimize unsupervised access to funds.

Foreign Travel Insurance Coverage

Provides medical benefits for injuries occurring during foreign travel. Costs of a medical evacuation may also be covered. Often must be obtained as a separate endorsement or policy.

Action points

Check to see if your general liability policy excludes any injuries or damages occurring outside of the US (most general liability polices do exclude such coverage).
Make sure your church is covered if it sends groups on mission trips to foreign countries.

Umbrella Insurance Coverage

Covers legal judgments in excess of the limits on other insurance policies.

Action point

Does your church have substantial assets to be protected, or inadequate liability insurance? If so, you need to purchase umbrella coverage to protect against catastrophic damages.

Workers’ Compensation Insurance Coverage

Workers’ compensation insurance provides benefits to employees who are injured or become ill in the course of (or because of) their employment. Many church leaders erroneously assume that churches are not covered by state workers’ compensation laws. In most cases, this assumption is incorrect and exposes a church to a substantial uninsured risk.

Action point

Check to see if churches are subject to workers’ compensation law in your state. If so, obtain insurance to cover potential claims.

What amounts of coverage should your church have?

Church leaders often ask, “How much insurance should we purchase?” Unfortunately, there is no simple answer to this question. Here are a few points that may help:

Two key considerations

In general, the amount of coverage should be based on two primary considerations: (1) the nature and frequency of your activities, and (2) the net value of the church’s assets. To illustrate, if your church has a youth program that has frequent meetings involving several minors, or your church provides counseling, or hosts community activities, then your liability risks are increased and you should be looking for higher insurance limits. Further, as a general rule, liability insurance should have limits in excess of the net value of the church’s assets, so that the assets are protected in the event of litigation.

Review coverages every year

Annually review all church insurance coverages to be sure they are adequate.

Keep appraisals current

Periodically obtain appraisals of church property (real property, personal property, and fixtures) to be sure that you have adequate coverage.

Understand the coinsurance clause

Be sure that your church is insured for an amount in excess of what is required by a coinsurance clause in your insurance policy. A coinsurance clause is often difficult to understand, but the idea is this: unless a church is insured for a specified amount (e.g., 80 percent of market value) then the church becomes a “coinsurer” in the event of a partial loss, and is responsible for paying part of that loss.

This is done by a reduction in the amount that the insurer has to pay. The purpose of such clauses is to persuade property owners to insure their property for an amount equal to or approaching its market value. Over time, a church’s failure to increase the amount of its property insurance to reflect the current value of the church property will reduce the insured amount to less than the coinsurance amount, and this can result in an unpleasant and unbudgeted expense when the insurer only pays a portion of a substantial partial loss.

What are exclusions?

An exclusion is a loss that is not covered under an insurance policy. In some cases, excluded losses can be covered by a separate endorsement or “rider” by paying an additional premium. Church leaders should be familiar with exclusions under the church’s insurance policies, and obtain all desired endorsements.

For example, commercial general liability (CGL) insurance policies generally exclude intentional or criminal acts from coverage. Some policies specifically exclude coverage for sexual offenses. Insurers often assert such exclusions in cases of sexual molestation of minors by church employees and volunteers, since such acts are both intentional and criminal. But churches typically respond to such coverage denials by asserting that the exclusion does not apply since they were not guilty of intentional or criminal acts. Rather, they ordinarily are being sued on the basis of negligence. The courts have come to different conclusions in such disputes. This illustrates the importance of church leaders being familiar with the terms of their church’s CGL policy, and providing for sexual misconduct coverage as a separate policy or endorsement if necessary.

Most CGL policies exclude employment practices. As a result, churches that are sued for an employment-related claim may be denied coverage and the insurer will provide neither a legal defense nor indemnification. The most common employment-related claims involving churches include wrongful termination and various discrimination claims under state and federal law.

The duty to notify

Church insurance policies impose upon the church a duty to promptly notify the insurer of any potential claims when the injury or loss occurs, and not when a lawsuit is filed. This gives the insurance company sufficient time to investigate the incident and provide a defense. Notice is a condition of coverage and a church that fails to promptly notify its insurer of a potential claim may be denied coverage.

When faced with a “no coverage” letter due to failure to promptly notify, a church may argue that its delayed notification was not sufficiently long to violate the prompt notice requirement, or that its delay did not result in prejudice to the insurer. If it can be established that the insurer was not materially prejudiced by the insured’s delayed notice, the delay may not be fatal to the insurer’s obligations to defend and indemnify.

Additional reading

For deeper readings on church insurance and liability, see the following:

Take me back to “Rich’s 15 Must-Knows for Pastors” to choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Image: Canva/Kaelyn Brooks

Rich’s 15 Must-Knows for Pastors: Child Abuse Reporting

Learn what it means to be a mandatory reporter and state-by-state reporting requirements.

Richard R. Hammar, Attorney, CPA

Bio

Every state has a child abuse reporting law that requires persons designated as “mandatory reporters” to report known or reasonably suspected incidents of child abuse. It is imperative for ministers to be able to answer the following questions.

What is the definition of reportable “child abuse”?

All 50 states have enacted child abuse reporting statutes in an effort to protect abused children and prevent future abuse. Child abuse is defined by most statutes to include physical abuse, emotional abuse, neglect, and sexual molestation. A child ordinarily is defined as any person under the age of 18 years.

Some states specifically limit the definition of “child abuse” to abuse inflicted by a parent, caretaker, or custodian. Such a statute, if interpreted narrowly, might not require ministers and lay church workers who are mandatory reporters of child abuse under state law to report incidents of abuse inflicted by custodians, associate ministers, adolescents, or volunteer youth workers.

Am I a mandatory reporter of child abuse?

All 50 states enumerate categories of persons who are under a legal duty to report abuse to designated civil authorities. In most states, such “mandatory reporters” must report both actual and reasonably suspected cases of child abuse. Failure to do so is a crime (usually a misdemeanor).

Some states define mandatory reporters to include any person having a reasonable belief that child abuse has occurred. Obviously, ministers will be mandatory reporters under these statutes. The remaining states define mandatory reporters by referring to a list of occupations which generally includes physicians, dentists, hospital employees, nurses, coroners, school employees, nursery school workers, law enforcement officers, and licensed psychologists. Ministers are specifically identified as mandatory reporters under many of these statutes. But even if they are not, they may be mandatory reporters if they fall within a listed classification, such as school or child care workers, school administrators, or counselors. In summary, many ministers have a mandatory duty to report child abuse. Ministers should not assume that they have no duty to report.

Ministers who are not mandatory reporters under their state’s law generally are considered “permissive reporters,” meaning that they may report cases of abuse to the designated civil authorities but are not legally required to do so.

What if I learn of child abuse in the course of a conversation that is protected by the clergy-penitent privilege? Am I still required to report?

Ministers who are mandatory reporters of child abuse under state law are under a profound ethical dilemma when they receive information about child abuse in the course of a confidential counseling session that is subject to the clergy-penitent privilege. They have to choose between fulfilling their legal obligation to report or honoring their ecclesiastical duty to maintain the confidentiality of privileged communications.

Some states exclude ministers from duty to report in certain circumstances

A number of states have attempted to resolve this dilemma by specifically exempting ministers from the duty to report child abuse if the abuse is disclosed in the course of a communication protected by the clergy-penitent privilege. Other states, while not specifically excluding ministers from the duty to report, provide that information protected by the clergy-penitent privilege is not admissible in any legal proceeding regarding the alleged abuse. Some state child abuse reporting statutes do not list the clergy-penitent privilege among those privileges that are abolished in the context of child abuse proceedings. The intent of such statutes may be to excuse ministers from testifying in such cases regarding information they learned in the course of a privileged communication.

Even if the clergy-penitent privilege applies in the context of child abuse reporting, it is by no means clear that the privilege will be a defense to a failure to report, since (1) the information causing a minister to suspect that abuse has occurred may not have been privileged (that is, it was not obtained in confidence, or it was not obtained during spiritual counseling); and (2) a privilege ordinarily applies only to courtroom testimony or depositions, and not to a statutory requirement to report to a state agency.

Unfortunately, the failure by many states to recognize the clergy-penitent privilege in the context of child abuse reporting disregards the therapeutic purpose of the privilege. Many child abusers will be discouraged from seeking spiritual counsel if the privilege does not assure the confidentiality of their communications. This will only compound the problem. If, on the other hand, the privilege were preserved, many child abusers would seek out ministers for spiritual counseling, and the underlying causes of such behavior could be isolated and in some cases corrected.

Caution. Several states have enacted laws allowing child abuse victims to sue mandatory reporters who failed to report known or reasonably suspected incidents of abuse to the authorities. Such laws expose ministers and churches to potentially significant monetary damages. As a result, ministers should seek legal counsel before choosing not to report known or suspected incidents of abuse.

How do I report child abuse?

Persons who are legally required to report child abuse generally make their report by notifying a designated state agency by telephone and confirming the telephone call with a written report within a prescribed period of time. The reporter generally is required to (1) identify the child, the child’s parents or guardians, and the alleged abuser by name, and provide their addresses; (2) give the child’s age; and (3) describe the nature of the abuse. Most states have toll-free numbers that receive initial reports of child abuse.

Key point. Be aggressive in reporting child abuse. This means that consideration should be given to the following points (with input from legal counsel):

1. Resolve all doubts in favor of reporting.
2. Report even if you are a permissive rather than a mandatory reporter.
3. Report even if you are not certain the alleged abuse occurred (all that is required is reasonable cause).
4. Report even if information concerning abuse was obtained in a communication protected by the clergy-penitent privilege.
5. Report regardless of the status and reputation of the accused offender.

Such steps not only will protect ministers and churches from potentially substantial monetary damages in civil lawsuits, but more importantly, may reduce the risk of future incidents of abuse by placing the alleged offender in the criminal justice system thereby making it more likely that future searches of his background will reveal prior incidents of abuse.

What steps should clergy take after receiving an allegation of child abuse?

Clergy who learn of allegations of child abuse should consult with a local attorney and address the following questions:

Am I a mandatory or a permissive reporter under state law?
If the allegations are true, do they constitute child abuse as defined under state law? Remember, in some states the definition of child abuse is limited to abuse inflicted by a parent or person responsible for a child’s care.
Do I have reasonable cause to believe that abuse has occurred? Be sure to interpret this broadly. An alleged offender’s denial of any wrongdoing does not preclude reasonable cause. Remember, offenders typically deny any wrongdoing.
Did I receive the information in the course of spiritual counseling? If so, does the clergy-penitent privilege protect me from disclosing this information? In a few states, it does. But this is often a difficult legal issue that should not be made without legal counsel.
Do I (or my church) have any risk of civil liability under state law if I choose not to report the abuse? It is possible that abuse victims will be permitted to sue clergy who fail to report (even if they are not mandatory reporters) if their injuries are aggravated and perpetuated because of the failure to report.
Can child abuse be reported to law enforcement officials in my state? Some states permit this. If you are in such a state, and you have a law enforcement officer in your congregation, consider reporting to that person.

Additional reading

Reducing the Risk: A Child Sexual Abuse Awareness Program
Child Sexual Abuse Response Plan
Church Board Guide to a Child Sexual Abuse Prevention Policy
Sex Offenders in the Church
Pastor, Church & Law

Take me back to “Rich’s 15 Must-Knows for Pastors” to choose an article of interest or that fits a particular need.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Varying requirements by state

How churches are affected

Training requirements states have set

Shaping useful training for church offices

Make preparations now

California

Connecticut

Delaware

Hawaii

Illinois

Maine

New York

Consequences of Church Political Activity

Explicit contract limitations

Implied contract limitations

Legal limitations

Practicalities

Evaluate Risk Management Aspects of Any Spiritual Care Ministry

Check with Your Insurance Provider

Review Your Plan Regularly; Follow It Carefully

Take inventory.

Think “when” not “if.”

Creating a crisis response team.

Focus on the people—not just the problem.

Stay disciplined.

Physical Safety

Financial Safety

Music

Videos

Stay Informed to Prevent Church Lawsuits

Step one: Find bylaw language relevant to board and membership meetings

Step two: Evaluate how the relevant bylaw language relates to applicable state law

Three common scenarios

Prudent loan modifications

Communication is key

1. Does our state law allow virtual business meetings?

2. Do our governing documents allow virtual business meetings?

3. What actions can we take if a virtual business meeting is not allowed?

4. How will we know whether a quorum is present?

5. What special rules will we follow for discussion and voting?

Concluding thought: Be risk averse

Income tax-filing

Church reporting requirements

Installment Agreements

Offers in Compromise

Audits

Stay updated

Top 3 Tax Issues for Clergy

1. Reporting Income Taxes: Employee or Self-Employed?

2. Social Security Taxes: Employee or Self-Employed?

3. Paying Taxes: Quarterly Payments and Estimated Taxes

Steps for Paying Estimated Taxes

Handling Overpayments and Underpayments

FAQs About Clergy Taxes

Conclusion

Bylaw basics: What are church bylaws?

Know your current version of your bylaws

Do churches need both a constitution and bylaws?

Provisions you may want to include in your bylaws

Arbitration or mediation?

Parliamentary procedure?

Church discipline

Contract approval

Signatory authority

‘Bonding’ of church officers and employees

Annual audit

Indemnification

Defining the church fiscal year

‘Staggered voting’

Board authority to act

Virtual meeting

Absentee voting

Proxy voting

Minute management

Financial records management

Open records

Spell out voting requirements

Board suspension/removal

Board resignations

Is it time to rewrite our bylaws?