Q: Is there a minimum gift amount for which a contribution statement must be issued? For instance, if someone visited the church one Sunday and dropped a $10 check in the offering plate, is the church obligated to send a statement?
Churches commonly face this question in January when preparing year-end statements, but it may also arise throughout the year when issuing quarterly giving statements. Understanding the rules and best practices surrounding charitable contributions statements ensures churches stay compliant and provide clarity to donors.
Are Churches Legally Required to Issue Contribution Statements?
No federal law requires churches to issue a receipt for contributions. Issuing a receipt is a courtesy to the donor, enabling them to deduct their contributions if they itemize deductions. However, due to changes in tax law, the vast majority of donors no longer itemize deductions, reducing the incentive for some to request or rely on these receipts.
Donor Responsibilities for Substantiating Contributions
If the church decides to issue a receipt, it must meet all tax requirements to allow donors to deduct the contribution. Attorney Frank Sommerville, a senior editorial advisor for Church Law & Tax, clarifies:
For donations of less than $250, the church is not required to issue a receipt for the donor to deduct the contribution. A canceled check or equivalent bank record suffices as substantiation.
For donations of any size, Richard Hammar outlines in Chapter 8 of the annual Church & Clergy Tax Guide the substantiation requirements donors must meet to deduct contributions:
A bank record showing the charity’s name, date of the contribution, and the amount of the contribution (e.g., a canceled check, electronic fund transfer receipt, or credit card statement);
A receipt or written communication (including emails) from the charity that includes the charity’s name, date of the contribution, and the amount;
For payroll deductions, a pay stub, Form W-2, or other employer-furnished document showing the date and amount of the contribution.
Churches should remind donors that other forms of reliable records will not satisfy IRS substantiation requirements.
When Are Charitable Contributions Statements Required?
Churches must issue charitable contributions statements that meet IRS substantiation requirements for all contributions of $250 or more. The following information is required on these statements to make them valid for tax deduction purposes:
The name of the church or charity;
The amount of cash or a description of any non-cash contributions;
A statement that no goods or services were provided by the church in return for the contribution, if that was the case; or
If goods or services were provided, a description and good faith estimate of their value.
Providing accurate statements ensures that donors can deduct their contributions without issues during tax filing.
Key Takeaways for Churches
No legal obligation exists for churches to issue statements for contributions under $250; however, providing them as a courtesy is a good practice.
For donations of $250 or more, ensure charitable contributions statements include all required details for tax substantiation.
Encourage donors to maintain their own records, such as canceled checks or bank statements, for contributions below $250.
Frequently Asked Questions
Do churches need to issue statements for donations under $250?
No, churches are not required to issue statements for contributions under $250. Donors can use a canceled check or bank record for substantiation.
What information must be included in a charitable contributions statement?
A valid statement must include the church’s name, the amount of the contribution, and whether goods or services other than intangible religious benefits were provided in exchange for the donation.
Can donors deduct contributions if no statement is issued?
Yes, for contributions under $250, a canceled check or equivalent record is sufficient. For contributions of $250 or more, a proper statement is required.
Are charitable contributions statements required for non-cash gifts?
Yes, statements for non-cash gifts must include a description of the items donated and whether goods or services were received in exchange.
We’ve used a combination of AI and human review to make this content easier to read and understand.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: Getty/Paul Bradbury
Advantage Member
Mass Shooting Preparation is All About Planning—Not Panic
Churches need to first think through safety basics, not active-shooter scenarios when preparing mass shooting response plans.
Matthew Branaugh
Mass shooting preparation is top-of-mind for many faith leaders nationwide.
But has this anxiousness unintentionally overshadowed other, more common risks confronting churches? The statistical probabilities of a mass shooting at a church remain remarkably low. By contrast, the chances of an abuse allegation or personal injury claim are much higher.
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 likelihood (of a shooting) is extremely rare,” said Kevin Robertson, a former law enforcement officer who heads security for Saddleback Church and its multiple locations throughout Southern California.
Yet experts like Robertson still note the threat of gun violence against churches cannot be ignored, either. “Don’t bury your heads in the sand,” he tells churches. “But don’t micro-focus on it, either.”
Troubling events
The desire to “micro-focus” is understandable. Shootings generating widespread media attention have hit schools, retailers, music concerts, and movie theaters in recent years, not to mention faith communities. For instance:
A man fueled by a hatred of Christians launched separate attacks on the New Life Church in Colorado Springs, and a Youth With a Mission (YWAM) training center in suburban Denver (5 killed, 5 injured).
A man driven by racial hatred opened fire at Emanuel African Methodist Episcopal Church in Charleston, South Carolina (9 killed, 2 wounded).
A man reportedly expressing a desire to “kill Jews” attacked the Tree of Life synagogue in Pittsburgh (11 killed, 6 injured).
The ripple effects from these acts of violence have been felt. Attorney and ChurchLawAndTax.com senior editor Richard Hammar said one large church insurer’s general counsel recently told him the top question his legal department receives from churches each year pertains to active shooters and armed security.
On a larger scale, uneasiness is visibly evident—as demonstrated by two separate, nationwide polls, conducted in the spring of 2019, that were focused on church security and shootings. In one, 12 percent of the 2,001 adults polled said they did not feel safe in a house of worship, and their top concern was an armed intruder. In the other, which surveyed an undisclosed number of evangelical Christian leaders, 71 percent said they increased security at worship services in recent years due to mass shootings.
These events, combined with these sentiments, undoubtedly prompted this provocative headline in the October 2019 issue of Christianity Today magazine: “Armed Security at Churches Is Becoming a New Normal.” (Christianity Today is a sister publication of Church Law & Tax.)
Sorting through the statistics
Statistically speaking, though, the likelihood of an active shooter—or any violent activity—on church property is unquestionably the exception, not the rule.
There are an estimated 350,000 houses of worship in the United States. Based on Robertson’s detailed tracking, only 121 church shootings have occurred nationwide since 1999, 80 of which took place during a church service or event.
Carl Chinn, who helped develop New Life’s security program and was at the church the day it was attacked, has tracked violent incidents since 1999 as well. Chinn casts his net wider, both incorporating the properties of parachurch ministries and religiously affiliated schools and including all types of violent incidents, not just ones involving guns. While the numbers in his report continue to grow each year, the annual total typically remains fewer than 250.
Some of those situations occur during church functions, but many happen on church properties when the church is closed. Domestic violence has been the leading cause of an incident, Chinn noted.
Churches still should be aware of the threat of an active shooter, said Chinn, who leads the Faith Based Security Network and consults with churches across the country. “Just because those life-taking events are low probability, we also have to keep in mind they are still high impact,” he said. “But we should keep it in check. We should focus on the things most likely to happen.”
Basic safety as a ministry
Troubling to both Robertson and Chinn are the number of churches that inquire about shooting prevention and armed security training, only to reveal they have no basic safety or risk management efforts underway at all. Robertson, who fields half-a-dozen inquiries a week from church leaders nationwide, estimates about three-fourths “don’t have anything in place.”
That’s problematic because church safety basics are foundational to solving more complex and challenging situations like a violent threat. Chinn said New Life’s efforts to develop a comprehensive safety ministry likely saved lives, even though a handful of deaths still occurred. “Because we were good at the smaller things, we were better at responding to true evil,” he said.
Robertson, whose security books follow a “crawl-walk-run” model, puts it this way:
I encourage [churches] not to micro-focus on the active shooter, but to micro-focus on what’s more likely. What are you going to do if you have a medical issue? What are you going to do if you have a verbal disruption? What are you going to do if you have a noncustodial parent show up? Those are the ones that are more likely to happen. Those are the ones to micro-focus on.
Robertson sees safety as a ministry. The starting point is to build a team of people primarily committed to helping others, and avoid using the terms “security” or “security guards.” This posture often helps draw support from the senior pastor and church board, Robertson added, and creates long-term buy-in. When Robertson personally interviewed volunteers and staff members for Saddleback’s team, he said his first question was whether the person was comfortable praying with an attender. “It’s a ministry. It’s no different than ushers or greeters,” Robertson added.
Chinn agreed, describing the initial process as a “start-with-what-you-have” philosophy. New Life intentionally called its program the “Life Safety Ministry,” and sought “people serving on that team because of a compassion for their fellow man, not because of the sensationalism associated with the word ‘security,’” he said.
But also note: 41 states regulate the security operations of private parties—and that’s true whether or not the team members of those operations will be armed, Chinn said. Many local jurisdictions, like the city of Denver, do the same. Churches must be aware of these local and state laws and the requirements they must keep to maintain compliance for any team they assemble, he said.
“Keep it simple”
Once a team is established, Chinn said churches should avoid the temptation to rapidly expand policies and procedures. “So many of those inclined to start or head up a security program for their church make it too complicated at first,” Chinn said. Among his 10 standards for starting or improving security (see “10 Standards for Starting a Program”), he emphasizes No. 4 in particular: “Keep it simple.”
As far as first priorities, Robertson said child safety ranks first (if a church has only one volunteer interested to help with safety, he said he advises that church to place the person in the children’s ministry). Second is medical emergencies, followed by responding to verbal disruptions. (Added Chinn: “Our lips are what keeps much of the evil at bay. Whether it’s a violent act about to occur or an obnoxious one, we’ve got to get better at de-escalation training.”)
Leaders also should consult with their insurance agents for resources and to ensure those agents know the steps and measures the church plans to take, Robertson said.
Additional simple steps include securing building doors (the YWAM attack was likely minimized because doors properly latched and locked) and posting at least one person to watch the church parking lot and lobby during services (most attacks start outside the building), Chinn said.
In time, the conversation about active-shooter situations will emerge—as they should, Chinn and Robertson said. Leaders again should contact their insurance agents for possible resources and guidance. Local law enforcement agencies often want to connect with churches about prevention and response plans, and frequently provide low- or no-cost training workshops. Additionally, attorney Richard Hammar recommends hiring off-duty law enforcement if a church decides to implement armed security.
If a church decides to use outside help beyond law enforcement, and considers using security consultants (which have proliferated in number over the past decade), it should look for options that “truly understand the environment of faith-based places,” Chinn said. “Look for someone who has served in churches for years, understands the culture, and has the heart and experience of a protector.”
Require referrals from other churches they have served. Research their standing in the business community, too, he added.
Above all, remember that active-shooter prevention and response is a “run” step on the crawl-walk-run spectrum, Robertson said. Get started with crawl steps that simply focus on physically protecting the church and minimizing legal liability.
“Churches need to build up a foundation first,” he said.
Related resources
Kevin Robertson provides local churches nationwide with about a dozen types of documents, including sample policies and procedures, a sample safety team member application, and a manual covering how to use force when necessary during an escalated situation. Church Law & Tax Advantage Members are encouraged to contact Robertson about these documents, available for free, at kevinr@saddleback.com.
Advantage Members have access to the following on ChurchLawAndTax.com:
Editor’s Note: This article is part of the Advantage Membership. Learn more on how to become an Advantage Member or upgrade your membership.
Carl Chinn, who leads the Faith Based Security Network and consults with churches across the country, offers these 10 standards for starting (or improving) a security program:
Confirm executive support. The people in our care and the amenities they have funded with their contributions require the action of intentional protection. For a program to be the most effective, it should start at the top.
Conduct a baseline readiness survey. A church can hire a professional, use local law enforcement and fire departments (I advise using both), and use its liability insurance provider. Whatever way(s) you choose, develop some form of follow-up so you can measure not only how prepared you are now but can also track improvements.
Start with what you have. Start an effective program by identifying and organizing existing in-house resources.
Keep it simple. While there is value in complexity, I believe simplicity is better for safety and security operations. Don’t launch a safety program with a big budget request. There may be a time for budget discussions, but don’t start off with more than what is involved around the baseline readiness assessment.
Keep it legal. Whether it involves state and local regulations of security operations, potential criminal and civil liability for responding to threats, self-defense statutes, or clergy-penitent privilege laws, the guidance of a qualified local attorney can prove valuable.
Know your insurance agent and policies. There is nothing like working with agents to understand policies and identify problems. Churches can’t be serious about security or safety if insurance coverage is an unknown. Maintain regular check-ups, too, because things change over time.
Network and share. Connect with law enforcement and other churches and ministries. Share information. Indicate known risks. And make sure your safety team leaders regularly engage pastors and staff members to learn information vital to protecting their church.
Train and drill. If a team doesn’t train and drill, it really doesn’t believe anything will ever happen.
Develop policies and procedures. Keep it simple, but develop effective policies and procedures. Policies are statements about a given subject, while procedures are a guide to handle each policy.
It’s like jazz. Security operations in any environment are dynamic. Having no plan is reckless, but over-planning is futile. Somewhere in between is good. Security responses in significant events will always be like jazz, never a symphony.
The editorial team of Church Law & Tax is made up of Matthew Branaugh, attorney-at-law, and Rick Spruill, digital content manager.
Image: AdobeStock/Gatherina
When a Church Leaves A Denomination: Consequences to Consider
Seven practical considerations before moving forward with any plan to separate.
Sarah E. Merkle
Q: Our church is considering leaving our denomination and continuing as a nondenominational congregation. But we are concerned about the potential legal and financial consequences of doing so. Can the denomination lay claim to our church’s building or property? What else should we consider?
Leaving a denomination is an extremely consequential choice for an individual body of believers. Your church leadership would do well to have a solid plan in place before approaching the denomination or introducing the idea of separation to the congregation.
Before you take even a first step toward denominational separation, I want to recommend that your church leadership answer seven questions in full, obtaining legal counsel where necessary.
What denominational rules apply to church formation and separation?
The first step in planning for separating from a denomination is to understand the applicable denominational rules. What documents govern the denomination as a whole, and what do those documents say about the control which the denomination has over individual churches?
Before proceeding down a path of separation, access your denomination’s website or call its headquarters to obtain current copies of the denomination’s constitution, bylaws, and other rules (e.g., The Book of Church Order of the Presbyterian Church in America).
What governing documents and meeting records does your church have?
Your church needs to gather all of its governing documents and meeting records. For example, your church may have a charter, articles of incorporation, bylaws, or special rules. In addition, it should have minutes from its board and congregational business meetings.
Gather these governing documents and meeting records in one place so that you can research how the church was formed and what church-specific rules may apply to a separation. Visit the secretary of state website for your state as well to access any documents that your church has filed related to its incorporation or existence.
What real estate does your church use and who owns it?
Another important step is to identify the real estate associated with your church and determine who owns it. This can be done by accessing the land records for the municipality where your church is located and pulling the deeds associated with the property addresses.
Think broadly—the primary meeting place may be just one of the properties associated with your church. There may also be mission houses, gymnasiums, reception halls, or the like. The church leadership needs to know who owns each of the real estate assets.
Once you’ve gathered the deeds, create a document listing each property and noting its owner. If the denomination owns the real estate, or if it has claim to the real estate under certain circumstances, you’ll need to factor a physical relocation into your plan for exiting the denomination.
What funds does your church receive from the denomination?
If your church receives funding from the denomination, how much does it receive, and for what purposes? Make a list of these funds that is clear and easy for a lay person to understand. Doing so will prepare you to explain the financial effect of a denominational separation to any member of the congregation.
Determine, too, whether your church is obligated to repay any portion of funding received toward specific projects or during a fiscal year. Ideally, the denomination’s governing documents will address this, but you may have to ask the denomination directly.
Your church’s ability to reassure congregants about a separation includes explaining the church’s financial outlook after it leaves the denomination. If congregants are confused about financial stability, it will challenge your ability to gain their trust and commitment to the separation and to the new church that forms afterward. That’s why this information regarding denominationally affiliated funding is important to compile in an understandable way.
What obligations does your church have to the denomination?
Does your church have monthly or annual financial obligations to the denomination? If so, check the denomination’s governing documents to find out when in the separation process these funds would no longer be due. Knowing this detail may help you time the separation in a way that is financially beneficial to your church.
You should also check the denomination’s governing documents for any notification requirements related to separation. Make a calendar of these deadlines and incorporate them both into your overall timeline and the rollout of any separation plan to your congregation.
How does your church intend to continue operating?
Be careful to not focus solely on how to leave the denomination. The question of how your church will continue is just as important. You indicated that you want to become nondenominational or independent. What are the ramifications of doing so? Or, what would happen if you decided to join another denomination, association, or “co-op”? Regardless, the new entity will need to create the same types of governing documents as you had with the old church: charter, articles of incorporation, bylaws, and special rules.
The new entity will also need leaders and members, and the church may not want to assume it will retain the same leaders and members from the old entity. Consider how leadership will be chosen. Do you want to select a few individuals (e.g., a pastoral staff) and have them appoint others, or do you want to hold an election? Also consider how you want to assimilate the members. What specific procedures do you want them to follow to be able to join?
Incorporating these decisions and details into your plan cannot be overemphasized. You want the process to flow as smoothly as possible, but you will not be able to accomplish that unless you think through the composition of the new entity and your vision of how it will operate for the first six months to a year post-separation.
What procedures should your church follow to make its exit official?
Make sure you are thorough in understanding what the denomination’s governing documents say about how to make the exit of your church official. Here are some questions you will want answered:
Is a vote of the board and the membership required?
What are the vote thresholds that you need?
Do the votes need to be taken at a special meeting with a certain type of advance notice to the members?
Once the decision is made by the individual church, what kind of notice is required to the denomination’s governing bodies?
Does the denomination’s leadership also have to vote on the separation? If so, what is the timing for when that vote must be taken?
Does the denomination’s leadership have to send any communication to the church to make the separation official? If so, what is the timing for, and form of, that communication?
Having a well-developed plan for how the process will work is one of the best ways to ensure you will have a stable, thriving church in the end.
Sarah E. Merkle, a senior editorial advisor for Church Law & Tax, is 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, churches, nonprofits, and public bodies navigate rules applicable to governance and business meetings. Sarah is the founder and CEO of Civility, LLC, where she creates resources designed to make parliamentary procedure more accessible to lay users and advises clients in matters of governance and parliamentary procedure.
For court cases addressing the issue of church property after separating from a denomination, see the following case analyses by attorney Richard Hammar:
Attorney Sally Wagenmaker is a partner in a Chicago-based law firm serving churches and nonprofits. Wagenmaker is the current president of the Christian Legal Society (CLS).
Editor Matthew Branaugh interviewed Wagenmaker about legal issues confronting churches and pastors and the ways churches can secure legal representation when needs arise and resources are limited. In Part 1 of this two-part interview she shares insights on legal risks and liabilities associated with ministry.
As an attorney experienced with working with churches and nonprofits, what are the recurring legal problems you consistently see arise for churches and other nonprofits?
Churches and other nonprofits must comply with myriad legal requirements, plus they are accountable to donors and their members as stewards of charitable resources. Many legal areas are implicated: governance, employment, real estate, abuse issues and related risk management, intellectual property, international activities, and tax issues. Because ministry organizations are varied and often complicated, so too are legal compliance issues.
Given limited resources and focus on ministry activities, attention is often not given to: annual government filing obligations, maintaining up-to-date bylaws that accurately fit the organization’s governance, proper real estate ownership and tax exemption matters, program safety, correctly handling employment matters, and permitted uses of creative works protected as intellectual property. Filing requirement issues may be relatively minor, but the other legal issues can result later in serious financial and operational implications.
What immediate steps can church leaders take to reduce the legal and risk liabilities associated with these issues?
Know thyself. Organizationally speaking, that means knowing where the church’s corporate charter, bylaws, and other governance documents are located, as well as the location of other key documents, including its real estate ownership documents, employee policies, and abuse prevention documents.
I recommend putting these materials in an electronic corporate notebook that provides access to all directors, officers, and other key leaders and tracks all updates as they occur to keep for the church’s future leaders.
Beyond documents, take an inventory of what and how the organization is carrying out its activities. For example, if the church runs a children’s ministry, it should have strong child abuse prevention policies, with documentation detailing its abuse-prevention policy, background screening, training, and appropriate follow-through measures. Or, does the church sponsor mission trips as well as other activities? Then make sure that the church has excellent liability insurance coverage, plus good waiver and consent forms and tax-compliant fundraising practices.
If the church has employees, make sure that it complies with applicable tax requirements for any clergy housing allowances (e.g., annual board resolution, with percentage increases), that payroll is done properly (ideally through a payroll service), and that an excellent employee handbook is in place (including anti-harassment, social media, biblical code of conduct, and technology usage provisions). With respect to church services, make sure safety measures are in place, such as usher training, emergency evacuation plans, and property monitoring for potential problems.
All such matters are likely best handled through an administrative pastor or other administrative leader. Churches may wish to hire such personnel or to seek out interested and capable volunteers.
What are some new or unexpected issues that you’ve seen surface for churches and nonprofits over the past year?
First, religious liberty issues continue to unfold with complexity, and from sometimes surprising directions. Generally speaking, churches should be attentive to governance areas, facility usage, and employment—in the event a lawsuit emerges challenging the church’s First Amendment rights.
We see this play out a number of ways. For example, on a broader level, our law firm is handling an unemployment case right now addressing the fundamental question of the extent to which the government gets to decide if an organization is religious “enough” for the categorical religious exemption to apply (and thus prevent a civil court from deciding the case).
Churches do not have to show whether they are “religious enough” for cases like this, but we are seeing employment cases involving non-ministerial employees in which civil courts are increasingly willing to evaluate the merits of certain claims.
Second, safety issues are increasingly important, including sexual harassment, child protection, and violence. Likewise, new scandals involving clergy abuse of minors underscore the incredible importance of child safety protocols, effective screening and training for children and youth workers, high quality monitoring, and legally compliant reporting of problems.
#MeToo movement
The #MeToo movement has heightened the importance of protecting workers and nurturing a respectful culture where all are valued. The good news: these values are entirely consistent with biblical truths.
Many ministry leaders are stepping up passionately and responsibly with new workshops, trainings, and other measures to address these concerns. In particular, Jeff Dalrymple of Jacksonville, Florida, is leading the charge on an accreditation council focused on abuse prevention policies and practices in churches. It involves an expert panel of nationally renowned leaders.
The council’s mission is focused on developing and maintaining model standards for religious and other tax-exempt organizations to help protect against child abuse and other forms of abuse and to provide related educational materials.
Beyond child and youth protection, churches continue to wrestle with preventing violent incidents (such as a shooting), resulting in the need for safety monitoring and related protocols. Lastly, data privacy and security issues for websites and donor-related data are quickly evolving into critical areas needing legal compliance.
Sally Wagenmaker is a partner in a Chicago-based law firm serving churches and nonprofits, and she is the current president of the Christian Legal Society (CLS).
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: Getty
When Is It Wise to Pay for Legal Counsel?
Attorney Sally Wagenmaker offers guidelines on when to consider paid professionals in an interview with Matthew Branaugh.
Attorney Sally Wagenmaker is a partner in a Chicago-based law firm serving churches and nonprofits. Wagenmaker is also past president of the Christian Legal Society (CLS).
Editor Matthew Branaugh interviewed Wagenmaker about legal issues confronting churches and pastors and the ways churches can secure legal representation when needs arise and resources are limited. In Part 2 of this two-part interview she shares insights on common misconceptions about outside legal help.
Church leaders often express worry about dealing with legal issues—that the complexities and costs are so overwhelming that they end up doing very little in response. What are some practical ways these leaders can overcome this, given the scarcities of time and resources they face?
First, include legal expenses as part of a church budget. By doing so, a church will be better prepared and equipped to absorb legal costs when they arise. And they likely will arise as an expected part of doing ministry in a complex world.
Second, identify what can be handled by volunteers and what should be outsourced to paid professionals.
Perhaps the church’s employee handbook could first be developed by a volunteer who is experienced with human resources issues, and then outsourced to a paid attorney for review. Or perhaps the church’s real estate purchase could be handled by a volunteer attorney in the congregation, with the follow-up specialized property tax exemption work done by a paid attorney who focuses on that legal area.
Third, be wise in all things. If volunteers lack the time, expertise, or trustworthiness to follow through, then don’t ask for their help.
Sometimes the best stewardship is to pay others to handle matters, especially complicated legal matters requiring particular expertise. But in doing so, check the costs. It is appropriate to ask for a fee estimate, and a church should definitely hire an attorney who is experienced with serving churches and other nonprofits. One would not hire a mechanic for dental drilling work, nor should an organization hire a patent lawyer to help address often-tricky employment issues.
What types of matters do you think should prompt a church to hire an attorney?
Churches hire attorneys because of a crisis or becuse of a vulnerability that requires planning.
Church leaders who understand this can shape their church budgets accordingly each year. They can set money aside for the unexpected. They can also set money aside for normal developments that require planning.
What is a legal crisis? Our most common “911” types of calls include the following:
When a childcare worker suspects child abuse that may trigger “mandated reporter” requirements;
When an employee complains of being sexually harassed;
When a clergy member is not sure of the scope of the privilege in relation to a parishioner who shares confidential information;
When a supervisor believes that an employee needs to be fired due to misconduct or other serious problems;
When someone is injured and has accused the church of wrongdoing; or
When someone threatens harm against the church or people involved with the church.
Knowledgeable legal assistance in an urgent situation can be critical. This is particularly critical in sidestepping devastating harm. It is also key in avoiding relational damage, financial repercussions, and legal liability.
Planning is the other way—and it’s the preferable option for obvious reasons. It fosters better decision-making with a church’s long-term well-being and vitality in mind. Through planning, leaders are also in a better position to identify the time- and expense-related priorities. This can help their church absorb the associated legal costs over a longer period of time.
Prime examples of planning opportunities include situations like a church contemplating a merger with another congregation, weighing a request to share its facility space with another ministry, realizing a new-and-improved abuse prevention policy is needed, or discovering the need to address employment and intellectual property matters (e.g. use of sermons, worship materials, and other creative works).
For churches—especially smaller ones—how can they secure helpful legal representation, especially when their resources may be even more limited than most other congregations?
Our law firm represents many small churches, and we address legal fees as a matter of mutual trust and transparency with church leadership. Church leaders who are thinking about hiring an attorney should ask questions upfront about fee structures and how the attorney will get paid by the church.
Church leaders also should prioritize the work they want addressed to ensure the most pressing needs get handled first, which then allows the attorney and church to determine whether lower-ranked projects should wait until additional budget funds are available later in the year.
There is often a temptation to secure free legal information or services. Remember, people oftentimes get what they pay for. Make certain the information and services are good and effective.
Christian Legal Society (CLS) can also be a great resource for churches in need of legal counsel. Pro bono assistance may be an option.
More commonly, CLS provides training to licensed attorneys about representing churches and ministries, particular through its national conferences. Attorneys who do not practice in church- or ministry-related areas can connect with other attorneys who do through CLS, allowing them to network and discuss strategically needed approaches for churches or ministries.
Sally Wagenmaker is a partner in a Chicago-based law firm serving churches and nonprofits, and she is the current president of the Christian Legal Society (CLS).
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: Piotrekswat | Getty
Understanding How to Use Form 941
Discover when churches need to file Form 941 and how to handle reporting for ministers and nonminister employees.
Q: Should a church with no nonminister employees and only one minister file the quarterly 941 form (Employer’s Quarterly Federal Tax Return)?
What Is Form 941?
Form 941 reports the number of employees, the amount of Social Security and Medicare taxes, and withheld income taxes that are payable. Line 4 of the form contains a checkbox to indicate whether wages and other compensation are not subject to Social Security or Medicare tax. Churches that have filed a timely Form 8274 with the IRS, exempting them from the employer’s share of these taxes, should check this box.
Reporting Clergy Wages
Line 2: Wages of ministers who report their income taxes as employees are included here, along with nonminister employees’ wages. Do not include a minister’s housing allowance, as it will not be reported on the Form W-2 issued to the minister.
Line 3: Ministers’ wages are exempt from tax withholding unless they elect voluntary withholding. If no election is made, no amount is entered here.
Lines 5a through 5d: Ministers do not pay the employee’s share of Social Security or Medicare taxes, and their employing church does not pay the employer’s share. Instead, ministers pay the self-employment tax, so these lines remain blank.
Do Churches with One Employee Need to File Form 941?
For churches with only one employee (the minister), filing requirements depend on whether wages are subject to income tax withholding:
If the minister’s wages are not subject to withholding and there are no nonminister employees, Form 941 is not required.
If the minister has elected voluntary income tax withholding, Form 941 must be filed to report those withholdings.
If the church employs nonminister employees, it must file Form 941 to report their wages and withholdings.
IRS Regulations
According to IRS Regulation 31.6011(a)-4(a)(1), only employers required to withhold income taxes under Section 3402 of the tax code need to file Form 941. Section 3401(a)(9) excludes compensation paid for “services performed by a duly ordained, commissioned, or licensed minister of a church” from income tax withholding, meaning the church is not required to file Form 941 if the minister is the sole employee.
Instructions for Form 941
The instructions state, “File your initial Form 941 for the quarter in which you first paid wages that are subject to Social Security and Medicare taxes or subject to federal income tax withholding.” If a church has only one employee (its minister), who has not elected voluntary withholding, it is not required to file Form 941.
Additional Considerations
If a church employs multiple ministers but no nonminister employees, Form 941 is still not required.
Issuing a Form W-2 to a minister without filing quarterly Forms 941 may trigger an IRS inquiry. This apparent discrepancy can be explained by the exemption of ministerial wages from withholding.
Form 941 is due on the last day of the month following the end of each calendar quarter.
FAQs About Using Form 941
What happens if a church files Form 941 incorrectly? Errors on Form 941 can trigger IRS inquiries or penalties. Ensure accuracy by consulting IRS instructions or a qualified tax professional. Can a church with no nonminister employees skip Form 941? Yes, if the minister’s wages are exempt from withholding and no nonminister employees are on staff, Form 941 is not required. What if a minister elects voluntary tax withholding? In this case, the church must file Form 941 to report the voluntary withholdings. Where can churches get help with Form 941? Call the IRS toll-free at 1-800-829-4933 for assistance with Form 941, tax deposit rules, or obtaining an EIN.
Conclusion
Understanding when and how to use Form 941 is crucial for churches to comply with IRS regulations. Churches with no nonminister employees and only one minister are generally exempt from filing, but exceptions apply when voluntary withholding is elected or nonminister employees are on staff. For further guidance, consult a tax professional or the IRS directly.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Employment Dispute Ruling Reinforces Church Decisions about Hiring and Firing
Seventh Circuit: Churches, not courts, should determine ministerial nature of roles.
Erik Stanley
The US Court of Appeals for the Seventh Circuit, headquartered in Chicago, decided an important case last week regarding the ministerial exception to employment discrimination laws. The answers to the questions before the court in this case are important ones. The ministerial exception to employment discrimination claims gives churches the right to hire and fire and make employment decisions for any reason without being subject to Title VII (and other employment discrimination laws).
The case
The case involved a lawsuit brought by Stanislaw Sterlinski, who claimed he was fired from his position as a church organist because of his Polish heritage. Sterlinski once was the church’s director of music, but was demoted to the job of organist and later fired.
The Seventh Circuit recognized Sterlinski’s role as music director meant he was a “minister” for purposes of the ministerial exception to Title VII and therefore could have been fired for any reason by the church. But the questions the court wrestled with focused on whether Sterlinski could be considered a “minister” after he was demoted to the position of organist and, more importantly, who ultimately decides whether one’s role is ministerial—the employing church or a court.
Sterlinski argued that his job was simply to play notes assigned to him and therefore his role was not religious. The church argued that music was an integral part of its services and so the organist position was religious.
(Editor’s note: Members have access to Richard Hammar’s analysis after the lower federal court that heard the case issued its original decision.)
The court’s analysis
The ministerial exception flows out of the recognition that a “minister” is the lifeblood of a congregation and churches should not be forced to accept or retain a minister they do not want. The word “minister” means more than just a priest or preacher. In 2012 the United States Supreme Court unanimously held that a Lutheran schoolteacher was a minister for purposes of the ministerial exception. The ministerial exception is a recognition of the old adage that “personnel is policy.” Thus, courts have recognized for years that forcing churches to accept or retain unwanted ministers can profoundly affect the direction and course of the church.
In the present case, the Seventh Circuit highlighted a disagreement over who gets to decide what is religious—federal judges or the church? Courts have reached conflicting answers to that question. In particular, the Ninth Circuit Court of Appeals held in an earlier case that it can decide for itself whether a given employee’s job was religious as opposed to secular.
The Seventh Circuit decided to take a different approach. It noted:
If the Roman Catholic Church believes that organ music is vital to its religious services, and that to advance its faith it needs the ability to select organists, who are we judges to disagree? Only by subjecting religious doctrine to discovery and, if necessary, jury trial, could the judiciary reject a church’s characterization of its own theology and internal organization.
The Seventh Circuit held that subjecting churches to this kind of decision-making by federal judges would result in “judicial entanglement in, and second-guessing of, religious matters.” Instead, a church must be given the right to assert that a particular job is religious and the job of a federal judge is simply to determine whether that characterization is honest, not whether it is correct.
The Seventh Circuit’s decision is binding for the states of Illinois, Indiana, and Wisconsin. It is considered persuasive for the remaining federal circuit courts nationwide.
Looking ahead
The issue of which employees fall within the ministerial exception is one that is heavily litigated. Because many cases are already being litigated on this issue, it is likely the Supreme Court will take up the issue again in the future. When that will be is difficult to determine. The first ministerial exception case was decided by a court in 1972, but the Supreme Court did not take up the issue until 2012. Churches and religious organizations may be in for a long, wait with more favorable cases in some circuits and less favorable in others.
What is reasonable to expect is that there will be more cases about this issue in the future. It is important for churches and religious organizations to address this matter with competent legal counsel before an employee files a claim. Being prepared is much better than trying to scramble after a lawsuit is filed.
Erik Stanley is an attorney at Provident Law, specializing in religious liberties, churches and nonprofits, commercial litigation, and business law, and the former senior counsel for Alliance Defending Freedom.
Planning and Advocating for Your Church’s Disaster Budget
Setting a church disaster budget is a form of stewardship that ensures ministry continues for the congregation and the community.
Jamie Aten
Last Reviewed: September 10, 2024
Planning a church disaster budget is about being prepared for the unexpected.
For example, you get a call in the middle of the night. A flood has hit your community. Your church building has sustained some minor damage, but many in your congregation and community have sustained significant damage to their homes. They’re wondering where to go, and your church is already receiving phone calls wondering if you’re open for shelter.
What would it cost for your church to open up and provide basic shelter for a night? For a week? For longer? And would you be prepared to provide support services to those in your congregation and community?
When most churches think of “disaster preparedness,” what comes to mind is a lump sum of money raised and then set aside for a literal rainy day. This money collects dust until the day it can be used on building repairs necessitated by storm damage. While such a fund can certainly come in handy for those churches with the resources to support it, I believe that any church can make steps toward preparedness by building preparedness into their budget from the ground up. In fact, I believe this mindset—and the process it takes to work toward it—allows churches to become better versions of themselves before, during, and after an event. This kind of financial preparedness must begin with reframing how your congregation and church leadership—and especially your finance committee—thinks about disaster preparedness.
Don’t just think in terms of a “church disaster budget”
While the idea of setting aside a dedicated disaster reserve may work for a large congregation, most smaller churches find it difficult to set aside money for a future emergency. Rather than thinking about setting aside a lump sum of money, most churches can make steps toward preparedness by building disaster preparedness into their annual budgets. This kind of financial preparedness must begin with reframing how your congregation and church leadership—and especially your finance committee—thinks about disaster preparedness.
Thinking of your “disaster budget” as separate from your regular operating budget can make it difficult to prioritize preparedness—especially when it means relocating funds from another important ministry. It can be tough work, but it’s important for church leaders to dig in and find out how current dollars are spent—and how the prioritization of those dollars could have more ministry impact in the event a disaster strikes. Thinking of this money as part of what it takes to maintain your church’s current ministries can help cast a vision of how your church values and supports the work of these individual ministries and their roles in the community. Increases within each ministry budget line item, specifically for providing funds to those ministries during a potential disaster event, is one practical way to find needed money each year and spread the costs out reasonably across the church.
Advocate by identifying needs
As you advocate for disaster budgeting to your finance committee, it’s helpful to first paint the picture demonstrating the need. Go in prepared, knowing what types of realistic risk your congregation faces as well as the risks your community faces. Don’t just advocate setting aside dollars; have a plan for how you would practically use the money in the event of an emergency. Helpful questions to ask as you’re preparing your budget for disaster:
What does our insurance cover—and what funds would we need to meet deductibles as well as keep things running while we wait for any claims to get processed and paid? (I go a bit further into insurance-related questions later in this article, too.)
What would it take to keep our church’s doors open and lights on if the building is still standing after disaster strikes?
What additional costs would be needed to run the church facility, above and beyond normal operational expenses?
What dollar amount would you put on each additional cost?
These questions are an important place to start, but think beyond physical repairs, too. Consider how your church would assist people who most need it. A few more helpful questions to frame your thinking:
What needs are we currently meeting in our congregation? In our community?
How would we continue meeting these needs in the event of an emergency?
What dollar amounts would it take to be able to turn areas in our building into a homeless shelter, warming center, dining hall, or food pantry?
Most often, disasters disproportionately affect those who are already more vulnerable, including children, elderly people, chronically ill people, disabled people, and people who are economically unstable. They may not have the resources or ability to adequately prepare for, respond, or recover from a disaster on their own. How can your church prepare to offer them assistance in the event of a disaster?
This is also an opportunity to consider your church’s role in the community—or the role you’d like to have. When disaster strikes, people in the community tend to go to churches for assistance, even if they’re not an attender or even a person of faith. They do this because they know that churches are supposed to be a safe place to receive help. By being prepared to respond to disaster, you are reaffirming that your church wants to be a place of refuge for those in your community.
Another way to advocate: help your finance committee understand how reserve funds could be used to care for existing non-disaster-related needs that, if addressed, would help reduce the impact of disaster. A National Institute of Building Sciences (NIBS) study in 2005 found that every $1 spent on mitigation saves society an average of $4 in future disaster costs, and a 2017 update on that study found “that the return is actually higher than previously thought.” This should encourage you to think creatively about disaster budgeting: money budgeted for preventive or mitigating actions, like repairs on the building, could end up going much further than reactive “rainy day fund” spending. Extending this even further: investing in your community (e.g. helping to reduce poverty) can help reduce the impact of potential disaster while also addressing ongoing needs.
Another way to get buy-in is to talk with other church administrators and leaders who have weathered a disaster in the past. Ask them about what they wish they had known prior to the adversity they faced. Listen for tips, recommendations, and past mistakes they might be able to share with you. Also, be sure to listen not just for important statistics and numbers, but also stories to be able to show how being prepared now can have a major positive benefit on the life of your church in the future should a disaster arise. You need stories, not just the statistics, to get buy-in.
Think creatively
While it can feel impractical or even impossible to set aside large amounts of money in a disaster fund, challenge your finance committee or board to consider places in the budget where a little extra money could be leveraged in the event of a disaster. This will not only make the money go much further; it also will strengthen your current budget needs and will position your church to effectively respond, with its building and other resources, both now and for when it might be needed in the future. For example, say your church has a strong or growing youth ministry. By building in additional capacity to reach out to and develop relationships with vulnerable youth in your community, you will be well positioned to pivot your existing ministry if disaster strikes. This can work for anything your church does well; shifting your focus from inward-focused programs toward outward-focused needs is an effective form of preparedness as well as a great way to affirm and strengthen the value of your church’s ongoing ministries.
Spending time identifying and evaluating how current dollars are being used can help your congregation identify the essential ministries it wants to continue should a disaster strike. Thus, this way of thinking promotes a continuity of operations approach that can be used to strengthen the overall resilience of the church, especially the church’s finances. This can improve the daily functioning of your church, not just during times of disasters.
Also, as you expand your thinking about disaster budgeting, think beyond just dollars. Consider the other resources that may be available in your congregation. For example, maybe you don’t need to set aside as many dollars specifically for debris removal if you know you have people in your congregation who have the skills, tools, resources, and knowledge to do this work well. Perhaps you could set a plan in place ahead of time with congregation members who might be willing to volunteer or give a discounted rate for such services. You still would likely need funds to be able to assist with debris removal, but it may require much less when you recognize the in-kind resources that you may have access to thanks to your congregation or broader community.
As funds earmarked for disaster go unused, you may be tempted to lower or stop placing additional money into these reserves. But it’s important to regularly reevaluate your budget for inflation and cost-of-living adjustments, as well as any increased risks in your community. What seemed adequate in the past might not be enough in the future, especially as weather-related events continue to rise.
Review your insurance
It’s important for your church to have insurance to cover certain disaster scenarios. A yearly review with your insurance agent on what is and isn’t covered and what else might be needed is important. For example, there are communities that are now at risk of flooding that previously were not. It’s also important to dispel any misconceptions about what is and isn’t covered should disaster strike. A realistic understanding of your coverage will help your finance committee determine true financial need in areas that aren’t fully covered or aren’t covered at all.
TIPAs you evaluate insurance and other potential funds, it’s important to understand how to access any available funding through the Federal Emergency Management Agency (FEMA). For a helpful overview, see my article “What Churches Need to Know About the New FEMA Disaster Aid Process.”
Some closing thoughts about buy-in and fundraising
It may seem counterintuitive, but another way to build buy-in for disaster funding and budgeting is by encouraging your church to donate or support other churches or organizations responding to disasters. This can be a great place to start. As your church considers giving to disaster organizations, it also begins to create a culture of preparedness and readiness. It also helps congregation members, as well as the finance committee, see the importance of taking steps toward cultivating resilience, including through your budget, for disaster preparedness. Through these acts of altruistic giving, not only is your church helping others, but by doing so, it helps the congregation develop new skills and raises awareness about the need to prepare, which makes getting the overall buy-in easier both among leaders and members.
When it comes to fundraising, consider a special event to raise awareness about disasters in your community and create opportunities for giving for preparedness efforts. It may also be helpful to look to your denomination or donors that may have a particular interest in funding church preparedness activities and recovery efforts. The Federal Emergency Management Agency (FEMA) and the Department of Homeland Security have also offered grants in the past to help strengthen the security of houses of worship, so be on the lookout for opportunities to procure dollars for effective mitigation strategies.
It’s important to remember that, as with most things in life, a little bit of energy and money spent on preparedness goes much further than what it takes to figure out solutions after a disaster hits.
Dr. Jamie D. Aten is a disaster psychologist and the founder and executive director of the Humanitarian Disaster Institute (HDI) at Wheaton College in Illinois. HDI recently launched a new MA in Humanitarian & Disaster Leadership at Wheaton College Graduate School. Jamie’s latest books include the Disaster Ministry Handbook and Spiritually Oriented Psychotherapy for Trauma . You can follow Jamie on Twitter at @drjamieaten or visit his website.
For additional information, see these articles and downloadable resources:
Church boards can use the language below to create a resolution for a housing allowance. Use it for pastors who own or rent a home.
Important note: A resolution can only be applied prospectively. It can never be applied retroactively.
For a church to have a housing allowance resolution in place for a specific calendar year, it needs to adopt it by December 31 of the previous year. A resolution can be adopted after the start of a new calendar year, but it only applies from the date of the adoption and going forward.
Sample housing allowance resolution for pastors
The following resolution was duly adopted by the board of directors of [Name of Church] at a regularly scheduled meeting held on [Day, Month, Year], a quorum being present:
Whereas, ministers who own or rent their home do not pay federal income taxes on the amount of their compensation that their employing church designates in advance as a housing allowance, to the extent that the allowance represents compensation for ministerial services, is used to pay housing expenses, and does not exceed the fair rental value of the home (furnished, plus utilities); and
Whereas, Pastor [First and Last Name] is compensated by [Name of Church] exclusively for services as a minister of the gospel; and
Whereas, [Name of Church] does not provide Pastor [First and Last Name] with a parsonage; therefore, it is hereby
Resolved, that the total compensation paid to Pastor [First and Last Name] for calendar year 2025 shall be [$_____], of which [$_____] is hereby designated to be a housing allowance; and it is further
Resolved, that the designation of [$_____] as a housing allowance shall apply to calendar year 2025 and all future years unless otherwise provided.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: AdobeStock/solipa
Can We Give Additional Income to a Church Employee Who Opts Out of Our Medical Plan?
Understand the rules for offering a medical stipend to church employees who opt out of coverage and how to ensure compliance with IRS and ACA regulations.
Q: My church has an employee who is covered by his spouse’s medical insurance plan. Is it okay to give a stipend to an employee who declines our plan so long as it is reported as taxable income?
The answer is maybe. Employers, including churches, cannot offer a cash or benefit option to employees who opt out of group health insurance as a general choice. Doing so—providing an increased paycheck in lieu of participation—may jeopardize the tax benefits of your medical plan for all employees.
How Can a Church Structure an Opt-Out Payment?
The opt-out payment should be structured in compliance with the Affordable Care Act (ACA) and should not disrupt the benefits of those who remain in the plan.
It must be coordinated properly to avoid making the benefit taxable for all employees.
The church should consider placing the opt-out payment within a Section 125 cafeteria plan to preserve tax benefits.
When Is the Opt-Out Payment Taxable?
Unless structured within a Section 125 plan, the opt-out payment is taxable. Churches should work with a tax professional to ensure compliance with federal regulations.
FAQs About Church Employee Medical Stipends
Can churches offer cash payments to employees who decline medical coverage?
Yes, but only if structured correctly within a compliant benefits plan to avoid negative tax implications.
Does an opt-out stipend impact other employees’ benefits?
Potentially, yes. If not handled correctly, it may make the employer’s entire group health plan taxable for all employees.
What is a Section 125 cafeteria plan?
A Section 125 plan allows employees to receive certain benefits pre-tax, preserving tax advantages for both the employer and employees.
Should churches consult a tax professional before offering an opt-out stipend?
Yes, it is essential to consult a tax or benefits expert to ensure compliance with ACA regulations and IRS guidelines.
By structuring an opt-out payment correctly, churches can ensure they remain compliant while supporting employees with alternative medical coverage options.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
Can One Church Warn Another of a Former Employee’s Misconduct?
A negative employment reference could create civil liability.
If Church A dismisses an employee for misconduct and that individual is later hired by Church B, does Church A have a legal duty to warn Church B?
This article reviews a recent court case, examines several related cases, and concludes with key considerations and a practical checklist.
Recent Case: McRaney v. Mission Board
In McRaney v. Mission Board, 304 F. Supp.3d 514 (N.D. Miss. 2018), a federal district court ruled it could address a minister’s claims against a denominational missions board. The court found that neither the ministerial exception nor the ecclesiastical abstention doctrine barred the case.
Facts of the Case
A missions agency terminated its executive director (the “plaintiff”), an ordained minister.
The plaintiff alleged that an unrelated denominational missions board interfered with his business and contractual relationships by:
Trying to cancel his scheduled speech at a pastors conference (unsuccessful).
Taking steps that led to his termination from the missions agency (successful).
Getting him removed from speaking at a missions symposium.
The Lawsuit
The plaintiff sued the missions board for intentional interference with business relationships.
The court noted that, under Mississippi law, a claim for interference requires:
Intentional and willful acts;
Acts aimed at causing damage to the plaintiff’s lawful business;
Acts done with an unlawful purpose or malice;
Actual damage or loss resulting; and
Proof that the defendant’s acts caused the damage.
Key Court Findings:
The claim related to the canceled pastors conference was dismissed—no actual damage occurred.
The claims involving his termination and cancellation from the missions symposium were allowed to proceed.
Ministerial Exception Not Applicable: The court found the ministerial exception did not apply because:
The plaintiff was not employed by the missions board.
The claim did not involve an employment decision made by the defendant.
Four Case Studies: Interference with Contract
Across many states, individuals who interfere with an existing contract can be sued for “interference with contract.”
Important:
Timing matters.
Interference after hiring may lead to liability.
Comments before hiring typically do not.
Case Study 1: Marshall v. Munro (Alaska)
A denominational official made disparaging comments about a newly hired minister, leading to job loss.
The Alaska Supreme Court allowed the interference claim, noting no core ecclesiastical issues were involved.
Case Study 2: Williams v. Palmer (Illinois)
A Methodist minister sued over an unwanted transfer.
The court dismissed the claim under the ecclesiastical abstention doctrine, stating the matter was internal church governance.
Case Study 3: Hayden v. Schulte (Louisiana)
A priest claimed a church official’s letter harmed his Navy chaplain prospects.
The court leaned toward protecting internal church communications.
Case Study 4: McGarry v. Saint Anthony of Padua Roman Catholic Church (New Jersey)
A music director sued after a prior employer disclosed his criminal conduct.
The court dismissed the case, citing:
No malicious intent;
Information was requested, not volunteered;
A qualified privilege protected the disclosure.
Six Key Considerations
Churches must tread carefully when discussing a former employee’s misconduct. Here are six critical points:
1. Proving Interference with Contract
To succeed, plaintiffs usually must prove:
A valid employment contract existed;
Intentional interference by a former employer;
Actual damage or loss occurred.
Note: Some courts also recognize “interference with prospective contractual relations,” requiring proof that:
A relationship or contract was likely;
A wrongful act prevented it;
The act was intentional;
Harm resulted.
2. Misunderstanding the Duty to “Warn”
Many church leaders mistakenly believe they must warn other churches about a former employee’s misconduct.
However, courts generally do not impose an affirmative duty to warn.
Example: In Hornback v. Archdiocese of Milwaukee, 752 N.W.2d 862 (Wis. 2008):
The Wisconsin Supreme Court ruled that the Diocese had no duty to warn future employers or the public about a priest’s past misconduct.
The court emphasized the lack of a foreseeable relationship between the Diocese and the victims.
Important Distinction:
Churches are not required to track former employees or warn every potential future employer.
Liability may arise if a church provides a positive, unqualified reference that omits known misconduct.
3. High Plaintiff Win Rates
According to the American Bar Association:
Interference with contract claims have a 70% plaintiff success rate, the highest among liability claims.
4. The Ministerial Exception
In Hosanna–Tabor Evangelical Lutheran Church and School v. E.E.O.C., 132 S. Ct. 694 (2012), the U.S. Supreme Court confirmed that:
The ministerial exception bars many employment-related lawsuits involving clergy.
However, as seen in McRaney, not all interference claims are automatically barred.
5. Volunteers
Most interference claims require an employment relationship. Thus, warnings about volunteers typically do not trigger interference with contract liability.
Conclusion
Churches must balance two risks when dealing with former employees:
Remaining silent and potentially allowing misconduct to continue elsewhere.
Speaking up and risking an interference with contract lawsuit.
Key takeaways:
Avoid gratuitous disclosures unless asked for a reference.
If providing information, stick to factual, verifiable details.
Understand that an affirmative legal duty to warn is rare.
Be cautious when issuing positive references for individuals with known misconduct.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: MangoStar_Studio | Getty
How to Investigate a Sexual Harassment Allegation
Seven steps to take when an allegation arises—and when outside help may prove wisest.
William R. Thetford Jr. and H. Robert Showers
Every church should have a carefully crafted and legally sound policy to address sexual harassment. Such a policy can help guide and protect the church in case an accusation of harassment by an employee surfaces. It can also help prevent abuse from taking place at all.
New study on sexual harassment in the Christian workplace: Learn about the extent of this troubling problem in churches and parachurch ministries.
Once you have a policy in place, your church is in a much better position, both in terms of fostering a healthy workplace culture and in maintaining a sound legal position. However, should an allegation arise, your church must stand ready to follow the policy and shrewdly respond. Use the following seven steps to conduct a proper investigation for your church.
1. How to receive complaints
First, church leaders must be receptive to receiving a complaint. Do not treat a complaint as a nuisance created by the reporter. Along the same lines, do not promise punishment for the accused until you have investigated the allegation. In other words, it is important that the church treats the complainant and all parties involved with respect. While it is too early in the process to promise a result (dismissal or exoneration of the alleged offender, and so on), it is important that you take this matter seriously and assure everyone that a full and fair investigation will be undertaken.
Before further discussing the investigative process, it is important to note here that not all complaints are made through a formal channel. Sometimes they are given informally. Churches still must be vigilant to understand when this is happening and direct this situation into the proper channels. For instance, if an employer is made aware of sexual harassment, either through informal conversation with an employee or through observing this behavior directly, the employer should begin to take action. If no action is taken, courts will likely find that the employer “knew or should have known” about the problem and may impose liability on the employer. In such a situation, the employer should probably respond by seeking to establish a formal complaint and have the known victims or witnesses to record their accounts in writing. Likewise, if you have a sexual harassment policy and the employee/victim does not report an alleged incident, then the church will be able to raise a defense if a lawsuit is later filed.
Once a complaint is received, whether formally or informally, the church may need to do an initial evaluation to determine the scope of the upcoming investigation and see if there are any interim remedial steps that need to occur pending the outcome of the investigation. For instance, it is generally inappropriate to have the alleged offender continue to maintain direct oversight over the complainant. In fact, it may be wise—if probable cause exists—to put the alleged offender on paid administrative leave pending the results of the investigation. (For a definition of “probable cause,” please see the related article “Seven Steps for Creating an Effective Sexual Harassment Policy.”) There may be other instances in which the complainant should be offered paid administrative leave, too. Whatever the case may be, church leaders must make certain any remedial steps they take are not actual—or perceived—retaliatory measures against the complaining employee, nor actual or perceived steps taken to retaliate or punish alleged offenders before the evidence has been fully considered. Fairness and respect to all parties must be emphasized in order to build trust and transparency on all levels.
2. Other early steps
At the beginning stages, if your church has liability insurance, review your policy. Should you want to make a claim, your church needs to know what must be done—and when—with the insurer to ensure it maintains coverage.
Also, your church should take time early on to explain the process of the investigation to the appropriate stakeholders (e.g., the church board, church members, and other leadership), and decide how the findings will be distributed. Help both the victim and the alleged perpetrator know that you will conduct an objective and professional investigation, and what they should expect throughout the process.
3. Choosing an investigator
In accordance with your sexual harassment policy, your church will need to take prompt action. The first major decision you will have to decide is who will handle the complaint. There are essentially three options available to conduct the investigation:
do it internally;
hire an independent outside group that is not a law firm; or
hire an independent law firm.
Some minor complaints can be handled internally. However, sexual harassment is a sensitive subject and has the potential to become a highly charged issue with long-term ramifications for your church. Moreover, conducting the investigation internally may subject your church to real or perceived bias that may taint the process. Any decision to conduct an internal investigation must be made with caution.
For most serious allegations or for allegations involving church leadership, you will want to choose an independent agency to conduct the investigation. This may be more costly initially, but it may save your church’s reputation, resources, and morale, if done right.
We do not recommend independent outside groups that are not law firms. An independent investigation by legal counsel experienced in sexual harassment complaints is prudent for three reasons, especially if there is a chance that the issue may result in a lawsuit or legal liability:
Communications with legal counsel regarding the matter will be protected by attorney-client privilege or the standards of confidentiality that law firms are obligated to follow.
While a thorough investigation made in good faith can prevent the church from being held legally responsible for the acts of the offender, a poorly handled investigation can leave the church on the hook. In some states, an employer with good intentions even can be liable for the malicious acts of its employees if the employer conducts a negligent investigation and takes action on that errant basis. (For more information on an employer’s liability for taking disciplinary action on a negligent investigation, see Vasquez v. Empress Ambulance Serv., 835 F.3d 267, 269 (2d Cir. 2016)). Similarly, a negligent investigation is not likely to protect a church which fails to take appropriate action. Moreover, beware that a grossly negligent investigation done in house can bring potential liability as well.
Some third-party investigation firms have been known to endlessly investigate, needlessly expending resources and taking months, if not years, to conclude. Such a scenario puts the church in the difficult position of deciding whether to continue the investigation until its resources are exhausted or to fire the investigators, a move outsiders may perceive to be an attempted cover-up and breach of trust. Moreover, the alleged victims and perpetrators are indefinitely left in limbo. Speed can be as important as completion in any sexual harassment investigation.
CAUTION Do not allow alleged victims or outside victim advocacy groups to pressure the church, through social media or otherwise, into conducting a one-sided investigation or into hiring an investigator who is not objective and trying to find the truth regardless of where it leads.
Whether the investigation exonerates or finds wrongdoing on the part of the alleged offender, the stakes are high. Liability can result both in failing to protect a victim or defaming someone who was innocent. A law firm skilled in sexual harassment investigations can minimize and overcome numerous challenges such as the ones described above.
Good questions to ask legal counsel early on include:
What statements do we make to the employees?
What should we say to the complainant?
How should we communicate with the alleged wrongdoer?
How should we handle the media if our church is approached by reporters? How do we handle social media?
4. Conducting the investigation, gathering documentation
When investigating the accusations, the investigator, whether in-house or third-party, should interview both the victim and the accused. The investigator will try to corroborate the claims of the witnesses with other evidence (including other witnesses) to try to verify what really happened. After reviewing this new evidence, the investigator may need to reinterview the reporter and/or the accused.
How to address the individual who has reported the harassment is a sensitive subject. It is important to get to the bottom of what happened so that appropriate action can be taken. However, as stated earlier, the victim should be treated with respect, not harshness.
All findings should be documented, with an awareness that what is written down could end up in court. As you go through the investigative process, your primary concern is to understand what happened and how to respond. However, you should also seek to learn how this happened and what steps can be taken to prevent this situation from arising again in the future.
5. Take reasonable action
As a result of the investigation, the employer must take reasonable action. However, determining reasonable action depends upon the level of proof the church requires—a standard that should be considered and established with its sexual harassment policy long before a problem ever occurs. For specific information and guidance on choosing a level of proof, see the “Standard of evaluation” section in our policy article.
If the investigation determines the offender is guilty of serious wrongdoing, formal discipline or potential job termination is warranted. If termination is contemplated, though, it is important the employee received notice that sexual misconduct could lead to that result. This means it is essential that your church’s sexual harassment policy states termination is a possible consequence. It is also essential all employees acknowledge the policy to demonstrate they received notice of this possible outcome in light of a violation.
Of course, if the investigation reveals sexual harassment did not occur, then this finding should also be reported to all parties involved. However, it is important not to let such an outcome create a perception in the church that future allegations should not be brought forward.
6. Communicate the results prudently with legal guidance
This step is increasingly important since employers are more highly scrutinized by the public in the seemingly ever-expanding world of social media, including the #MeToo and #ChurchToo movements. Honesty, trust, and transparency are virtues, but so is discretion. There is no requirement that all information must be revealed to the public and all parties. In fact, doing so could destroy attorney-client privilege, result in defamation lawsuits, and either start or exacerbate a negative public relations war. Do not give in to public pressure or social media in communicating something that you will later regret. Be wise in the dissemination of information and/or statements made to the public (social media included).
This step is another critical juncture to seek out legal counsel as the best course of action will vary greatly based on the specific situation. Typically, the final report containing the full findings of the investigation is kept by the employer and the parties are only given a written summary of the findings and results. If appropriate, another statement can be issued to the congregation or others who may have reason to know. Public statements are particularly problematic since potential defamation, intentional infliction of emotional distress, and other causes of legal action may flow from thoughtless and unwise releases of information. Telling the truth is important—but do it wisely and with counsel from experienced professionals.
7. Follow up
Just because the investigation is concluded (and, if warranted, an appropriate measure of discipline is applied) does not mean that everything goes back to the way it previously was.
The church must not allow any retaliation against the complainant for making a good-faith complaint. It would be wise for the church also to periodically check in with the victim to ensure that the situation improves and that no retaliation has occurred. If the offender was disciplined short of termination and warned not to repeat his or her behavior, the church also must ensure that the individual complies. Conversely, if the investigation reveals the alleged victim was using the sexual harassment allegation as a tool to distract from poor performance or to settle a score, it is just as important to make certain that issue gets resolved for the sake of fairness and transparency.
Further, it will be important to document the steps that your church took during the investigation and the result of it. Usually, the best practice is to prepare a short, written report. If you have hired legal counsel to assist in this matter, this document can be protected as attorney work product, except for the conclusions and discipline.
Handling historical investigations
Historical investigations of sexual harassment are much more difficult to address compared with ones investigating the recent past. These types of situations have garnered significant media attention recently. A prime example is the allegations made against Justice Brett Kavanaugh during his confirmation hearings for the US Supreme Court. Other examples include years-old and decades-old sexual misconduct allegations arising within the Catholic Church, the Southern Baptist Church, and Penn State University. Memories can fade over the years and it may be difficult to locate the relevant witnesses, documents, or other evidence.
Many of the investigation principles discussed above and the policy recommendations given in this article will apply to historical investigations, but it may take more digging in order to reach the truth of what occurred. When your church does reach a conclusion, you may find that it is a bit hazier than an investigation of a recent event. One of the keys will be corroborating evidence. Often, documentary evidence, which can be critical in corroboration, may be more difficult to find the longer the time period between the sexual harassment event and investigation. It initially may be the word of one person against the other, but if you can independently confirm or contradict the details of the testimony you receive, you may be able to get a better picture of who is telling the truth, what was forgotten, and what really happened. It may be a complicated interconnected puzzle where one piece can help lead to another to get the whole clear picture.
Seven Steps for Creating an Effective Sexual Harassment Policy
A strong sexual harassment policy policy not only can provide protection for all involved, but also can serve as a deterrent.
William R. Thetford Jr. and H. Robert Showers
The #MeToo and #ChurchToo movements have captured headlines and national attention in recent months, placing a renewed emphasis on understanding, exposing, and preventing sexual misconduct. It is imperative that churches and nonprofits understand the legal, practical, and public relations implications of this crucial subject. A poorly handled response to such an allegation will mangle the mission of the church or organization and may lead to an expensive and time-consuming legal labyrinth.
A 2020 study on sexual harassment in the Christian workplace: Learn about the extent of this troubling problem in churches and parachurch ministries.
Legal claims for sexual harassment typically arise in the employment context. Therefore, it is of utmost importance that churches take action to prevent this threat from taking root in their workplaces and carefully address any issues that do arise in a prompt and honest way.
Key point. Under Title VII of the Civil Rights Act of 1964, sexual harassment is a form of sex-based discrimination. See 42 U.S.C. 2000e-2(a). Only churches with 15 or more employees that engage in interstate commerce are subject toTitle VII. While only between 1 percent and 2 percent of all churches are subject to Title VII, several states enforce comparable laws—and many use a lower employee threshold.
Why churches need a policy
It may be tempting to believe that something as serious as workplace sexual harassment could never occur in your church. Understandably, many leaders may feel reluctant to think in detail about how to handle something so unpleasant and something that they hope will never happen. Still, the best time to create a sexual harassment policy is well before one is needed. It is much easier to create a wise plan of action before the pressures, emotions, and relational complexities among the people in your church arise in a moment of crisis.
A strong sexual harassment policy is crucial for three reasons:
First, a good anti-sexual harassment policy may prevent sexual harassment in the first place. This policy will make clear to potential wrongdoers that this conduct has no place in your church. Because sexual harassment deals, in part, with what is or is not “welcome,” there is a great potential for misunderstanding between employees as to what kinds of comments, jokes, or actions are appropriate or inappropriate, and what constitutes illegal sexual harassment. Your policy should clarify what actions constitute sexual harassment and how your church will address those actions.
Second, if the policy does not stop someone from engaging in harassing behavior, this policy will help your church address the serious issue for what it is, protect the rights of the victim and the accused, and move forward.
Finally, implementing and following a strong sexual harassment policy may protect your church from civil liability, should it ever be sued regarding a sexual harassment allegation. For certain hostile work environment sexual harassment complaints, it is an affirmative defense to liability for an employer if it can prove it created a policy, communicated it to employees, and followed its complaint procedure. In certain other claims, the employer will not be held liable for sexual harassment that occurs if it shows that the employer took “immediate and appropriate action.”
Crafting an effective sexual harassment policy
A sexual harassment policy is vital to any church, organization, or business that has employees. There are many differences between the way for-profits and nonprofits should operate; however, both for-profits and nonprofits need a strong sexual harassment policy.
Further, a church or nonprofit may find certain behavior unacceptable, even if it is not illegal. For those situations, it may be helpful to create a high standard for your church and address indiscretions at that level, rather than awaiting misdeeds that are also a violation of law. In fact, the unique nature of churches and ministries allows them to enforce moral standards in accordance with their religious convictions to a greater extent than other organizations can. Of course, churches must enforce such moral standards consistently—for instance, not treating women less favorably than men. For additional insights on this topic of enforcing moral standards, see “Discrimination Based on Religion or Morals” in Pastor, Church & Law.
Thankfully, a sexual harassment policy need not be particularly long to be effective. It may only be a few pages by itself or it may be a part of the church’s broader employee handbook. However, there are seven central aspects that any policy should contemplate.
1. Make it broad in who it applies to and in what it prohibits
The policy should be clear that no harassment will be tolerated. Those who are found to have engaged in sexual harassment should be subject to discipline, up to and including termination.
Because there is a lot of uncertainty about what constitutes sexual harassment, define it for your employees so that there are no misunderstandings and no excuses. Federal government regulations define sexual harassment as:
Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when (1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment, (2) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual, or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile, or offensive working environment. 29 C.F.R. § 1604.11.
Your policy should be at least as broad, if not broader, than the federal government definition. You should also provide examples of what can constitute sexual harassment, such as:
Unwanted physical contact or conduct of any kind, including sexual flirtations, touching, advances, requests for sex, or propositions;
Repeated unwelcome requests for a romantic relationship;
Verbal harassment of a sexual nature, such as lewd comments, sexual jokes or references, and offensive personal references;
Demeaning, insulting, intimidating, or sexually suggestive comments about an individual;
Graphic, verbal commentary about an individual’s body, sexual prowess, or sexual deficiencies;
The display in the workplace of demeaning, insulting, intimidating, pornographic, or sexually suggestive objects, pictures, calendars, or photographs; and
Demeaning, insulting, intimidating, or sexually suggestive written, recorded, or electronically transmitted messages (such as email, text messages, instant messaging, and internet materials, including social media and social networking sites).
Key point. Sexual harassment can occur between individuals of the opposite sex or of the same sex.
In sexual harassment cases, there is often confusion about how “consent” factors into the consideration. The standard is actually whether the actions or comments are “welcomed” by the individual and deemed as such by a reasonable person. Just because the victim does not immediately object does not mean that it is not “unwelcome.” Your policy should note this. Sometimes individuals do not lash out when they are offended by sexual misconduct. Some victims may immediately object or they may be surprised by what they perceive to be brazen misconduct and not know how to appropriately respond.
Tip.It is important to warn employees that violations of this policy can result in discipline, up to and including termination.
For more on defining sexual harassment, including specifics on “quid pro quo” and “hostile environment” harassment, examples demonstrating the need for a policy, and case studies, see this article by attorney and Church Law & Tax senior editor Richard Hammar.
2. Lay out a reporting procedure
The second important feature of a sexual harassment policy is creating a procedure to handle reports of sexual harassment. Employees who believe they may have been sexually harassed need to know who to go to and how to make a complaint.
You may want to encourage your employees who believe they are being harassed to firmly notify the offender that his or her behavior is unwelcome. There are some situations where that will put an end to the behavior. However, this will not always be possible, especially when the offender has a position of power or influence over the victim.
The reporting hierarchy will depend on the structure of your church. However, it is common to have employees notify their direct supervisor, manager, or human resources officer first and then senior executives if necessary. It is important to have multiple avenues of reporting in case the official who is supposed to receive reports is the one accused or ignores the report for any reason.
The policy should strongly encourage that sexual harassment complaints be in writing. This aids the investigation, if needed, and serves to preserve the memory of details that would otherwise become hazy with time. It also serves to confirm or dispel the possible response from the alleged offender that the complainant’s story has changed.
If the employee cannot give a written report, or prefers not to do so, the person receiving the report should document what was reported and when. If possible, have the employee review and verify the documented statement and agree to it with a signature.
3. Develop a framework for conducting an investigation
Your policy should include the framework of how you will conduct investigations. Importantly, once you receive a report, you have a duty to investigate it promptly. Promptness is important for a variety of reasons. It is much more difficult to determine what happened long after the fact. Also, the organization is often only protected from liability for harassment undertaken by one of its employees if it took immediate and appropriate action in response to a report.
The policy also should clearly state that your church will give a fair investigation, both to the one who reported the abuse and to the accused individual. Both the victim and the accused should be given the opportunity to present evidence to the investigator, tell his or her side of the story, and offer witnesses. You may want to indicate in your policy that employees will be required to participate with the investigation. There may be employees who are witnesses to the harassment but will not want to get involved in “office politics” unless you require them to talk to the investigator.
Some policies will reserve the right of employers to place any or all employees involved in the matter on administrative leave (with or without pay) while the investigation is pending. This is more commonly used for the accused employee. You may offer the alleged victim paid leave or reassignment during the investigation to protect his or her privacy. However, you should not force the alleged victim to go on leave or take reassignment, because that will appear to be retaliation against the employee for making a report.
Find guidance for choosing an investigator and the steps for conducting an investigation in this article.
4. Determine the standard of evaluation
The policy should also address what happens once the investigation concludes, and how certain the investigator must be before discipline is undertaken.
There are five standards used in the American legal system for evaluating whether a claim or charge brought in a matter prevails. These are listed below in increasing degree of rigor and certainty:
Reasonable suspicion;
Probable cause;
Preponderance of the evidence (more likely than not)—used in most civil cases;
Clear and convincing evidence;
Beyond a reasonable doubt—used in most criminal cases.
Reasonable suspicion and probable cause are used as introductory matters in criminal cases to determine when certain investigations can be conducted and when searches, arrests, or charges may be made.
Preponderance of the evidence just means that there is more evidence in support of a claim than there is against it. Most civil cases are decided by that standard.
Clear and convincing evidence is a more stringent standard than preponderance of the evidence, but it is used less frequently.
Lastly, a criminal defendant cannot be convicted unless the evidence shows he is guilty beyond a reasonable doubt, the highest standard in American jurisprudence.
When there is a debate over what occurred, the standard of evaluation may make the crucial difference at the end of the investigation. A well-publicized example is the difference between the two O.J. Simpson cases. In those two cases, one civil and one criminal, the same facts, same witnesses, and same defendant led to different results because the evidence did not rise to the standard of beyond a reasonable doubt in the criminal case, but the evidence was enough to move past the preponderance of the evidence standard in the civil case.
A good policy will answer two questions:
What standard is necessary to begin an investigation?
What standard is required to find someone in violation and to exercise discipline?
At a minimum, there should be reasonable suspicion in order to begin an investigation. But you need more than that in order to take appropriate disciplinary action against someone. Most businesses, organizations, and churches will utilize the preponderance of the evidence standard, but some will opt for the more rigorous test of clear and convincing evidence. In any civil case against the church or organization for sexual misconduct, the standard or proof will be preponderance of the evidence. Thus, in most cases, it is appropriate and consistent to make preponderance of the evidence the standard for the investigation as well. However, some organizations choose to use the stricter clear and convincing standard. Clear and convincing evidence is a higher threshold reserved for allegations such as fraud in civil lawsuits (but less than beyond a reasonable doubt standard required for prosecution of criminal acts). Some churches believe that, under biblical standards, serious accusations against a spiritual leader (like an elder or a pastor) require a higher degree of certainty.
5. Provide confidentiality
Make it clear in your policy that complaints and investigations will be handled confidentially to the extent practical and appropriate under the circumstances. You should handle with sensitivity the report of the victim, interviews with the witnesses, and other information the investigation produces. You should also avoid jumping to false conclusions of such a serious nature as well, which can result in defamation lawsuits. However, you will still need to relay information to the accused and key stakeholders (e.g., board members, denominational leaders, or church members). What you communicate, when, and to which group of stakeholders is a good question to discuss with your legal counsel.
6. Prohibit retaliation for good faith reports
Your policy should prohibit any retaliation or retribution for reporting sexual harassment in good faith (meaning a report is made based on a genuine belief about the act in question, and not based on intentional dishonesty). Even if there is not enough evidence to support disciplining the accused, there should be no reprisals against the reporter if the report was made in good faith. You may want to address bad faith complaints. Fabricating allegations or lying during an interview may be its own cause for discipline or termination.
7. Consider off-premises conduct
You should also consider whether your policy will apply to conduct amongst employees that takes place during nonwork hours and outside of work. Our recommendation: Whether it is a work-sponsored activity or not, your policy should take a strong stance against any sexual harassment.
If a thorough investigation shows that one employee engaged in sexual harassment against another (or engages in other conduct which violates your church’s moral standards or code of conduct), the church may wish to impose discipline against that employee even though the actions occurred offsite and during nonwork hours. Just because the sexual harassment occurs between employees off-site or after-hours does not necessarily make it less damaging. It certainly does not make it less wrong. The actions of an employee can still dramatically impact the reputation of the employer.
If you want your church to be able to respond effectively in these types of situations, we advise that your policy and your employee handbook clearly explain that conduct (including sexual misconduct) at work and outside of work reflects on an employee’s ability to carry on the religious mission of the church and lead spiritually, and that such misconduct may warrant discipline from the church, up to and including termination.
Such a provision frequently appears in well-drafted employee handbooks. Such a provision could be included in documents that volunteers review and sign as well, but it is much less common to seek to govern off-site and after-hours conduct by an unpaid volunteer.
Follow-up: training and expectations
Once the policy is written, it is important for employees to understand it. They need training in how to handle sexual harassment allegations because helping them develop a clear understanding of expectations and procedures could prove pivotal in the event of a crisis, or better yet, it may avoid one altogether. One important component to this training will be the reporting process, including who employees should contact in the event an allegation arises. Retaining experts to conduct training on sexual harassment, either online or in person, will help develop this understanding while also building the culture of trust and transparency needed within a church workplace .
See also this article on conducting investigations in response to sexual harassment allegations.
Q: During one of our church services, someone submitted a prayer request card describing a situation that may involve child abuse. How should we respond to this situation and any future ones like it?
Gather the facts
The first thing to do is carefully read the prayer request card to determine whether the situation is described with sufficient specificity to evaluate under the relevant child abuse statutes. Does the card identify the child or sufficient facts to identify the child? Does it describe a current situation or one that occurred years ago? Does it describe circumstances in detail sufficient to evaluate as potential child abuse? If the prayer request fails any one of these questions, then the church should contact the requestor for more information to determine the answers.
Refer to state law
Assuming the church has sufficient information, the next thing to do is evaluate your state’s mandatory child abuse reporting law. This will help you determine what constitutes a legally required report of child abuse or neglect and who the law says is a required reporter. The top priority is to determine whether the person who read the card is a mandatory reporter. Generally, if someone is a mandatory reporter, the report must be made very quickly. Time is of the essence.
Understand definitions
Additionally, the definition of what is considered abuse or neglect is also important to review. Neglect can be very broad in some states. Therefore, what may be a required disclosure in one state may not be required in another. The church should also review its policies and procedures regarding child abuse and neglect reporting. Hopefully, these policies and procedures have been vetted by an attorney knowledgeable about your state’s child abuse reporting status. Each church should be familiar with the statutory definitions of child abuse and neglect.
Identify who are mandated reporters
For an example, let’s consider what reporting might look like in California—the state in which I practice law. California’s Penal Code has an extensive list of those who are considered mandated reporters of suspected child abuse. Clergy members, which are defined in the Code as a “priest, minister, rabbi, religious practitioner, or similar functionary of a church, temple, or recognized denomination or organization,” fall within the category of mandated reporters.
In addition, “any custodian of records of a clergy member” are mandated reporters. This means that church secretaries and other lay people could be considered mandated reporters if their job—or even voluntary function—is to maintain records for clergy. According to the California Penal Code, “[a] mandated reporter shall make a report to an agency whenever the mandated reporter, in his or her professional capacity or within the scope of his or her employment, has knowledge of or observes a child whom the mandated reporter knows or reasonably suspects has been the victim of child abuse or neglect.”
Is is penitential communication?
After determining whether there is a reportable offense and if it was made to a mandatory reporter, the second step is to determine if there is an exception for penitential communication. Or, to put it in another way, you should determine if the communication is protected by your state’s law addressing the clergy-penitent privilege. Some states do not require clergy to report if the communication is penitential in nature. Using California as an example again, a penitential communication is defined as “a communication, intended to be in confidence, including, but not limited to, a sacramental confession, made to a clergy member who, in the course of the discipline or practice of his or her church, denomination, or organization, is authorized or accustomed to hear those communications, and under the discipline, tenets, customs, or practices of his or her church, denomination, or organization, has a duty to keep those communications secret.” The provision is narrow. The Penal Code states that the exception does not limit a clergy member’s duty to report known or suspected child abuse or neglect when the clergy member is acting in some other capacity that would otherwise make the clergy member a mandated reporter.” Therefore, a pastor is a mandated reporter unless the prayer card is considered a penitential communication.
Courts have yet to address whether a prayer card would be considered a penitential communication. However, churches can take steps to bring some clarity to this issue.
An initial step is to include a statement on the prayer card that says “CONFIDENTIAL—For the pastoral team only.” The goal is to indicate that the prayer request is intended to be read only by someone in a pastoral role. This could be helpful evidence that the communication was intended to be penitential and the pastor might not be a mandated reporter in that situation.
If the prayer card does not indicate that the prayer request is only to be read by the pastors, then the pastor cannot reasonably invoke the provision and should make an immediate report assuming the circumstances describe potential child abuse or neglect. In California, the code requires reports to be made “as soon as is practicably possible” and a written report is required within 36 hours. The quick time frame demonstrates why it is important for a church to understand its role in reporting suspected child abuse or neglect.
However, if the card was not marked confidential, or it was still seen by someone other than a pastor, the question remains as to who read the prayer card. Was it a prayer team volunteer, an usher, or a church secretary? Are any of these people mandated reporters? If someone is not a pastor by title but employed by the church in a role that is ministerial in nature, they could be viewed as a mandated reporter and must make an immediate report. The church should address this issue in its child abuse and neglect reporting policy. Since this is a fact-specific matter, it may be best to have an attorney review the matter prior to the leadership choosing to make the report.
Develop a plan
After all these questions have been asked and answered, one question remains: How should a church respond to a prayer card where abuse is at least implied? This will look different for each church. Everyone wants to keep children safe and well cared for. Even if the prayer card is confidential and the reader is exempt from making a report, churches should always consider the steps they can take to ensure the safety of children who are at risk of harm or neglect. We recommend that all churches have a comprehensive plan in place to minimize the risk of abuse and to follow up with all reports of possible child abuse and neglect.
Kelli Marsh is an attorney with Church Law Center, offering clients legal counsel in the areas of governance and tax-exemption.
Supreme Court Upholds Constitutionality of Bladensburg Peace Cross
Overview of the Case
A high-profile legal case concerning a nearly 100-year-old war memorial was recently resolved by the United States Supreme Court. In a 7-2 decision, the Court ruled that the presence of a large cross on public land does not violate the U.S. Constitution. This decision carries important implications for churches and religious organizations.
Historical Background
1918: Citizens of Prince George’s County, Maryland, formed a committee to honor locals who died in World War I.
Design: The committee, which included mothers of fallen soldiers, chose a 32-foot-tall Latin cross, designed and built with community donations.
Completion: When funds ran low, the American Legion completed the project in 1925.
Features: The cross stands atop a pedestal with inscriptions like “Valor,” “Endurance,” “Courage,” and “Devotion.” A plaque honors 49 local men who died in the war.
Ownership: The land was transferred to the state’s park and planning commission in 1961.
The cross, known as the Bladensburg Cross or Peace Cross, became a focal point for patriotic events and was eventually surrounded by other memorials in what is now Veterans Memorial Park.
The Legal Challenge
2012: The American Humanist Association (AHA) filed a lawsuit claiming the cross violated the Establishment Clause of the First Amendment.
Request: The AHA sought removal of the cross or alteration to eliminate its religious appearance.
Defense: The American Legion intervened to defend the monument.
Court Journey: A district court upheld the cross; a federal appeals court reversed that decision; the Supreme Court granted review.
Supreme Court’s Analysis and Rationale
The majority opinion, authored by Justice Samuel Alito, outlined several key points.
1. Problems with the Lemon Test
The Court criticized the Lemon v. Kurtzman test, noting:
It failed to account for long-standing traditions and symbols.
It struggled to explain why prayers, “In God We Trust,” or religious holiday observances remain constitutional.
It created legal uncertainty and confusion.
The Court provided four reasons why the Lemon test should not apply:
Uncertain Historical Motives: Determining original intent decades later is speculative.
Evolving Symbolism: Over time, religious symbols often gain new, secular meanings.
Changing Public Perception: Monuments can become ingrained in cultural identity.
Risk of Hostility: Removing old religious symbols may appear hostile to religion, evoking memories of secular regimes that erased religious references.
2. Avoiding Religious Hostility
The Court emphasized:
Altering or removing the cross could be seen as disrespectful.
Government efforts to eliminate long-standing religious symbols may reflect hostility, not neutrality.
3. A Shift Toward Historical Practice
Rather than rely on Lemon, the Court:
Turned to historical context as a more reliable guide.
Cited Marsh v. Chambers (1983) and Town of Greece v. Galloway (2014) as examples where prayer and religious symbols in public settings were upheld based on tradition.
4. Final Holding
The Court concluded:
The cross has dual meaning: It honors WWI soldiers and reflects its historical Christian symbolism.
Over nearly a century, it gained significance beyond religion, symbolizing sacrifice, memory, and civic unity.
Its continued presence is constitutional, especially given its original context and long-standing role in the community.
Implications for Churches and Religious Organizations
This decision weakens the Lemon test, a long-used but controversial standard in Establishment Clause cases. The Court acknowledged:
Lemon has been criticized by justices, judges, and scholars.
Legal scholar Michael McConnell called it a source of “doctrinal chaos.”
Key takeaways for church leaders:
Older monuments with religious imagery are now strongly presumed to be constitutional.
This includes:
Crosses on public land
State and city names with religious roots
Phrases like “In God We Trust” on currency
However, the ruling focuses on existing monuments, not the creation of new ones.
The Supreme Court concluded: “Retaining established, religiously expressive monuments, symbols, and practices is quite different from erecting or adopting new ones. The passage of time gives rise to a strong presumption of constitutionality.”
In summary, the Bladensburg Peace Cross may remain, and by extension, many similar memorials may continue to stand as reminders of faith, sacrifice, and national heritage.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Annual Nondiscriminatory Policy Reporting Deadline Looms for Church-Run Schools
Filing Form 5578 is one of the most commonly ignored federal requirements of church-run schools and preschools.
Filing the certificate of racial nondiscrimination (IRS Form 5578) is one of the most commonly ignored federal reporting requirements of private schools and preschools, including ones operated, supervised, or controlled by churches and other religious organizations.
A private school is defined as an educational organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly conducted. The term includes primary, secondary, preparatory, or high schools, as well as colleges and universities, whether operated as a separate legal entity or an activity of a church.
Key point. The term school also includes preschools, and this is what makes the reporting requirement relevant for many churches. As many as 25 percent of all churches operate a preschool program.
Private schools must meet certain requirements
The IRS requires that a private school have:
a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that is has a racially nondiscriminatory policy toward students.
a statement of its racially nondiscriminatory policy toward students in all its brochures and catalogs dealing with student admissions, programs, and scholarships.
The IRS also requires that a school make its racially nondiscriminatory policy known to all segments of the general community served by the school either online, in the local newspaper, or via broadcast media (see below).
What is an acceptable public notice?
The IRS has offered this template:
Notice Of Nondiscriminatory Policy As To Students
The (name) school admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs.
Exceptions to the public notice requirement
The publicity requirement is not required if one or more exceptions apply. These include the following:
During the preceding three years, the enrollment consists of students at least 75 percent of whom are members of the sponsoring church or religious denomination, and the school publicizes its nondiscriminatory policy in religious periodicals distributed in the community.
The school draws its students from local communities and follows a racially nondiscriminatory policy toward students and demonstrates that it follows a racially nondiscriminatory policy by showing that it currently enrolls students of racial minority groups in meaningful numbers.
The school can demonstrate that all scholarships or other comparable benefits are offered on a racially nondiscriminatory basis.
Online notice options
Private schools can post their racially nondiscriminatory policy online, per IRS Revenue Procedure 2019022 (2019).
To do that, a school must display a notice of its racially nondiscriminatory policy on its primary publicly accessible Internet homepage at all times during its taxable year (excluding temporary outages due to website maintenance or technical problems) in a manner reasonably expected to be noticed by visitors to the homepage.
Per the IRS, a publicly accessible Internet homepage is one that does not require a visitor to input information, such as an email address or a username and password, to access the homepage.
Factors to be considered in determining whether a notice is reasonably expected to be noticed by visitors to the homepage include the size, color, and graphic treatment of the notice in relation to other parts of the homepage, whether the notice is unavoidable, whether other parts of the homepage distract attention from the notice, and whether the notice is visible without a visitor having to do anything other than simple scrolling on the homepage.
A link on the homepage to another page where the notice appears, or a notice that appears in a carousel or only by selecting a dropdown or by hover (mouseover) is not acceptable. If a school does not have its own website, but it has webpages contained in a website, the school must display a notice of its racially nondiscriminatory policy on its primary landing page within the website.
Other notice options
A school may publish its racially nondiscriminatory policy at least once a year in a newspaper of general circulation, or via broadcast media.
Filing the certificate of racial nondiscrimination
The certificate of racial nondiscrimination is due by the fifteenth day of the fifth month following the end of the organization’s fiscal year.
However, for organizations that operate on a calendar-year basis, the Form 5578 deadline is May 15. Schools must also maintain supporting records documenting compliance with the policy in order to retain their tax-exempt status.
Form 5578 is easy to complete. A church official simply identifies the church and the school and certifies that the school has “satisfied the applicable requirements of sections 4.01 through 4.05 of Revenue Procedure 75-50.”
Key point. Independent religious schools that are not affiliated with a church or denomination and that file Form 990 do not file Form 5578. Instead, they make their annual certification of racial nondiscrimination directly on Form 990 (Schedule E).
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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Are Employee Discounts on Church Retreats and Events Taxable?
Churches offering employee discounts on retreats and events must determine whether these benefits are taxable. IRS Publication 15-B allows certain exclusions, but restrictions apply, especially for highly compensated employees. Get expert insights on compliance and best practices.
Q: We want to offer all staff who work 32 hours a week or more discounts to church retreats and functions. Does the “employee discounts” exclusion outlined in IRS Publication 15-Bapply or must discounts be treated as taxable income to the employees? The publication says: “This exclusion applies to a price reduction you give your employee on property or services you offer to customers in the ordinary course of the line of business in which the employee performs substantial services.”
I would also like to point out that Publication 15-B says, “You can generally exclude the value of an employee discount you provide an employee from the employee’s wages, up to” certain limits—including “a discount on services, 20% of the price you charge nonemployee customers for the service.”
There are some caveats to this discount, and this one may apply to your executive leadership: “You can’t exclude from the wages of a highly compensated employee any part of the value of a discount that isn’t available on the same terms to” other employees.
If you are giving a discount of 20 percent or less to any employee, it is nontaxable. If the discount is more than 20 percent, then the term “substantial services,” as you quoted above, will need clarification from a tax expert.
For some additional insights, I reached out to nonprofit CPA Mike Batts, a nationally noted expert, an editorial advisor of Church Law & Tax, and author of Church Finance: The Church Leader’s Guide to Financial Operations. He concludes his remarks by dealing specifically with the terms “line of business” and “substantial services,” which relates specifically to whether an employee needs to work in the department conducting the discounted activity in order to be eligible for the discount.
Here, then, is what Mike had to say:
The nontaxable fringe benefit rule that your reader is referring to is the “qualified employee discount” exclusion found in Internal Revenue Code Section 132(a)(2). Under this rule, an employer can generally exclude from an employee’s wages the value of an employee discount of up to 20 percent of the price charged to nonemployee customers for the same service. An employee discount provided to “highly compensated” employees is nontaxable only if the discount program does not discriminate in favor of highly compensated employees. In other words, the discount given to highly compensated employees should not be more favorable than that given to other employees. For this purpose, the term “highly compensated employee” generally refers to individuals whose total compensation exceeds $125,000. This is the amount applicable to 2019 and it is indexed annually for inflation. Note that for this purpose, the compensation used in determining whether an individual is highly compensated is the compensation of the prior year. The definition of “compensation” varies depending on the circumstances, but it generally does not include a validly designated clergy housing allowance within allowable limits. As far as the “substantial services” question, unfortunately, neither the Internal Revenue Code nor the related Regulations provide a definition or “bright-line” test for what constitutes “substantial services.” However, the Regulations do indicate that an employee who performs substantial services that directly benefit more than one line of business of an employer is treated as performing substantial services in all such lines of business. In our experience, we believe it is likely that all of the ministry activities of a traditional church taken together would comprise a single line of business for purposes of this fringe benefit rule. In practicality, churches rarely consider their employees to work in separate lines of business as that concept would be applied to this issue.
David Fletcher has more than 35 years of experience as a pastoral leader in churches. In 2003, he founded XPastor, a resource website for executive pastors, and XP-Seminar, an annual church leadership conference.
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Does a Gift to Support a Camp Counselor Have Tax Implications?
Giving financial gifts to church camp counselors comes with a variety of tax considerations.
Q: A college student from our church will be a volunteer counselor at a Christian camp this summer. Our church will give the camp $600 from our mission budget and give him $900 from the mission budget as a gift for his service. He is not an employee of the church. Is there a tax reporting requirement for this gift?
The amount paid directly to the student is considered mission support for the student’s activities. Mission support of individuals is required to be reported on Form 1099-NEC if it is $600 or more.
The amount paid to the camp might be reported, depending on the intention of the payment. If the payment is intended to help cover the student’s expenses, then it is reported on the student’s Form 1099-NEC issued by the church along with the $900. If the amount is intended to be a contribution to the camp, unrelated to the student’s service, then it is not reported on the student’s Form 1099-NEC issued by the church.
For additional information on the proper use of Form 1099-NEC, see chapter 4 in Elaine Sommerville’s book, Church Compensation.
Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.
