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Downloadable Checklist: Is our Church Keeping It Confidential?

This nine question checklist can help your church maintain financial and personal confidentiality.

The Editors

Last Reviewed: February 4, 2025

Confidentiality is always a high priority among church staff and members. Use this checklist to guage how your church is doing at securing confidential information.

Download a PDF version of this checklist.

Creating a Culture of Confidentiality

Verbal sharing is sometimes overlooked in discussions about church-office confidentiality. On the phone or in person, office employees field questions about personal appointments or express concerns about church members.

Put it in writing.

One church administrator at a large Baptist church on the West Coast said that all office workers must sign a statement of confidentiality before being hired. Employees that breach this rule are dismissed. Several churches include a confidentiality clause in their employee handbooks.

Clear the area.

Information can be leaked unintentionally. If a secretary gets a phone call from a distraught person, the secretary may have to ask questions before directing the call. The secretary should make sure others are not present who might hear this confidential conversation. If potential eavesdroppers are nearby, the caller should be put on hold until the area can be cleared.

Put a lid on the log.

Many offices log in phone calls or keep copies of messages. This information could be harmful if shared with others. It might be wise to limit access to the church office, particularly after office hours.

Stress confidentiality.

People who work in the church office should be regularly reminded of their role in maintaining confidentiality. What each person should ask prior to divulging information is, “Does this person have a qualified need to know it?” If not, the information should be kept quiet.

To learn more about confidentiality, check out attorney Richard R. Hammar’s commentary on the topic in Pastor, Church & Law: Your ultimate reference guide to understanding the legal issues and responsibilities of the church in America. Full access to this guide is available to with a Church Law & Tax membership.

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Church ‘Policy’ or Church ‘Procedure’? Knowing the Difference

A church business manager shares best practices learned through the process.

Mark Simmons

Q: I’m working on a policies and procedures manual for my church. It has grown to 28 pages, and I expect it will get longer. Would it be better to have separate documents—one for policies and one for procedures—or should everything be kept in a single document? Also, what else should we consider when developing policies and procedures for our church?

We went through this process a number of years ago and settled on the following best practices that may prove helpful to you.

Policies and procedures are separate documents

We decided to create two separate documents, but one references the other.

There were three reasons for doing this:

Church boards should be focused on policies and not on writing and monitoring procedures for policies. This helps board members stay focused on the broader area of church governance without burdening them with step-by-step procedural matters.
Procedures typically change much more often than policies, and they should. System, organizational, and other changes may trigger the need to rework procedures within a church. Procedures are best kept up to date by staff using some formal review and approval methodology to ensure they stay true to policy and operational standards.
Staff and volunteers will be able to reference specific procedures related to their job easier. Sometimes a policy requires multiple procedures. Yet employees or volunteers with specific jobs often only need to refer to a procedure or procedures related to their areas of responsibility. Having policies and procedures all lumped into one document can make it hard for your staff and volunteers to parse out what they need to do.

FAQs

1. Why should church policies and procedures be kept as separate documents?

Policies and procedures serve different purposes. Policies guide church governance at a high level, while procedures outline the step-by-step actions to carry out those policies. Keeping them separate ensures that church boards focus on governance, while staff and volunteers handle procedural updates as needed.

2. How often should church procedures be updated?

Procedures should be updated more frequently than policies. Changes in systems, organizational structure, or operations may require adjustments to procedures. A formal review and approval process helps ensure they remain aligned with policies and operational standards.

3. Who should be responsible for maintaining church policies and procedures?

Church boards should focus on setting and overseeing policies, while staff members should manage and update procedures. This division of responsibility prevents board members from being burdened with operational details and allows staff to keep procedures current and relevant.

4. How does separating church policies from procedures benefit church staff and volunteers?

When policies and procedures are separate, staff and volunteers can more easily find and reference the procedures relevant to their specific roles. Since a single policy may require multiple procedures, keeping them distinct prevents unnecessary confusion and makes it easier to follow proper processes.

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Churches Can Once Again Reimburse Employee Health Care Costs

New rules maintain the same tax-favored status for employer contributions toward a traditional group health plan.

Richard R. Hammar

Last Reviewed: May 20, 2025

2019 rules issued by various federal departments fundamentally transformed the way many employers assist employees with their health care costs.

The rules again allowed employers to:

reimburse employees for some or all of the premium expenses they pay for an individual health insurance policy, and
use their funds to directly pay the premiums for individual health insurance policy covering an employee.

Employers commonly used these methods to provide health insurance for employees. But the Affordable Care Act (ACA or Obamacare) made these methods unlawful.

Background

The Affordable Care Act contains several reforms of the insurance market (market reforms). Many apply to group health plans, including the following:

Annual dollar limit prohibition. A group health plan may not establish any annual limit on the dollar amount of benefits for any individual.
Preventive services requirement. Employer-sponsored group health plans must provide certain preventive services without imposing any cost-sharing requirements for these services on employees.

Pre-ACA, the tax code allowed several tax-favored options for covering employees’ health care costs, including employer payment plans (EPPs). But since EPPs typically did not incorporate the two market reforms listed above, they were illegal under ACA. This meant employers that continued to use EPPs faced a $100 per day penalty ($36,500 per year) per employee.

Defining an EPP. The Internal Revenue Service (IRS) defines an EPP as any plan under which “an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy . . . or arrangements under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee.” Notice 2013-54.

For additional background information on the Obamacare reforms discussed above, see my article, “ Are Church-Paid Medical Insurance Benefits Taxable? ”

Two significant developments

The use of EPPs was partially restored by two significant developments:

Qualified small-employer health reimbursement arrangements (QSEHRAs) and
“Individual Coverage HRAs” (ICHRAs). These options will again allow many employers to reimburse employees for some or all of the premium expenses incurred for an individual health insurance policy. They will also allow employers to pay the employees’ individual health insurance premiums.

Both developments are addressed below.

Qualified small-employer health reimbursement arrangement

Under the 21st Century Cures Act (2016), a QSEHRA is generally not a group health plan under the tax code and thus is not subject to the group health plan requirements. Most importantly, this means that a QSEHRA will not be assessed the $100 per day per employee penalty for failure to comply with the market reforms that apply to group health plans.

Defining a QSEHRA

In brief, a QSEHRA is defined as an arrangement that:

is provided on the same terms to all eligible employees of an eligible employer;
is funded solely by the eligible employer, and no salary reduction contributions may be made under the arrangement;
provides, after an employee gives proof of minimum essential coverage, for the payment or reimbursement of medical expenses of the employee and family members; and
the amount of payments and reimbursements under the arrangement for a year cannot exceed specified dollar limits (for 2019, the dollar limit for an employee is $5,150 or $10,450 for an employee and family members).

Eligible employers and employees. For definitions and qualifications, see my article “New Act Restores Tax-Free Premium Reimbursements for Many.”

Not all churches benefit

The relief from the $100 per day excise tax will not benefit all churches. A church may be subject to the penalty if, for example, it offers an employer payment plan or health reimbursement arrangement (in which an employer reimburses the employee for medical expenses generally of the employee and family members) and

it is an applicable large employer with an average of 50 full-time and full-time equivalent (FTE) employees during the previous calendar year;
it offers a group health plan to any of its employees;
it contributes more than $6,350 ($12,800 for a family) to an employer payment plan or health reimbursement arrangement; or
the arrangement fails to satisfy one or more of the other requirements for a QSEHRA summarized above. (The $6,350 and $12,800 amounts are adjusted annually for inflation and represent the 2025 amounts.)

A penalty of $50/employee (up to a maximum of $2,500/calendar year) can apply for not providing a written notice.

The law’s provision of relief from the $100 per day per employee penalty for noncompliant group plans is effective retroactively.

Other key points

Churches that have or are using an employer payment plan should keep this in mind:

Such plans may trigger an excise tax penalty of $100 per day per affected employee unless an exemption applies.
Employers with fewer than 50 employees may avoid the $100 per day per employee penalty by adopting a QSEHRA.
Larger employers (with 50 or more full-time employees during the prior year) are subject to the $100 per day per employee excise tax for maintaining an employer payment plan unless an exception applies.
One exception approved by the IRS in Notice 2015-17 is to implement a plan that “increases an employee’s compensation, but does not condition the payment of the additional compensation on the purchase of health coverage (or otherwise endorse a particular policy, form, or issuer of health insurance).” Similarly, Notice 2013-54 provides that an employer payment plan “does not include an employer-sponsored arrangement under which an employee may choose either cash or an after-tax amount to be applied toward health coverage. Individual employers may establish payroll practices of forwarding post-tax employee wages to a health insurance issuer at the direction of an employee without establishing a group health plan, if the standards of the DOL’s regulation 2510.3-1(j) are met.”
Large employers with 50 or more employees during the previous year should consult with a tax professional to address compliance issues.
An arrangement under which an employer reimburses (or pays directly) some or all of Medicare Part B or Part D premiums for employees constitutes an employer payment plan, as described in Notice 2013-54, and if such an arrangement covers two or more active employees, it is a group health plan subject to the market reforms. An employer payment plan may not be integrated with Medicare coverage to satisfy the market reforms because Medicare coverage is not a group health plan.

For additional background information and other pertinent details, see IRS Notice 2017-20 and my article “New Act Restores Tax-Free Premium Reimbursements for Many.”

New rules for health reimbursement arrangements (HRAs)

The new rules released by the Departments permit employers to offer a new individual coverage health reimbursement arrangement (ICHRA) as an alternative to traditional group health plan coverage, subject to certain conditions. Among other medical care expenses, ICHRAs can be used to reimburse premiums for individual health insurance chosen by the employee, promoting employee and employer flexibility, while also maintaining the same tax-favored status for employer contributions toward a traditional group health plan.

Specifically, this significant development will again allow employers to

reimburse employees for some or all of the premium expenses incurred for an individual health insurance policy, and
use their funds to directly pay the premiums for an individual health insurance policy covering an employee.

As mentioned earlier, this benefit was commonly used by employers in the past to provide health insurance for employees, but was made illegal by the Affordable Care Act.

Benefits of the new rules

The new rules also increase flexibility in employer-sponsored insurance by creating another, limited kind of health reimbursement arrangement (HRA) that can be offered in addition to a traditional group health plan. These “excepted benefit” HRAs” (EBHRAs) permit employers to reimburse dental, vision, long-term care, COBRA, and the cost of copays, deductibles, or other expenses not covered by the primary plan even if the employee declines enrollment in the traditional group health plan. However, individual insurance premiums are not eligible for reimbursement under EBHRAs.

Most importantly, the new rules will provide hundreds of thousands of employers a better way to offer health insurance coverage and millions of workers and their families a better way to obtain coverage. The ICHRA rules will especially help small employers, who face larger administrative costs from offering a traditional group health plan, compete for talent. Many small employers struggle to offer coverage to their employees, and a significant number of small employers have stopped offering coverage since 2010.

Supporting Statistic. Between 2010 and 2018, the percentage of firms offering coverage declined from 59 percent to 47 percent at firms with 3 to 9 workers, from 76 percent to 64 percent at firms with 10 to 24 workers, from 92 percent to 71 percent at firms with 25 to 49 workers, and from 95 percent to 91 percent at firms with 50 to 199 workers (2018 Employer Health Benefits Survey from the Kaiser Family Foundation).

The Departments estimate that once employers fully adjust to the new rules, roughly 800,000 employers will offer ICHRAs to pay for insurance for more than 11 million employees and family members, providing these Americans with more options for selecting health insurance coverage that better meets their needs.

Tax advantages and other perks

ICHRAs provide tax advantages because the reimbursements provided to employees do not count toward the employees’ taxable wages. In effect, ICHRAs extend the tax advantage for traditional group health plans (exclusion of premiums, and benefits received, from federal income and payroll taxes) to reimbursements of individual health insurance premiums.

Employers may also allow employees to pay for health insurance purchased outside the ACA-created health insurance exchange (off-exchange) on a tax-favored basis, using a salary reduction arrangement under a cafeteria plan, to make up any portion of the individual health insurance premium not covered by the employee’s ICHRA.

Note. Employers are not required to assist employees in finding health insurance in the private market. This is the employees’ responsibility.

In most cases, the ICHRA rules will increase worker options for health insurance coverage, allowing workers to shop for plans in the individual market and select coverage that best meets their needs. These rules will also result in coverage being more portable for many workers.

Supporting statistic. Of employers offering health benefits in 2018, 81 percent of small to midsized employers (fewer than 200 employees) and 42 percent of larger employers (at least 200 employees) provided only one type of health plan to their employees (2018 Employer Health Benefits Survey from Kaiser Family Foundation).

Facts to consider about ICHRAs

Church leaders should note the following additional information about ICHRAs.

An ICHRA reimburses employees for their medical care expenses (and sometimes their family members’ medical care expenses), up to a maximum dollar amount that the employer makes available each year. Qualifying medical expenses are listed in IRS Publication 502. The employer can allow unused amounts in any year to roll over from year to year.

Employees must enroll in individual health insurance (or Medicare) for each month the employee (or the employee’s family member) is covered by the ICHRA. This can be individual health insurance offered on or off an Exchange. However, it cannot be short-term, limited-duration insurance (STLDI) or coverage consisting solely of dental, vision, or similar “excepted benefits.”

Employers that offer an ICHRA must offer it on the same terms to all individuals within a class of employees, except that the amounts offered may be increased for older workers and for workers with more dependents.

Who can receive ICHRA

You cannot offer an ICHRA to any employee to whom you offer a traditional group health plan. However, you can decide to offer an ICHRA to certain classes of employees and a traditional group health plan (or no coverage) to other classes of employees. Employers may make distinctions, using classes based on the following status:

Full-time employees
Part-time employees
Employees working in the same geographic location (generally, the same insurance rating area, state, or multistate region)
Seasonal employees
Employees who have not satisfied a waiting period
Nonresident aliens with no US-based income
Salaried workers
Non-salaried workers (such as hourly workers)
Temporary employees of staffing firms, or
Any group of employees formed by combining two or more of these classes.

To prevent adverse selection in the individual market, a minimum class size rule applies if you offer a traditional group health plan to some employees and an ICHRA to other employees. The minimum class size is 10 employees for an employer with fewer than 100 employees.

Other ICHRA guidelines

Employers can contribute as little or as much as they want to an ICHRA. However, an employer must offer the ICHRA on the same terms to all employees in a class of employees, except that employers can increase the amount available under an ICHRA based on the employee’s age or number of dependents.

Employers must provide a written notice to eligible participants regarding the ICHRA and its interaction with the premium tax credit. Employers must also have reasonable procedures to substantiate that participating employees and their families are enrolled in individual health insurance or Medicare, while covered by the ICHRA. Employees must also be permitted to opt out of an ICHRA at least annually so they may claim the premium tax credit if they are otherwise eligible and if the ICHRA is considered unaffordable.

If an employee opts out of the ICHRA, the employer generally will not have any responsibility with respect to the individual health insurance itself that is purchased by the employee, because it will not be considered part of an employer-sponsored plan, provided:

An employee’s purchase of any individual health insurance is completely voluntary
You do not select or endorse any particular insurance carrier or insurance coverage
You don’t receive any cash, gifts, or other consideration in connection with an employee’s selection or renewal of any individual health insurance
Each employee is notified annually that the individual health insurance is not subject to the Employee Retirement Income Security Act (ERISA), which is the federal law governing employer-provided health coverage.

Q&A about ICHRAs and EBHRAs

Here are the answers to some key questions about ICHRAs and EBHRAs:

Can an employer offer an ICHRA to satisfy the employer mandate?

First, only certain employers are applicable large employers subject to the employer mandate. Generally, large employers are those with at least 50 full-time employees, including full-time equivalent employees, in the prior year. For these employers an offer of an ICHRA counts as an offer of coverage under the employer mandate.

Does a large employer that offers an ICHRA to FTEs (and their dependents) owe a payment under the employer mandate? This depends on whether the ICHRA is affordable. This is based, in part, on the amount the employer makes available under the ICHRA. So you will need to contribute enough for the offer of the ICHRA to be considered affordable.

Additional Information from the IRS. The IRS has announced that it will provide more information on how the employer mandate applies to ICHRAs. When this announcement is made, it will appear on irs.gov.

May an employer allow employees to pay any portion of the premium for their individual health insurance that is not covered by the ICHRA on a tax-preferred basis by using a salary reduction arrangement under a cafeteria plan?

No, the IRS does not allow this. However, that restriction does not apply to coverage that is purchased off an Exchange. Therefore, if an employee buys individual health insurance outside an Exchange and the ICHRA doesn’t cover the full premium, the employer could permit the employee to pay the balance of the premium for the coverage on a pretax basis through its cafeteria plan, subject to other applicable regulations.

Can large employers offer ICHRAs too?

Yes. The various agencies expect that the rule will especially benefit small and mid-sized employers. However, employers of all sizes may offer an ICHRA, subject to the conditions in the ICHRA rules.

What are the benefits of offering an EBHRA?

Your church may want to offer a reimbursement plan in addition to a traditional group health plan. This can help cover the cost of copays, deductibles, or non-covered expenses. EBHRAs generally allow for higher levels of employer contributions than health flexible spending arrangements (FSAs). They also can permit rollover of unused amounts from year to year. As of 2020, reimbursement arrangements can be offered as “excepted benefits.” These benefits are exempt from many federal health care requirements that don’t work well for account-based plans. Employees may use them even if they do not enroll in the traditional group health plan (or any other coverage). This distinguishes the EBHRA from other HRAs.

To qualify as excepted benefits:

The annual HRA contribution must be limited to $1,800 per year (indexed for inflation beginning in 2021).
The HRA must be offered in conjunction with a traditional group health plan. Note that the employee is not required to enroll in the traditional plan.
The HRA cannot reimburse individual health insurance premiums, group health plan premiums (other than COBRA), or Medicare premiums. But it can reimburse premiums for excepted benefits, such as dental and vision coverage, as well as for STLDI.
The HRA must be uniformly available to all similarly situated individuals. This is defined under the Health Insurance Portability and Accountability Act. The act generally permits bona fide employment-based distinctions unrelated to health status).

The EBHRA will help employees who have been opting out of their employer’s high-premium group plans.

Supporting Statistic. In 1999, 17 percent of workers eligible for employer coverage at small and midsized firms (those with 3 to 199 workers) turned down the offer of employer coverage. By 2011, this share had climbed to 22 percent, and in 2018 it was 27 percent (2018 Employer Health Benefits Survey from the Kaiser Family Foundation).

Need help setting up an ICHRA or EBHRA?

Contact:

your church pension provider
an attorney
CPA
employee benefits professional
Department of Labor at 1-866-444-3272 or askebsa.dol.gov.
More information regarding ICHRAs and Excepted Benefits HRAs is also accessible at dol.gov/agencies/ebsa.
Another option is IRS Office of Chief Counsel, Health and Welfare Branch at 202-317-5500. This office can help with matters regarding the federal tax-treatment of employer-provided health coverage.

QSEHRA or ICHRA?

Supplementary information to the final rule notes that “an employer may not both offer an ICHRA and provide a QSEHRA.” However, “the final rules do not change the ability of eligible employers to provide QSEHRAs. Rather, the final rules provide an opportunity for all employers, including those who may or may not qualify to sponsor a QSEHRA, to sponsor an individual coverage HRA.”

Many employee benefits professionals are suggesting that employers use QSEHRAs instead of ICHRAs unless

they have 50 or more employees,
the caps on contributions to an ICHRA are too low, or
you want more freedom to provide an ICHRA to only certain classes or groups of employees.

Mastering Seventeen End-of-Year Financial Tasks

Mastering seventeen end-of-year financial tasks before January 1, 2025, will help churches and ministers thrive with the upcoming tax season.

The Editors

Bio

Last Reviewed: November 18, 2024

Here’s to finishing 2024 strong and getting off to a great start in 2025!

1. Designate a housing allowance

A key end-of-year financial task for a church board or congregation should be designating a housing allowance for 2024 for ministers who own or rent their home (and for ministers who live in a parsonage and who pay some of their housing expenses from their own funds).

Find sample housing allowance and parsonage allowance resolutions in chapter 6 of Richard Hammar’s annual Church & Clergy Tax Guide.

“Because housing allowances can only be provided prospectively (that is, after they have been approved by the board or the board’s designee), obtain approval from the board prior to January 1,” advises Rob Faulk, a CPA and partner with CapinCrouse.

2. Review W-4 forms

All employees should review their W-4 form and submit a new form if circumstances have changed. This will ensure accurate tax withholding.

“Many employees are surprised when they complete their tax return and find they owe money,” says Elaine Sommerville, a CPA and senior editorial advisor for Church Law & Tax. “Employees may be caught short on taxes paid if both spouses are working.”

She explained that the tax withholding tables “don’t appropriately take a dual-earner household into consideration. It is advisable for employees who owed money with their 2023 Form 1040 to complete a new Form W-4 at this time.”

And don’t leave out ministers, says Frank Sommerville, a CPA, tax attorney, and senior editorial advisor for Church Law & Tax. Unfortunately, “many ministers just go to the treasurer and say, ‘Withhold such-and-such from a paycheck,’” he said. “But the pastor should also fill out a W-4 or provide other written documentation for withholding income tax.” (For more information on this aspect of the topic, see #9 below.)

Tip. Visit the IRS’ publications site to download the 2025 edition of IRS Publication 15 for the new withholding tables. (This publication is regularly updated each December for the upcoming year.)

3. Provide a notice to donors

Advise donors in the church bulletin or newsletter, on the church website, or in a letter or email from the church, not to file their federal income tax return before they receive their contribution summary from the church.

Donors may not be able to deduct individual contributions of $250 or more if they file a tax return before receiving a qualified contribution receipt from their church.

Double-check the software the church uses to prepare charitable contributions receipts to confirm that the vital “no goods or services other than intangible religious benefits were provided” statement is included when the receipts are prepared.

“Making sure donors have those contribution acknowledgements prior to filing is definitely important,” added Kaylyn Varnum, a partner and assistant national director for tax services for the accounting firm Batts Morrison Wales & Lee, and an advisor-at-large for Church Law & Tax.

While deductions may be available to fewer donors, it’s still important to notify all donors, Frank Sommerville stressed, because churches simply don’t know who might qualify for a deduction.

Tip. Answer many of your members’ questions about charitable giving and tax law with the Charitable Contributions Tax Reminder (for their 2023 returns).

4. Determine if contributions are effective for 2024 or 2025

The general rule is that a contribution is effective when delivered. A check deposited in the church offering in January of 2025 cannot be deducted in 2024, even if it is backdated to 2024. One exception—checks mailed and postmarked in 2024 are deductible in 2024, even if they are not received until 2025.

IRS Publication 526 offers these guidelines for three other types of giving (adapted):

Text message. Texted contributions are deductible in the year the donor sends the text message if the contribution is charged to the telephone or wireless account.

Credit card. Contributions charged on the donor’s bank credit card are deductible in the year the donor makes the charge.

Pay-by-phone account. Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. This date should be shown on the statement the financial institution sends the donor.

5. Correctly handle gifts and noncash/cash benefits to staff and volunteers

Consider these two categories of gifts:

Cash Christmas gifts to employees. Be sure to correctly handle any Christmas gifts made by the church or congregation to a minister or lay staff member. In most cases, these transfers represent taxable income and not a tax-free gift and must be reported as income on the recipient’s W-2.

“If the gifts are paid through accounts payable, the value of the gifts will need to be submitted to the payroll system prior to the end of the year to allow for correct reporting on the recipient’s W-2 and on the church’s fourth-quarter Form 941,” Elaine Sommerville explains.
Noncash gifts to employees and volunteers. Noncash gifts may also create income requiring payroll reporting. A gift of property having a value so small “as to make accounting for it unreasonable or administratively impracticable” is a nontaxable “de minimis fringe benefit” (see Section 132(e)(1) of the tax code). This exception does not apply to cash or “cash equivalents” (such as gift certificates).

“Information on noncash gifts that may not be considered as ‘de minimis’ will need to be provided to the payroll system prior to the end of the year to allow for correct reporting on the recipient’s Form W-2 and the church’s Form 941,” Elaine Sommerville says.

Avoid monetary gifts (including gifts cards) to volunteers of any amount, says Frank Sommerville.

“Once you give people money, they are no longer volunteers,” he says. “They are employees. Once you compensate them, then you’re getting into all kinds of issues. Does employment law apply? Does workers’ comp apply? Once you give them anything of value, they no longer qualify as a volunteer under many, many statutes.”

6. Be careful about accepting certain types of end-of-the-year noncash donations

Near the end of the year, churches should be wary of a noncash donation of significant value, such as an antique car or a gift of real estate. Some gifts might be hard to sell. With land, there could be unresolvable zoning issues or issues with toxic soil. With a building, there could be structural issues or a problem with lead or asbestos.

“You don’t want to be rushed into making a decision,” says Frank Sommerville. “If a gift comes in near the end of the year, you don’t have the time to do your due diligence.” He stressed that the gift could end up costing you a lot more than it is worth.

An exception: publicly traded stock. “Stock is pretty easy to address appropriately as a year-end gift,” he says.

Additional resources: “Gifts of Property: Help Donors Get It Right” offers tips on handling noncash gifts of real property (buildings and land) while “Tax Rules for Gifts of Personal Property” offers tips on handling noncash gifts of personal property (such as cars, household items, and stock).

7. Review classification of employees for US Department of Labor (DOL) purposes

“Now is the time to decide if employees are properly classified for wage and hour purposes,” Elaine Sommerville says. “Review job descriptions to determine if employees qualify for the ministerial exception. Then review job descriptions for non-qualifying employees and decide if they’re exempt or non-exempt.”

This step cannot be overlooked for 2025 because there has been a lot of uncertainty regarding the minimum weekly salary requirement for exempt employees under the federal Fair Labor Standards Act (FLSA).

The requirement was set to increase substantially through a phased approach starting July 1, 2024, and again on January 1, 2025. However, in November of 2024, a federal court in Texas vacated the DOL’s proposed changes. For now the minimum salary requirement for exempt employees remains $684 per week, or $35,568 per year.

With so many changes occurring between the DOL and the courts, it’s wise for churches to again review the compensation of exempt employees. Should any fall below the current threshold, they must be reclassified. It is still possible to compensate nonexempt employees on a salary arrangement. A church needs to take special steps with these arrangements, such as considering a strict no-overtime policy and requiring weekly timesheets from the new nonexempt employees.

For further guidance, see Elaine Sommerville’s article “The Right Way to Handle Wage Classifications.”

Separate from applying the DOL’s ministerial exception discussed above, a church must also determine who is a minister for IRS and Social Security purposes.

Many churches incorrectly report ministers as employees for paying into the Social Security system by withholding Social Security and Medicare taxes from their wages. This is incorrect, since the tax code classifies ministers as self-employed for purposes of paying into the Social Security/Medicare system with respect to services they perform in the exercise of ministry. As a result, they pay the self-employment tax with their individual income tax returns and not through withholding and employer matching of Social Security and Medicare taxes.

Now is also a good time to provide information to ministers regarding their unique tax classifications to make them aware of the unusual filing requirements.

Caution. Ministers who are incorrectly classified for Social Security and Medicare jeopardize their ability to receive the tax-free housing allowance. The ideal time to reclassify these ministers as self-employed for Social Security is January 1 and the prior year’s reporting should be corrected to preserve the other benefits afforded to ministers.

9. Voluntary withholding

Since ministers’ wages are exempt from Social Security, Medicare, and federal income tax withholding (with respect to services performed in the exercise of their ministry), they use the quarterly estimated tax procedure to prepay their federal taxes.

However, ministers who report their income taxes as employees can enter into a voluntary withholding arrangement with their employing church by submitting written authorization—such as a letter, email, or a W-4 form—to the appropriate church representative. Under such an arrangement, the employing church withholds income taxes as it would for any other employee and also can withhold an additional amount of income taxes to cover the minister’s self-employment tax liability.

Tip. The ideal time to start voluntary withholding is January 1. However, Ted Batson, a CPA and tax attorney with CapinCrouse, and an advisor-at-large for Church Law & Tax, says adjustments in voluntary withholding can be made at any time during the year.

In addition, some churches have filed a Form 8274 with the IRS exempting themselves from the employer’s share of Social Security and Medicare taxes. As a result, lay employees of these churches are responsible for making quarterly estimated self-employment taxes to the IRS.

If the employee requests additional voluntary withholding, the church withholds an additional amount of federal income taxes to cover their estimated self-employment tax liability.

“For ministers who prefer to make estimated tax payments rather than allowing the church to withhold federal income tax, it is beneficial to enroll in the IRS Electronic Funds Transfer Payment System (EFTPS),” Elaine Sommerville suggests. “Making tax payments through the EFTPS system provides the minister with the ability to preschedule estimated tax payments and to receive immediate confirmations of the payments.”

10. Review plans for compensation in 2025

Review compensation and benefits for employees for the upcoming year. Doing so will “provide for the proper documentation of compensation packages and proper taxation of benefits provided to employees,” says Elaine Sommerville.

Additional resource: Find help for your various compensation issues in Elaine Sommerville’s book, Church Compensation, Second Edition: From Strategic Plan to Compliance.

11. Have applicable employees fill out various required elections

Certain plans require benefit elections by the beginning of the plan year. These include benefit elections for a church’s cafeteria plan or Section 125 plan, enrollment in insurance plans that begin on January 1, and the required health insurance opt-out election certificates required by large employers.

For any church that’s an applicable large employer—and currently in its annual benefit enrollment period—Rob Faulk from CapinCrouse offers this guidance: Ensure that any employee who chooses to opt out of the health benefit plan completes an opt-out election certificate [or waiver] and furnishes proof of enrollment in another qualified group health benefit plan from a source other than your church’s plan before coverage is terminated.

12. Review payments to any independent contractors

Preparations for filing the annual Forms 1099-NEC should include a review of payments to unincorporated independent contractors, including LLCs, and their related W-9 forms. (Credit card or PayPal payments are not reported on the Form 1099-NEC.)

With this task, it’s important to remember the electronic filing requirements for churches filing 10 or more reporting forms of any type and make plans to identify a provider who can accomplish this task (see Task #14 below for more information).

“If a Form W-9 hasn’t been obtained for a contractor, determine if the church has the correct address and Social Security/employer identification number for the contractor,” Elaine Sommerville stressed. “And don’t forget to include payments to attorneys even if paid to a law firm that is incorporated.”

Tip. The Form 1099-MISC is still used for other reportable payments, so make sure the church orders the right forms to report all necessary payments. For example, payments made to unincorporated lessors are still reported in Box 1 of Form 1099-MISC. Forms 1099-NEC are due to the IRS and the recipients by January 31, 2025, and Forms 1099-MISC are due to recipients by January 31, 2025, and to the IRS by February 28, 2025.

13. Report all taxable fringe benefits on W-2 forms

Did your church give a low-interest or interest-free loan to your pastor this year?

How about forgiving interest or principal on a loan to your pastor during the year?

Could employees’ children attend your summer camp without charge? Did you provide employees with free memberships to the local gym?

The value of such benefits needs to be reported on your employees’ W-2s “and included on your Form 941 with tax withholdings and payroll taxes paid as applicable,” Batson says.

“Whenever possible, taxes for fringe benefits should be withheld throughout the year and at the time the fringe benefit was received,” Batson says. “But in cases where that has not happened, the value of the fringe benefit should still be included on the W-2s at the end of the year.”

Elaine Sommerville adds that “taxes associated with the fringe benefits may still be calculated and paid through additional withholding from employees’ final paychecks this year, if not calculated at the time the benefit was provided.”

“Fringe benefit plans should be reviewed to determine the plan documents are still in compliance with applicable law and the church is operating within the boundaries of the applicable benefit plan,” Elaine Sommerville says.

“A church that provides its minister a car should download IRS Publication 15-B and review the Fringe Benefit Valuation Rules to ensure the proper amount for personal use is included in the pastor’s W-2,” Batson says.

14. Prepare for proper filing of Forms W-2 and 1099

The IRS requires electronic filing for 10 or more 1099, W-2, and many other forms.

There are many easy systems allowing for electronic filing of payroll reports. The Social Security Administration maintains a portal for filing Forms W-2 electronically for smaller employers.

The IRS has created the Information Returns Intake System (IRIS) as a free system for meeting electronic filing requirements. Filers must register to utilize the IRIS system.

Local office supply stores sell hard copy forms for the few employers who may use them. While irs.gov/forms, offers many forms for download, Form 1096, Form 1099-MISC, and Form 1099-NEC still require original, red-colored forms when filing paper forms.

15. Finalize 2025 budgets and take care of any budgeting issues

If your current budget year ends on December 31, finalize your 2025 budget before then, Faulk advises. Further, he says to perform a variance review of income statement (actual vs. budget). “This process may affect decisions about next year’s budget and may be particularly challenging due to the changes caused by the pandemic,” Faulk explains. “To help, CapinCrouse offers a free e-book, How to Budget Effectively in Changing Times.”

Additional resource: “Some Churches Keep Their Budgets Rolling,” by CPA Michael Batts provides insights on how to closely monitor income and expenses during unpredictable economic circumstances.

16. List and take care of any additional year-end items

Sit down and list any additional items that could easily slip through the cracks, which are particular to your church, then take care of them before the end of the year. Faulk mentions the following items:

Reconcile your church’s donor system to your general ledger, and then investigate any significant differences. This is an important internal control to help detect any errors and to prevent fraud.
If your church has a loan, talk to your lender about instances of noncompliance before the end of the year.
Learn more about how many of these year-end steps are effective tools for preventing financial fraud in your church.
Review and sign annual conflict-of-interest forms.
Reconcile detailed property and equipment depreciation listings to the general ledger.
Record destroyed items in accordance with document retention and destruction policies.
Review insurance policies and update as appropriate.
Document a list of authorized check signers and update bank records.
Document a list of those authorized to approve expenditures.
Document a list of approved bank accounts. Close the ones the church no longer needs.
If your church will have an audit or review, your finance or audit committee should be in the process of selecting the independent auditors.
Make sure the church has adopted an accountable expense reimbursement plan and makes it available to all employees, especially those with church-issued credit cards.
Confirm the church is still in good standing with the state where it formed and make sure the name and address for the registered agent is current.

17. Update your church’s resource guides

Now is a good time to order Church Compensation, Second Edition: From Strategic Plan to Compliance by Elaine Sommerville. It’s also a good time to preorder the 2024 edition of Richard Hammar’s Church & Clergy Tax Guide. Both can help answer the various tax, payroll, and compensation questions that will invariably arise next year.

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

Image: AdobeStock/famveldman

Protect the Children in Your Church’s Small Groups

How churches can help prevent child abuse in the context of a small-group gathering.

Robert Showers, Attorney

Bio

Last Reviewed: February 12, 2025

Many churches encourage small-group participation, and pastors or other staff provide resources for these groups, but there often is very little oversight by church leadership.

How can the church and the small group best protect the children in their care? What happens if an incident of child abuse occurs in the home of a church member during a small-group function? Who is liable?

Handling childcare for small groups

One important consideration is how to provide childcare in a small-group setting. Of course, you can make it an “adults only” meeting, which would require parents to find their own childcare for the evening. However, some small groups would find this option untenable, especially if the host and most attendees have children.

Another often used option is to have a volunteer, perhaps a teen, supervise the children in another room of the host home. If the church sponsors the small group as part of its ministry (providing leadership, curriculum, and structure), this presents a serious liability to the church and the host, as well as a significant risk to the children attending.

Church members tend to trust fellow churchgoers’ integrity without question in choosing a volunteer caregiver. But, in the era of #ChurchToo, it is increasingly evident that this kind of trust has been misplaced and has led to much abuse and heartache.

Even when a risk is exposed, the church far too often opts for a misunderstood concept of grace and forgiveness that sacrifices the safety and well-being of the “least” among them.

Implement a child protection policy

In order to be “wise as serpents, and harmless as doves” (Matt. 10:16, KJV), the church must implement safeguards to protect the congregation under its care. Implementing and adhering to a child protection policy is one of the first (and most important) steps a church can take.

A church should consider enforcing the child protection policy within every small group that it endorses as a part of its ministry. Small-group leaders/hosts should sign the policy and agree to adhere to it in order to be sponsored by the church.

Some basic elements of a child protection policy include:
Providing background checks, training, and references for volunteer childcare workers;
Implementing the two-adult rule, which requires two unrelated adults to be in the room with the children at all times;
Requiring childcare workers to go get the parents/guardians if the child needs to use the restroom;
Requiring children be kept in as public of a location as possible—avoiding bedrooms, and preferably meeting in an area with windows.

A child protection policy is one of the most basic, yet important, ways to create a safe environment for children and to minimize liability for churches.

Creating the safest environment possible

In addition to implementing and adhering to a child protection policy, here are a few other considerations for church leaders, in order to provide the safest environment for children in their congregations:

Mandatory training session for small-group leaders

When an individual or family expresses interest in starting a small group, the church should require that the small-group leaders attend a church-sponsored sexual abuse and child protection course. This training also should be a requirement in order for the church to sponsor and affiliate with the small group.

This training should include helping small-group leaders with the elements of the child protection policy as well as how to recognize the signs of abuse and “grooming behaviors.”

In many churches, there is online training for child protection programs where a certificate must be obtained to pass the course.

Awareness of known sex offenders in the church

Some churches may allow convicted sex offenders to attend their worship services. In these instances, the congregation should know who these individuals are, and every precaution should be taken to protect children by ensuring sex offenders only attend small groups that do not have any children present when the groups meet. Of course, many sex offenders will be prohibited by their parole or probation from even being near children, but regardless, they should have no contact with children in any circumstance.

Additional reading. “Successful Church Assimilation of Sex Offenders” provides guidance for churches on how to safely minister to sex offenders, while also protecting the vulnerable within the congregation.

Post a sponsored small-group list

In small-group bulletins and websites, include a statement that any small group not listed is operating independent of church leadership and is not affiliated with the church, even if church members are involved or leading the group. This way, the church separates itself from liability if something were to happen within a small group that did not follow the church’s child protection policy and training.

Check with your insurance provider

Churches should contact their insurance agent to see if small groups are covered, or can be covered, under the church’s insurance. Some insurance companies offer this option, which would protect homeowners who host small groups from having to rely on their homeowner’s insurance should something happen in their home.

Crucial steps

In summary, there are several crucial steps that churches can take in considering the “least of these” in their congregation and providing the most protection within their power. These steps include:

Providing a child protection policy;
Requiring background and reference checks for all childcare workers;
Providing due diligence in obtaining insurance coverage;
Training small-group leaders in knowing the signs of abuse and “grooming”; and
Making sure parents and guardians are duly notified of all known sex offenders in the congregation.

Additional reading. “Minimize Child Abuse: How to Do Excellent Background Checks for Child and Financial Protection” explains how to best protect children through better background and reference checks; and “Reporting Child Abuse: What Is Your Duty?” discusses your duties to report child abuse and how to do it best.

This article is adapted from “ Protecting Children in Church Small Group Settings ” by H. Robert Showers—an attorney with Simms Showers, LLP . Used with permission.

For additional help, see Richard R. Hammar’s “Minimizing the Risks of Child Molestation in Churches,” along with these downloadable resources:

Robert Showers helped start Simms Showers LLP in 2002 as a principal partner and heads up the Northern Virginia/Washington, D.C., office.

Three Reasons Christians Should Defend Religious Liberty for All

Preserving rights for other faiths enhances our own witness—and is the right thing to do.

Luke Goodrich

In my work as a religious freedom attorney, I defend people of all faiths—even those whose beliefs differ sharply from mine.

One example: I once defended a Muslim mosque in Tennessee. Local zoning authorities had approved 20 Christian churches in a row. But when the mosque applied, they imposed a higher legal standard—just because some neighbors objected.

In short, the mosque faced stricter rules because it was unpopular.

My Christian friends sometimes ask why I defend religious freedom for non-Christians. To me, that mosque case highlights three clear reasons why we, as Christians, should care deeply about religious freedom for everyone.

1. It Protects Our Own Freedom

Let’s start with self-interest: defending religious freedom for non-Christians protects religious freedom for Christians too.

This principle is easy to see in zoning cases like the one in Tennessee. That mosque wasn’t welcome in its neighborhood. But I’ve also defended Christian churches that were equally unwelcome.

A few examples:

A small Texas church couldn’t use a vacant building because city officials preferred a business that would generate more tax revenue.
A church in Colorado was blocked from expanding after officials declared, “There will never be another mega-church in Boulder County.”

The legal principles in all these cases are the same. If the government can block a mosque based on public hostility, it can also block a church for similar reasons.

Conversely, when we win protections for one faith group, we strengthen the legal precedent for others. When I won that Texas zoning case, the judge based his ruling on an earlier case involving a Jewish synagogue in Florida.

So a victory for a synagogue became a victory for a Christian church.

This principle cuts both ways:

A loss for non-Christians often turns into a loss for Christians.
The best-known example is Employment Division v. Smith—where the Supreme Court upheld a law punishing Native Americans for using peyote in religious ceremonies.
That decision has since been used to deny protections in numerous religious freedom cases—including ones involving Christians.

The takeaway is simple: if we ignore the rights of Muslims, Jews, Native Americans, or others, we undermine our own. When we defend their rights, we’re defending ours too.

The second reason is rooted in evangelism: defending religious freedom helps more people come to Christ.

This is a theological point, not a legal one. Scripture doesn’t call us to use government power to make disciples. Jesus didn’t do that. Neither did the early church.

We’re called to “preach Christ” (1 Corinthians 1:23) and to trust the Holy Spirit to convict hearts (John 16:8). Coercion isn’t part of the gospel.

Government coercion can backfire:

Preventing someone from building a mosque or wearing a headscarf won’t bring them closer to Christ.
At best, it pressures them to pretend to be Christian—without true faith.
At worst, it hardens their hearts and pushes them further away.

But religious freedom opens doors:

Because I defended the Tennessee mosque, I got to know the imam personally. We’ve had honest conversations about our faiths.

He challenges the logic of the Trinity.
I explain why we can’t earn God’s favor and must turn to Jesus as Savior.

I never would have had that opportunity if I hadn’t stood up for his freedom.

3. It’s Simply the Right Thing to Do

Finally, we should defend religious freedom for others because it’s just.

Here’s why:

God created every person for a relationship with Him.
That relationship must be entered into freely, not coerced by governments or laws.
When the state interferes unnecessarily, it’s exceeding its rightful authority and robbing people of a God-given opportunity.

It’s also a human rights issue:

Every person is born with a spiritual impulse—a desire to seek truth.
But we can only seek truth authentically if we’re free to do so.

So when the government forces people to violate their understanding of truth, it violates their human dignity.

This isn’t relativism. It’s the opposite: it’s rooted in the absolute belief that God designed us to choose Him freely—not through pressure or punishment.

So Don’t Ask Why—Ask How

In short, don’t ask why I defend religious freedom for non-Christians.

Ask how you can, too.

The 10 Commandments of Church Management

The 10 commandments of church management cover everything from intellectual property to unrelated business income.

Frank and Elaine Sommerville

The 10 Commandments of church management offer a basic framework for ensuring your church does not veer too far off the path of sound financial, tax and governance matters.

I. Thou shalt not allow the church’s intellectual property to be used for personal purposes.

Rule: Under the work for hire doctrine, any property developed within the scope of the job duties of an employee is the property of the employer.

Practice Tip: An intellectual property policy should be carefully crafted and adopted. It should address all areas of concern, such as curriculum, sermons, and music.

II. Thou shalt not have a substantial amount of revenue derived from unrelated business income.

Rule: An organization may have some unrelated business income, but too much can endanger the exempt status of the church.

Unrelated business income is generated from activities that are r egularly carried on; not substantially related to exempt purposes, and trade or business.

Practice Tip: The rules are complicated and there is an exception to every exception. Each activity must be separately analyzed. The commercial manner in which an activity is conducted can create unrelated business income even if the activity seems to be related.

III. Thou shalt carefully design outreach programs to provide for the benefit of a charitable class.

Rule: The church’s programs cannot create unacceptable private benefit to individuals and organizations. Therefore, all programs have to be able to pass a test that any benefit to an individual is permissible private benefit and will not endanger the exempt purposes of the church. Such programs include the benevolence program and scholarship programs.

Practice Tip: The church should construct policies and guidelines to be followed for these programs that comply with the applicable rules.

IV. Thou shalt not allow any transactions with another party to be conducted at more than or less than fair market value.

Rule: Any transaction may benefit the church, but the transaction may not provide a greater benefit to the other party (with the exception of another nonprofit organization). Transactions with disqualified persons may be subject to intermediate sanctions of 25 percent to 200 percent under IRC Section 4958.

Practice Tip: Fair market value should always be established for a transaction. Where a control party is involved, this should be determined and documented in writing. For example, competitive bids should be obtained for transactions involving outside services, purchases, or sales.

V. Thou shalt not endorse any candidate for any public office, nor dedicate a substantial amount of your assets to legislative activities.

Rule: No support or opposition may be given to a political candidate and only limited support can be dedicated to legislative activities.

VI. Thou shalt fully document every aspect of a control party’s (disqualified person’s) compensation package within the requirements of IRC Section 4958.

Rule: A disqualified person is someone who carries influence in the church, either currently or within the past five years. Examples include the senior pastor and other senior leaders (whether credentialed ministers or not); board members; committee members who oversee key areas of the church; and, family members of any of those individuals.

The compensation paid to a disqualified person must meet the following criteria:

• It must be decided by the independent persons.

• It must be based on outside, comparable data.

• It must be documented in writing along with the basis for the amount of compensation determined.

Practice Tip: Each year, analyze every benefit provided to a disqualified person and re-document these in writing prior to the start of the next year. This includes cash compensation, noncash compensation, and fringe benefits. (To go deeper on compensation-setting, and the topic of disqualified persons, see Chapter 2 of CPA Elaine Sommerville’s Church Compensation, Second Edition.)

VII. Thou shalt document all expenditures as to the exempt purpose of the expenditure and maintain documentation as required by law for those special expenses involving meals, entertainment, and travel.

Rule: Every expenditure of a church must be documented as to the exempt purpose of the expense. For meals, entertainment, and travel, the “who, what, when, where, and why” must be documented.

Practice Tip: The following should be adopted and maintained by the church:

• An accountable plan for all business expenses.

• A credit card acceptance policy that requires employees to submit receipts for all charges.

• A formal policy should be adopted to require immediate repayment of any expense that is determined to be a personal expense.

VIII. Thou shalt conduct all designated fundraising programs with the greatest of care and caution and don’t mess up the contribution receipts.

Rule: Designated contributions must be used as designated unless the restriction is released by the donor or by the appropriate state office or court.

Practice Tips:

• Attempt to build in a provision that allows excess funds to be redirected to another ministry of the church or to the general fund.

• Make sure everyone is familiar with the rules regarding events that include a contribution where benefits may be exchanged.

IX. Thou shalt adhere to all payroll/labor rules—even the ones you don’t like.

Rule: Churches are subject to many of the same payroll tax rules as other organizations, with the complication of special rules for ministers. Additionally, the majority of labor law rules apply to churches and religious ministries.

Practice Tip: Pay special attention to the following areas:

• Classification of ministers.

• Classification of employees vs. independent contractors.

• Deposit rules for payroll taxes and filing requirements for Forms 941, 944, W-2, and 1099-Misc.

• Taxation of fringe benefits.

• Designation of housing allowance.

X. Thou shalt endeavor to determine good governance procedures and adhere to them consistently.

Rule: Good governance equals good organization. Follow the basics:

• Knowledge of what the organization’s exempt purposes are.

• Good governing documents.

• Well-documented actions of the governing body(ies).

• Good policies.

• Good people.

• Keep the corporate status up to date and in good standing.

Practice Tip: Review governing documents, policies, and procedures and make sure that they are actually being followed.

Adapted from “The Ten Commandments of Religious Organizations,” by Frank and Elaine Sommerville. Used with permission.

Additional resource:

Church Compensation – Second Edition with 2023 Updates: From Strategic Plan to Compliance.

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Advantage Member Exclusive

The Building Blocks of Church Compensation Planning

Eight essentials for constructing legal and fair church pay packages.

Elaine L. Sommerville, CPA

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In this one-hour webinar, available exclusively to ChurchLawAndTax.com Advantage Members, CPA and author Elaine Sommerville walks leaders through the building blocks essential to compensation planning in their churches.

Key topics include:

Identifying the decision-makers
Defining job positions
Researching data
Establishing well-defined parameters for salaries and benefits.

Elaine L. Sommerville is licensed as a certified public accountant by the State of Texas. She has worked in public accounting since 1985.

Image: jadamprostore | Getty

Are Churches Required to Issue Charitable Contributions Statements?

What about a one-time donation of only $10? Are churches required to issue contribution statements for such small gifts?

Matthew Branaugh, Attorney and Editor

Bio

Last Reviewed: May 8, 2025

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.

Learn more about the specific information to include in the annual Church & Clergy Tax Guide.

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.

For more details, refer to the IRS Publication 526 and the IRS Publication 1771.

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

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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 motivated by a “domestic situation” stormed the First Baptist Church of Sutherland Springs in Texas (26 killed, 20 hurt).
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.

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:

“5 Steps for Building a Volunteer Safety and Security Team”
“Responding to Gun Violence Concerns at Church”
“Stopping a Shooter” and “Developing an Emergency Operations Plan”
“Drawing the Line on Danger” (including tips for de-escalating disruptive individuals)
“Minimizing the Risks of Child Molestation in Churches”
“The Legal and Moral Case for a Defibrillator”

Advantage Members also receive a 20-percent discount on these resources when they log into ChurchLawAndTaxStore.com using their email address:

Image: AdobeStock/Maryono

Advantage Member Exclusive

10 Standards for Starting a Security Program

Security consultant Carl Chinn outlines how to develop (or improve) your church’s plan.

The Editors

Bio

Last Reviewed: February 10, 2025

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.

For a better understanding of how gun violence fits into overall risk-management planning in churches, see “In an Era of Mass Shootings, a Call to Prepare—Not Panic.”

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:

Image: Gina Pricope | Getty

Protecting Your Church from Lawsuits

Attorney Sally Wagenmaker offers insights on legal risks and liabilities associated with ministry in an interview with Matt Branaugh.

Matthew Branaugh, Attorney and Editor

Bio

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).

Part 2: “When Is It Wise to Pay for Legal Counsel?”

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.

For additional insights from Wagenmaker, see the article “When Is it Wise to Pay for Legal Counsel?”

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.

Matthew Branaugh, Attorney and Editor

Bio

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).

Part 1: “Protecting Your Church from Lawsuits”

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.

For additional insights from Wagenmaker, see the article “Protecting Your Church from Lawsuits.” For additional insights related to hiring an attorney, see “How to Hire an Attorney for Your Church” by Richard R. Hammar.

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.

Richard R. Hammar, Attorney, CPA

Bio

Last Reviewed: January 17, 2025

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.

Video

IT Game Plans for Successful Ministry – Extended Q&A

This extended Q&A brings expert insights and advice from ‘Church IT’ author Nick Nicholau.

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Nick Nicholaou, author of Church IT: Using Information Technology for the Mission of the Church, joined us for a second time to answer the remaining questions asked during the “IT Game Plans for Successful Ministry” webinar.

Watch the first video here to learn about all things IT in the church.

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.

Initial questions to ask

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.

Deeper questions to ask

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?

Know your church’s role

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.

Evaluate where ministry spend is going

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.

Think beyond the dollars

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.

TIP As 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.

Raise awareness in the community

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:

“3 Ways to be a Good Neighbor to Disaster Survivors”
“How to Train Disaster Volunteers in Your Church“
“Preparing for a Disaster”

Housing Allowance Resolution for Pastors

A housing allowance is a the most important tax benefit for pastors. Use this resolution to help set a housing allowance for pastors in 2025.

Richard R. Hammar, Attorney, CPA

Bio

Last Reviewed: October 7, 2024

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.

Find quick tips for setting a housing allowance in “Designating a Housing Allowance for 2025.” For detailed information on the parsonages and housing allowances, see chapter 6 in the annual Church & Clergy Tax Guide.

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.

Elaine L. Sommerville, CPA

Bio

Last Reviewed: January 31, 2025

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.

Creating a Culture of Confidentiality

Policies and procedures are separate documents

FAQs

1. Why should church policies and procedures be kept as separate documents?

2. How often should church procedures be updated?

3. Who should be responsible for maintaining church policies and procedures?

4. How does separating church policies from procedures benefit church staff and volunteers?

Background

Two significant developments

Qualified small-employer health reimbursement arrangement

Defining a QSEHRA

Not all churches benefit

Other key points

New rules for health reimbursement arrangements (HRAs)

Benefits of the new rules

Tax advantages and other perks

Facts to consider about ICHRAs

Who can receive ICHRA

Other ICHRA guidelines

Q&A about ICHRAs and EBHRAs

Can large employers offer ICHRAs too?

What are the benefits of offering an EBHRA?

Need help setting up an ICHRA or EBHRA?

Contact:

QSEHRA or ICHRA?

1. Designate a housing allowance

2. Review W-4 forms

3. Provide a notice to donors

4. Determine if contributions are effective for 2024 or 2025

5. Correctly handle gifts and noncash/cash benefits to staff and volunteers

6. Be careful about accepting certain types of end-of-the-year noncash donations

7. Review classification of employees for US Department of Labor (DOL) purposes

8. Make sure ministers are properly classified for paying into the Social Security system

9. Voluntary withholding

10. Review plans for compensation in 2025

11. Have applicable employees fill out various required elections

12. Review payments to any independent contractors

13. Report all taxable fringe benefits on W-2 forms

14. Prepare for proper filing of Forms W-2 and 1099

15. Finalize 2025 budgets and take care of any budgeting issues

16. List and take care of any additional year-end items

17. Update your church’s resource guides

Handling childcare for small groups

Implement a child protection policy

Creating the safest environment possible

Mandatory training session for small-group leaders

Awareness of known sex offenders in the church

Post a sponsored small-group list

Check with your insurance provider

Crucial steps

1. It Protects Our Own Freedom

A few examples:

This principle cuts both ways:

2. It Helps Us Share the Gospel

Government coercion can backfire:

But religious freedom opens doors:

3. It’s Simply the Right Thing to Do

Here’s why:

It’s also a human rights issue:

So Don’t Ask Why—Ask How

Are Churches Legally Required to Issue Contribution Statements?

Donor Responsibilities for Substantiating Contributions

When Are Charitable Contributions Statements Required?

Key Takeaways for Churches

Frequently Asked Questions

Do churches need to issue statements for donations under $250?

What information must be included in a charitable contributions statement?

Can donors deduct contributions if no statement is issued?

Are charitable contributions statements required for non-cash gifts?

Troubling events

Sorting through the statistics

Basic safety as a ministry

“Keep it simple”

Related resources

What denominational rules apply to church formation and separation?

What governing documents and meeting records does your church have?

What real estate does your church use and who owns it?

What funds does your church receive from the denomination?

What obligations does your church have to the denomination?

How does your church intend to continue operating?