Court Tosses Out Labor Department’s Overtime Pay Rules

Court’s ruling reverses phased Labor Department’s overtime pay rules, meaning churches need only comply with previous minimum salary threshold.

A federal court in Texas halted key new overtime pay rules set by the US Department of Labor (DOL), relieving private employers—including churches—from paying potentially significantly more in personnel costs.

Earlier this year, the department instituted a phased plan to increase the minimum compensation that exempt employees must receive in order to not be owed overtime pay under the federal Fair Labor Standards Act (FLSA). 

In Texas v. DOL, (E.D. Tex.), the State of Texas and private employers separately sued the DOL, asking the court to void the DOL regulation. 


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The overtime pay rules

Under the phased DOL rule, the minimum salary went from $684 per week, or $35,568 per year, to $844 per week, or $43,888 per year starting July 1, 2024.

On January 1, 2025, it was scheduled to increase to $1,125 per week, or $58,656 per year. Automatic indexing then would start in 2027.

The plaintiffs claimed DOL’s new minimum salaries exceeded the authority granted to the agency by Congress. They also claimed automatic indexing was not authorized by Congress.   

In its ruling issued November 15, 2024, the Texas federal court agreed with the plaintiffs, voiding both salary increases and the automatic indexing. 

For now, this decision means that churches and ministries need only comply with the DOL’s previous minimum salary threshold of $684 per week, or $35,568 per year.

It’s possible the DOL will appeal the ruling to the United States Fifth Circuit Court of Appeals. However, success appears unlikely. In 2016, the Fifth Circuit affirmed a lower federal court decision that voided similar DOL attempts to increase the minimum salary threshold for exempt employees at that time. 

Any appeal now to the US Supreme Court also would likely lead to an affirmation of the decision, said national nonprofit accounting firm CapinCrouse. And the DOL under the Trump Administration taking office on January 20, 2025, isn’t likely to pursue such an appeal anyway, the firm noted.

Too little, too late?

This outcome potentially relieves churches in two ways, although for those that already made changes to comply with the DOL’s new rule, the decision may prove to be too little, too late. 

Before the July 1, 2024, threshold took effect, a church needed to determine which nonministerial positions would need to change from exempt to nonexempt under the new minimum salary test. The church then would need to decide whether to re-classify these workers as nonexempt or increase their compensation to meet the new threshold levels taking effect on July 1, 2024, and January 1, 2025, respectively.

Many churches made changes. With the Texas federal court’s decision, those changes now prove unnecessary. 

Those churches could opt to undo those changes, but as CapinCrouse also notes, those churches need to ensure such moves do not violate state laws. 

Furthermore, the firm said, churches must consider the negative impact on employee morale that such reversals could cause. 

A tug-of-war

The Texas federal court’s decision continues a seemingly constant tug-of-war between employers and the DOL.       

On one side, the DOL wants a bright-line salary test between exempt and nonexempt employees. On the other side, employers object to subjecting executive, administrative, and professional employees to overtime simply because they make less money than the DOL requires for the exempt classification.

The Texas federal court reasoned that the DOL’s minimum salary changes gave priority to pay levels over the duties test used under FLSA for determining exempt employee classification. The statute defines exempt-from-overtime status in terms of the duties required for executive, administrative, and professional employees and does not include a minimum salary test.  

According to the court, while salary can be a factor in the analysis, the failure to pay the proposed minimum salary should not preclude an employee from qualifying as exempt.

Key takeaway: Given the volatility of this issue, churches and ministries should continue to monitor for new developments. Until then, the minimum salary threshold of $684 per week, or $35,568, remains the rule to follow.

Frank Sommerville is both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.
Matthew Branaugh is an attorney and editor for Church Law & Tax.

State of the Church Research Reveals Key Leadership Challenges for Thriving Churches

Barna and Gloo’s State of the Church research reveals key trends in pastoring, politics, and leadership development.

New research from Gloo and Barna Group’s State of the Church initiative will help churches navigate today’s toughest challenges.

Designed to help pastors lead effectively, the research identifies obstacles and opportunities for fostering thriving churches in a polarized world.

Key Insights from State of the Church

  • Politics and Pastoring: Only 20% of pastors feel equipped to lead discussions on politics and civic engagement. Nearly half (45%) identified this as their greatest area of inadequacy. While partisan political activities can cause tax-related troubles for tax-exempt churches and congregational tension, pastors and leaders needn’t feel helpless. Enter “Can Our Church Get Political?“—a free download from Church Law & Tax. This resource offers ideas and ways churches can engage in the political arena and reinforce their congregants’ civic duties.
  • Measuring Success: 92% of pastors prioritize depth of engagement over church size. Yet only 8% see attendance numbers as an effective measure of success.
  • Burnout Among Younger Pastors: Leaders aged 44 and younger report higher levels of mental exhaustion and pressure compared to older peers.
  • Leadership Development: Half of pastors (49%) believe their churches under-prioritize developing the next generation of leaders.
  • Trust in Leadership: 54% of churched adults rated their trust in church leadership as a 9 or 10 out of 10.

What is State of the Church?

The State of the Church initiative is the largest church-wide research effort slated for 2025. It equips faith leaders with monthly updates on trends, free assessments, and community sentiment dashboards. The latest findings address pressing themes like political engagement, pastoral burnout, and succession planning.

David Kinnaman, CEO of Barna Group, highlighted the stakes for leaders. “Today’s polarized cultural climate and the ongoing strain of political division place unprecedented pressure on pastors striving to lead effectively in a changing world,” Kinnaman said. “These cultural headwinds drive burnout, underscoring the urgent need for tools like State of the Church to help pastors—especially young leaders—navigate complex issues and foster unity.”


Download your FREE copy of “Can Our Church Get Political?” for pastors and church leaders, alike.


Brad Hill, chief solutions officer at Gloo, emphasized the importance of equipping leaders to support their congregations. “This latest research highlights that pastors can foster whole-life flourishing without feeling compelled to address every cultural issue. Supporting leaders is crucial for the long-term health of the Church,” he said.

What’s next from State of the Church?

In December, Gloo and Barna will release further research on how Christians approach relationships and discipleship within their communities. This exclusive data will be available on Barna Access Plus, a subscription-based library offering insights tailored to church leaders.

For early access and additional resources, visit stateofthechurch.com.

To become a Church Law & Tax member, visit ChurchLawAndTax.com

Designating a Housing Allowance for 2025

Take advantage of the housing allowance, which is the most important tax benefit available to ministers.

The housing allowance is the most important tax benefit available to ministers.

But many ministers do not take full advantage of it because they (or their tax adviser or church board) are not familiar with the rules.

What can church leaders do to help? Consider the following guidance.

Designating a housing allowance for ministers in church-owned parsonages

Ministers who live in a church-provided parsonage or manse can exclude from their income for federal income tax reporting purposes (1) the fair rental value of the parsonage, and (2) the portion of their compensation designated in advance by the church as a “parsonage allowance”—to the extent that it is used to pay for parsonage-related expenses such as utilities, repairs, and furnishings and does not exceed the fair rental value of the home (furnished, plus utilities).

Recommendation. If your pastor lives in a church-provided parsonage or manse, and incurs any out-of-pocket expenses living there (for example, for utilities or furnishings), then have the church designate a portion of the pastor’s 2025 compensation as a “parsonage allowance.” This should be done in December 2024 so that it will be effective for all of 2025. Parsonage allowances cannot be designated retroactively.

Example. Your youth pastor lives in a church-provided parsonage. He is expected to pay his utilities and provide his furniture. His compensation for 2025 will be $35,000. In its December 2024 meeting, the church board designates $3,000 of this amount as a “parsonage allowance.” The youth pastor has parsonage expenses of at least $3,000 in 2025 (for utilities and furnishings). At the end of the year, the church treasurer issues the youth pastor a W-2 reporting only $32,000 as church compensation. The parsonage allowance is not taxable (assuming that it was used for parsonage expenses) for income tax reporting purposes.


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Designating a housing allowance for ministers who own their home

Many ministers own their homes. The portion of their compensation that is designated in advance by the church as a “housing allowance” is not subject to income tax to the extent it is used for housing expenses and does not exceed the home’s annual fair rental value (furnished, plus utilities).

Recommendation. If your pastor owns a home, have the church designate a portion of the pastor’s 2025 compensation as a housing allowance. This action should be taken in December 2024 so that it will be effective for all of 2025. Housing allowances cannot be designated retroactively.

Tip. Use the form in “Sample Housing Allowance Resolution for Pastors.”

Key question. Who should designate the housing allowance? In most churches, it will be the governing board. But this is not always the case. Some church boards delegate this authority (and other compensation decisions) to a personnel or compensation committee. In other churches, the membership approves all compensation decisions at the annual business meeting. Whichever method your church uses, be sure that the allowance is designated in advance, and that the action is in writing.

Designation a housing allowance for ministers who rent a home

Many ministers rent their homes. The Apostle Paul did for a brief time during his ministry. Acts 28:30 states that “for two whole years, Paul stayed there in his own rented house.” Perhaps your minister is renting a home or apartment. If so, you should understand that the portion of your minister’s compensation that is designated in advance by the church as a housing or rental allowance is not subject to income tax to the extent that it is used for rental expenses and does not exceed the fair rental value of the home (furnished, plus utilities). See the above recommendations and tips for ministers who own their homes.

Determining the amount of the allowance

How does your church determine the appropriate amount for a parsonage, housing, or rental allowance? A common practice is for churches to provide their pastor with an “estimated expense form” prior to the end of the year. The pastor estimates likely expenses for the following year on this form, and returns it to the board or other body that designates housing allowances. The allowance is based on the pastor’s estimated expenses.

Tip. Sample expense forms are reproduced at the end of chapter 6 in the annual Church & Clergy Tax Guide. There are separate forms for computing parsonage allowances, housing allowances, and rental allowances. This is a simple and convenient way for your church to designate an appropriate allowance.

Tip. Your church should not be too conservative in designating a housing allowance. The pastor cannot exclude from taxable income an amount more than the church-designated allowance. So, your church may want to designate an allowance in excess of a pastor’s estimated housing expenses for the new year.

Tax reporting

Most churches reduce the pastor’s W-2 by the amount the church designated as a housing allowance. But remember that the allowance is not necessarily nontaxable for income tax reporting purposes. For ministers who own or rent their home, the allowance is nontaxable only to the extent that it does not exceed actual housing expenses or the annual rental value of the home (furnished, plus utilities). It is the minister’s responsibility to report any excess housing allowance as taxable income on his or her tax return.

IRS Publication 517 states:

You must include in gross income the amount of any [housing, rental, or parsonage] allowance that is more than the smallest of

  • Your reasonable salary,
  • The fair rental value of the home plus utilities, or
  • The amount actually used to provide a home.

Include this amount in the total on Form 1040, line 1. On the dotted line next to line 1, enter “Excess allowance” and the amount.

Example. At the end of 2024, a church board determined that Pastor T’s compensation for 2025 would be $50,000. It designated $20,000 of this amount as a housing allowance. At the end of the year the church treasurer issues Pastor T a W-2 that reports taxable income of $30,000 (salary less housing allowance). However, Pastor T only has $17,000 of housing expenses in 2025. As a result, taxable income is understated on his W-2 by $3,000. It is Pastor T’s responsibility to report this $3,000 as additional income on line 7a of Form 1040.

Church treasurers should be sure that their pastor is aware of this reporting responsibility. Many pastors erroneously assume that they can reduce their taxable income by the full amount of the church-designated housing allowance. This will be true only if the allowance is less than the pastor’s actual housing expenses and the annual rental value of the home (including utilities).

Amending the housing allowance

What if the housing allowance designated for your pastor turns out to be too low? For example, the pastor has to pay for unanticipated home repairs, or begins to prepay part of the home mortgage loan. Can the church amend the pastor’s housing allowance? Yes it can, but note that the amendment only operates prospectively—from the date of the amendment forward. 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.

IRS Offers Churches Another Chance to Correct ERC Errors

A second Voluntary Disclosure Program means churches have until Nov. 22 to review and correct ERC errors at a discounted rate.

The IRS is offering churches a second chance to voluntarily disclose and correct COVID-era Employee Retention Credit (ERC) errors.

In a pair of releases issued in August (IR-2024-212 and IR-2024-213), the IRS announced the reopening of the Voluntary Disclosure Program (VDP) through November 22, 2024.

The agency is urging any businesses—including churches—that claimed the ERC to review and self-correct claims at a 15-percent discount. Doing so will avoid future audits, penalties, and interest.

The reopening follows an initial VDP for pending claims that expired in March. VDP offers organizations a chance to self-correct and repay any credits received as a result of erroneous claims. In many cases, erroneous claims are rooted in aggressive marketing schemes hatched by unscrupulous third parties.

IRS going after incorrect claims

The IRS is in the middle of trying to reverse or recapture more than $1 billion in improper ERC claims.

More than 30,000 compliance letters have gone out, with thousands more going out later in the year.


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“The limited reopening of the Voluntary Disclosure Program provides an opportunity for those with improper claims to come in ahead of IRS compliance work and get a discount on repayments,” said IRS Commissioner Danny Werfel. “This is especially important given increasing IRS compliance actions involving bad claims, many of them are the result of aggressive marketing tactics to lure unsuspecting businesses into claiming the complex credit. This provides a final window of opportunity for those misled businesses to make adjustments and avoid future compliance action by the IRS.”

The IRS is offering reduced and interest-free repayments under certain conditions, among other perks.

Who can apply

Businesses, tax-exempt organizations, and even government entities are eligible for the program. The program covers each tax period in 2021 that meets each one of the following requirements:

Your ERC claimed on a 2021 employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.

You now think that you were entitled to $0 in ERC.

You’re not under employment tax examination (audit) by the IRS.

You’re not under criminal investigation by the IRS.

The IRS has not reversed or notified you of intent to reverse all or part of your ERC. For example, you received a letter or notice from the IRS disallowing your ERC.

Other conditions apply.  Click here to learn more. Meanwhile, an IRS FAQ page offers answers to common questions, such as how to enter the second VDP.

Can Church Disputes Be Resolved Without Going To Court?

Attorney and Senior Editorial Advisor Lisa Runquist shares what she’s learned in more than four decades of handling church disputes.

How often have you heard about church disputes, and thought, This could have been our church?  

Or you thought, This will never happen to our church?  

Most pastors and church leaders never anticipate such a situation—until it happens. 

After more than 45 years of helping churches find solutions to complicated problems, here are a few things I’ve learned:

They can be financial in nature

They can involve a moral failure of some sort

Church disputes can involve an internal power struggle

Church disputes can be rooted in how church property is used

It is wise to have an internal dispute resolution process

Mediation and arbitration are vastly different processes

Selecting the right mediator or arbitrator is crucial

Arbitration is not always an option

Arbitration is not always a requirement

Before seeking options for resolving church disputes, it may be helpful to first identify some of the common types. 

These include:

Financial disputes

Churches receive tithes and offerings.  These mostly end up in the general fund and are used for church expenses.  As long as the funds advance the religious purposes of the church, the expenditures are likely permissible.      

However, if funds are used in a way that does not clearly advance the religious purposes, a dispute may arise.  

Churches also raise funds for a specific purpose. Restricted gifts (also known as designated gifts) support initiatives like a building fund. They may also finance a special program such as assisting the poor and needy or buying new choir robes.

Unless there is some qualifying language (such as retaining ultimate control over the use of the funds even if contrary to the donor’s stated preferences, or allowing a percentage of the funds to be used for administrative costs), the funds raised for this purpose are to be used only for the same purpose. When they are not, conflicts may again arise.

Similarly, a person occasionally may make a separate donation apart from the regular offerings and include specified restrictions. These restrictions will have to be set forth in writing to be effective. For example, a donation to finance a new building might come with a naming restriction. Again, a church’s decision to use the donation contrary to the donor’s restriction will likely trigger a dispute.

Claims of moral failures 

This type of dispute has become increasingly common, especially in the areas of child abuse or sexual misconduct. 

In addition to a claim against the alleged abuser, the church may find itself sued on the basis that it did not exercise appropriate oversight or, when the matter was brought to its attention, the church failed to act.  

The alleged abuser might be an employee, a volunteer, or someone in a position of authority within the church, whether a senior leader or a lay leader. 

Disputes over who controls the church  

When there is a functioning corporate structure, this question is less likely to be raised. 

However, independent churches founded by individual pastors are susceptible to control-related disputes, even when there is a functioning corporate structure. That is because, quite often, the pastor has exercised full oversight of the church to include making (or approving) all major decisions, and dies without a clear succession plan in place. When this happens, the pastor’s family often takes over and, on occasion, uses the assets for their own benefit. 

But even when the family does not abuse the church’s assets, the question of who controls the church often ends up in court.

Using church property contrary to religious doctrine

Along with the issue of church control is the issue of ensuring the purpose of the church and its religious beliefs remain unchanged with any change of control.  

Similarly, there are also numerous churches that have had to face disputes arising out of changing social mores within their congregation. Even well-established hierarchical churches have found themselves in the middle of disputes involving such matters as the ordination of women, gay rights, and use of gender-specific bathrooms, that have sometimes resulted in church splits. 

Developing a dispute resolution process

There are several reasons to develop a method to resolve disputes before going to court. Lawsuits are both time-consuming and expensive. But even beyond this,  it is important to remember courts are not allowed to make decisions based on a church’s religious beliefs. Instead, courts can only resolve church disputes based on outside objective facts, without interpreting doctrine or polity. 


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For example, what do your articles and bylaws say? Do you have a hierarchy that can override the decision of the local church? If the matter is left up to the directors, then what happens when the dispute is with those directors? And even if you have set out a method of resolving church disputes, how can you assure that the individual involved in the dispute is bound by that method? 

If the conflict impacts the life and vitality of the church, and a church wishes to avoid the civil courts, it is recommended that there be a method of resolving the dispute in a manner that allows religious beliefs and doctrine to be considered. 

Civil courts defer to church-mandated dispute resolution

As civil courts will defer to a church-mandated dispute resolution procedure, every church should consider to whom they are willing to submit a dispute for a decision. 

This varies by church; there is no “one-size-fits-all” language that can be adopted. As part of this, the church will also want to consider how the approved method of resolution will allow both sides to feel that their concerns have been heard, regardless of whether the final resolution is to their liking. 

Many churches start with the position that any dispute will be settled by the church authorities, which may include the pastor, the elders, the directors, or, for hierarchical churches, the higher church authorities. 

But what if the dispute involves those authorities?

 In that case, a court is likely to find there to be too much of a conflict of interest and will allow a court action to proceed in lieu of following the church arbitration provisions.

Mediation v. Arbitration

One should not confuse “mediation” with “arbitration.” 

Although there are similarities, there is one huge difference: mediation is not binding unless both parties arrive at an agreement.  

With mediation, the mediator works to bring both parties together. It is likely that neither party will get everything it wants; however, since both parties must agree to the terms of the settlement, each party is likely to be somewhat satisfied. Unless and until the parties agree, the mediation ends with the dispute still pending.

Arbitration, on the other hand, allows the outside third party to hear both sides of the dispute, and then make a decision

The arbitrator will often try to encourage the parties to settle; however, if no settlement is reached, then the arbitrator’s decision will be binding. Depending on how the arbitration provision is drafted, this can either be a permanent decision, or it can be appealed to the court. Obviously, since the intention of this process is to avoid court if possible, making the decision of the arbitrator binding is often preferable.

How arbitration works

The parties may always agree to mediate a matter, since it is simply a more formal attempt to settle with an independent mediator. It can—but need not be—a first step before arbitration. However, for arbitration, there must be rules as to when a matter is to be submitted to arbitration. There must be rules as to when arbitration must be used, and about who is required to submit to it. There must also be rules about how the arbitrators are to be selected, and how the arbitration shall proceed. 

The church should include in its bylaws the process selected for arbitration.  

There are some professional associations, including the American Arbitration Association and the Judicial Arbitration and Mediation Services, Inc. (JAMS), which offer mediation, arbitration, and alternative dispute resolution (ADR) services. If your church selects one of these organizations, the organizations have their own rules and processes to follow, and it is not necessary to spell out the process so completely in your church’s bylaws. 

If your church decides to set up its own method of arbitration, it can also designate the people or organizations from whom the arbitrator(s) will be selected. 

Choosing the right mediator or arbitrator

In addition to setting out the process, the professional associations have their own mediators and arbitrators from which to choose. 

Many of the JAMS mediators and arbitrators are retired judges. However, the problem with professional mediation/arbitration associations is that their arbitrators only have experience settling non-church matters.

Should you find someone that has worked with churches, they probably lack experience working with your church or your religious beliefs. This may not be an issue with mediation, but an impartial arbitrator might need to be educated on the matter. This is because they may not understand how religious beliefs and doctrine come into play.

There are some professional mediators and arbitrators who have experience in settling church matters. But, they may be harder to locate.

If your church is a hierarchical church, it may already have a dispute resolution process. Even if it does not, you have an existing church community from which you may be able to select arbitrators who are already familiar with your beliefs and doctrines. If you are a congregational church that is part of a recognized convention of churches (e.g. a Baptist church), or if there are other similar churches with which you associate, you may consider requiring that the arbitrators be selected from such related church entities.  

However, as noted above, the arbitrator(s) selected cannot be interested in the dispute without running the risk that a court will later find that the arbitration was unfair.

Who decides?

With mediation, there should be agreement between the parties on the mediator to be used. 

With arbitration, both parties may agree on an arbitrator.  

However, if your church is not going to use a professional association, the most common method of selecting the arbitrator is for each party to select an arbitrator and to have those two arbitrators select a third. 

Then, either all three arbitrators can participate, or the third arbitrator selected can run the arbitration. This depends on your church’s process.  

As noted above, the church can limit the groups from whom the arbitrator(s) are to be selected. This is fine as long as there is no resulting conflict of interest. 

Who must submit to arbitration?

No one can be required to participate in binding arbitration without having agreed to the process in advance. 

For example, an employment agreement may require binding arbitration over a dispute between the church and a nonministerial employee.  

But how does a church bind its congregants?

If the individuals become members, they will normally agree, as members, to follow the doctrines and beliefs of the church. The would also agree to abide by the rules and regulations thereof.

However, for there to be such an agreement, these individuals need to know what these rules are upfront. Therefore, if arbitration is to be required in certain circumstances, they must be spelled out (e.g., any matters concerning finances of the church). The required method of arbitration must also be described.  

The harder situation is when the church has a congregation, but no members who have formally joined the church. In that situation, arbitration can be recommended, and the congregant can agree to be bound by the arbitration process. However, the congregant cannot be forced to do so. If they do not agree, then the court is more likely to entertain a lawsuit.

Lisa A. Runquist has more than 40 years of experience as a transactional lawyer, both with nonprofit organizations and business organizations.

Church Disaster Preparation as an Act of Stewardship

Church disaster preparation is more than just protecting the church from harm, it is about serving the community during recovery.

Every year from June 1 to November 30, church disaster preparation takes place from Brownsville, Texas to the Outer Banks of North Carolina, as leaders brace for the possibility of one or more hurricanes making landfall in their areas.

In 2023, Hurricane Idalia caused a combined $3.6 billion in damages in Florida, Georgia and South Carolina, according to the National Oceanic and Atmospheric Administration’s (NOAA) Office of Coastal Management, and between 1980 and 2023, hurricanes are the most destructive force of nature in the United States, causing more than $1.3 trillion in damage while averaging almost $23 billion per storm, and accounting for almost 7,000 deaths.

Image courtesy NOAA showing weather and climate-disaster icons located throughout a map of the United States.

*Infographic courtesy NOAA.

Therefore, when a hurricane cuts a path of destruction through a community, God’s church is in a unique position to meet both physical and spiritual needs, assuming the church is on a good footing to do so.


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The below three articles, originally prepared and recently reviewed by Jamie Aten, founder and co-director of the Humanitarian Disaster Institute at Wheaton College, will put your ministry in a position to respond well should a hurricane—or other disaster—strike your community.

Can Getting Political Affect Our Church’s Tax Status?

Before you decide to get political, use this checklist to determine how it might affect your church’s tax status.

Some pastors and church leaders want to see their church take a stand on a certain issue or candidate during an election year but aren’t sure how it might affect their church’s tax status.

Others might hesitate, wondering whether taking a stand is the right decision, both from a spiritual and governance standpoint.

Either way, section 501(c)(3) of the tax code has something to say about tax-exempt churches that engage in political activities and speech, along with penalties for churches that run afoul of the rules, including the revocation of the church’s tax status.

While few public examples exist of the actual enforcement of these rules over the years by the Internal Revenue Service (IRS), churches and church leaders still should understand the prohibitions and limitations, including any potential tax consequences triggered by them.

Resources for pastors and church leaders

This free, easy-to-understand quick reference guide is designed to help churches and church leaders make informed decisions on what they can, and cannot, engage in on the political front.

Download it here, and share it with other church leaders.

Meanwhile, dig deeper on religious freedom in the United States with our carefully curated recommended reading section on the topic.

For pastors and church leaders thinking of engaging in political discourse on their social media feeds, give this 10-point checklist a look.

Emotions often can run high whenever political issues arise. These tools are designed to help pastors and church leaders navigate the volatility and make certain any decisions they make—in response to how they believe God has called them to act—are informed ones.

Church Law & Tax Bought By Gloo Family of Brands

Church Law & Tax has been bought by the Gloo family of brands along with sister site, ChurchSalary. The deal closed May 1, 2024.

Church Law & Tax has been bought by the Gloo family of brands.

Gloo purchased Church Law & Tax’s website and its vast array of print and digital resources from Christianity Today International. The acquisition also includes Church Law & Tax’s sister site, ChurchSalary.

The deal closed May 1, 2024. Financial terms were not made public.

“We are incredibly excited to welcome both Church Law & Tax and ChurchSalary into the Gloo family of brands,” said Brad Hill, Chief Solutions Officer at Gloo. “Both organizations have a proven track record of delivering exceptional value to church leaders. By integrating their capabilities into the Gloo portfolio of offerings, we can serve more church leaders in even more comprehensive ways, ultimately helping their organizations thrive.”

The acquisition positions Church Law & Tax to build on almost five decades of serving churches and church leaders.

What the acquisition means for members

Church Law & Tax’s Advantage Members and Basic Members will receive uninterrupted access and benefits to ChurchLawAndTax.com and ChurchLawAndTaxStore.com.

Additionally, efforts are already underway to offer Church Law & Tax members access to Gloo+, a powerful text-messaging platform for churches, and Gloo Marketplace, a church leadership resources platform. Gloo serves about 70,000 church leaders nationwide through its products and services.

“Gloo’s rapidly expanding abilities to unite and inform churches through its powerful technology platforms position Church Law & Tax to serve churches for decades more,” said Matthew Branaugh.

Branaugh joined Church Law & Tax in 2008, and has helped lead day-to-day and strategic operations for most of that time. He will become Church Law & Tax’s business owner at Gloo.

Richard Hammar, Church Law & Tax’s co-founder and senior editor, will continue his writing and research. Along with operating ChurchLawAndTax.com, Church Law & Tax publishes Hammar’s annual Church & Clergy Tax Guide and Pastor, Church & Law, Fifth Edition. The business also features online training, including Safeguarding Your Church’s Finances and Reducing the Risk: A Child Sexual Abuse Awareness Program.

Rick Spruill joined Church Law & Tax as managing editor in 2022. He will become Church Law & Tax’s digital content manager at Gloo.

Aaron Hill will continue leading ChurchSalary as business owner.

Fed Raises Minimum Salary Requirements For Exempt Status

New minimum salary requirement from DOL would make significant changes in 2024 and beyond.

Last Reviewed: November 18, 2024

Editor’s Note: On November 15, 2024, a Texas federal court vacated the US Department of Labor’s 2024 minimum salary requirement changes for exempt employees and overtime pay. The change that took effect on July 1, 2024, is no longer valid, and future scheduled ones will not occur. This means the minimum salary requirement in effect before July 1, 2024—$684 per week, or $35,568 per year—is in effect again. Follow Church Law & Tax for updates.

The US Department of Labor (DOL) raised the minimum salary requirement under the Fair Labor Standards Act (FLSA) from $684 per week to $844 per week as of July 1, 2024, with another change set to take effect on January 1, 2025—and future increases set to happen every three years thereafter.

Brief history of FLSA

FLSA became law in 1938 and was the first federal regulation of employment practices to withstand a Supreme Court challenge. 

It eliminated most child labor practices and established a minimum wage ($.25 per hour) and minimum weekly salary of $100 in order to be exempt from overtime pay.

FLSA required overtime pay for nonexempt workers that put in more than 44 hours in a week. That standard dropped to 40 hours a couple of years later.

Meanwhile, the minimum salary requirement for exempt status has changed many times through the years. It last changed in 2020 from $455 to $684 weekly.

New minimums phase-in 

The new regulations establish the minimum salary at the 35th percentile of full-time salaried workers in the lowest wage Census region, which is $1,128. 

Because the new minimum represents a significant increase over the previous minimum of $684, the DOL opted for a phased-in approach.

  • Phase 1: $844 per week (equivalent to $43,888 per year) on July 1, 2024. 
  • Phase 2: $1,128 per week (equivalent to $58,656 per year) on January 1, 2025. 

After that, the minimum salary will change every three years on July 1, starting in 2027. 

Note: The minimum salary for exempt status applies for part-time employees. In simpler terms, the minimum salary for exempt status applies whether an employee works one hour or 40 hours. 

Increases for highly-compensated individuals

The salary thresholds for highly compensated classification also increased from $107,432 to $132,964 (for 2024) and $151,164 for 2025.

What this means for churches and church leaders

All churches should immediately evaluate all positions and determine which positions are subject to the ministerial exception. That is because ministerial exception positions (clergy, pastors, ministers, and others with spiritual duties) are exempt from all labor laws, including federal and state minimum wage and overtime laws. 

From there, a church must determine what positions may change from exempt to nonexempt under the new minimum salary test. The church must act quickly regarding positions with compensation of less than $844 per week, or $43,888 annually. The church must either re-classify these workers as nonexempt or increase their compensation to $844 per week or $43,888 annually.


If you’re a Church Law & Tax member but haven’t yet spent time in Frank Sommerville’s 6-part series on church employment best practices, now is a good time to go through it.


Many churches err by classifying workers as exempt when they fail the duties test. Churches should also use this opportunity to review all their exempt positions to confirm that they otherwise qualify for their exempt classification.

Remember, the ministerial exception classification is entirely independent of the worker’s classification for income tax purposes. For example, a children’s ministry director may not qualify as a minister for income taxes because he/she does not possess a ministerial credential. However, the children’s ministry director qualifies for the ministerial exception for employment laws. 

Schools (K-12) should note that school teachers and school administrators are not subject to the minimum salary test. 

The church should discuss with an employment law professional to determine whether a preschool or daycare center qualifies as a school for employment laws.

The other standards for exempt status remain unchanged. These standards include that the employee must be compensated by salary that may not vary based on the number of hours worked. The worker must perform specific duties as defined by the Department of Labor. These duties tests include Executive, Administrative, and Professional duties. The defined duties must represent the workers’ primary duties. The Department of Labor will make the determination based on the totality of the circumstances. 


Elaine Sommerville’s “Church Compensation: From Strategic Plan to Compliance” covers FLSA classification in great detail. Advantage Members enjoy 20% off this important reference work for church leaders.


Important Caveat

Many business groups have filed a suit to block previous increases in the minimum salary.

New lawsuits are expected to challenge this latest increase. Some uncertainty will exist until the increase is implemented. Church administrators need to monitor the status of this proposed increase, but should still plan to implement the changes to comply with this new announcement.

Frank Sommerville is both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.

Iowa, Utah, and Nebraska Pass Religious Freedom Restoration Acts

More than half the country’s states possess laws addressing free exercise protections for individuals, churches, and religious institutions.

Last Reviewed: January 27, 2025

Editor’s Note: This article has been updated to include laws passed in Nebraska and Utah.

Iowa, Nebraska, and Utah adopted “Religious Freedom Restoration Acts” in early 2024, meaning more than half of the country’s states now have enacted such laws throughout the past three decades—seven of them since 2021 alone. 

Iowa’s statute is intended “(t)o restore the compelling governmental interest test and to guarantee its application in all cases where the free exercise of religion is substantially burdened by state action.”

Nebraska adopted the “First Freedom Act,” which also prohibits state actions from substantially burdening free exercise rights unless a compelling governmental interest exists and the action is crafted in the “least restrictive” way possible.

Utah’s statute also follows a similar standard, noting the “free exercise of religion as a fundamental right.” 

Individuals, churches, and religious institutions in these states can seek these protections when they believe their free exercise rights under the US Constitution have been substantially burdened by government actions at the local or state levels.

The laws resemble federal Religious Freedom Restoration Act

The wording in each of the states’ laws echoes language used in the 1993 Religious Freedom Restoration Act (RFRA).

The federal act, passed nearly unanimously, came in response to a controversial US Supreme Court decision.

The Court’s 1990 ruling in Employment Division v. Smith established a lower judicial standard for reviewing neutral, generally applicable laws, even when those laws substantially burden religious exercise. The resulting effect was a harder legal path for religious parties to defend their free exercise rights, prompting Congress to respond.


Read more about the state and federal Religious Freedom Restoration Acts as an Advantage Member.


Another Supreme Court decision in 1997 determined that RFRA could only apply to federal government agencies and actors. In response, states began adopting their own versions to address local- and state-level situations. 

Several RFRAs since 2021

In 2021, South Dakota and Montana passed RFRAs, while in 2023, North Dakota and West Virginia did the same. 

South Dakota, North Dakota, and West Virginia’s RFRAs also added language prohibiting state and local governments from restricting religious activities more than secular parties—an issue triggered by restrictions and executive orders during the COVID-19 pandemic that in some instances appeared to unfairly treat churches and ministries.

In response, the Supreme Court ruled restrictions imposed on churches violate the First Amendment unless they are uniformly applied to businesses and secular organizations. 

Nebraska included pandemic-tied language similar to South Dakota, North Dakota, and West Virginia. Neither Iowa nor Utah did.

In 2005, Utah adopted a religious land-use act designed to offer churches RFRA-like protections in property-related matters. Utah state representative Jordan Teuscher, the floor sponsor for the bill ultimately passed, said the law was “an important expression of Utah’s long-established commitment to religious freedom” due to “a world that’s increasingly hostile to religion,”  according to the Deseret News.

Kim Reynolds, Iowa’s governor, said her state’s law became necessary as well.

“Thirty years ago, the Religious Freedom Restoration Act passed almost unanimously at the federal level,” Reynolds said in a statement. “Since then, religious rights have increasingly come under attack. Today, Iowa enacts a law to protect these unalienable rights—just as twenty-six other states have done—upholding the ideals that are the very foundation of our country.” 

In all, 28 states have religious freedom laws on the books. Ten states do not. The remaining states rely upon past court decisions for determining the standards with which to evaluate a religious freedom claim.

Matthew Branaugh is an attorney and editor for Church Law & Tax.

Asked, Answered: The Clergy Allowance and Part-Time Ministers

Do part-time ministers qualify for the clergy housing allowance? Matt Branaugh helps you answer hat critical question.

Church Law & Tax members often ask us whether their part-time pastor or minister qualifies for the clergy housing allowance.

In this brief video, Matt Branaugh walks members through the five-factor test the Internal Revenue Services uses to determine whether a part-time minister qualifies for the clergy housing allowance.

The good news? It’s not as complicated as it seems.

Take a look:

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Of course, there are many facets to the housing allowance, and we’ve spent years unpacking all of them. It’s why you should bookmark our curated Recommended Reading page on the housing allowance for future reference.

The housing allowance is also extensively covered in Elaine Sommerville’s updated Church Compensation – From Strategic Plan to Compliance, available now at ChurchLaw&TaxStore.

Asked, Answered: The Importance of Governing Documents

Matt Branaugh reminds church leaders what they need to be looking for when it comes to church governing documents.

Does your church have governing documents? If you’re a pastor, do you know where those documents are located?

It’s a question every pastor and church leader should ask, and it’s the topic of this Asked, Answered from Church Law & Tax’s Matt Branaugh.

The topic bubbled to the surface recently in the ongoing controversy at Immanuel Baptist Church in Little Rock, Arkansas, where the absence of governing documents such as a corporate charter, constitution, or bylaws has complicated things for the 132-year-old church that is part of the Southern Baptist Convention.

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Church Law & Tax members enjoy plenty of access to resources on this topic, including:

For Basic and Advantage Members: Richard Hammar explains the basics of church bylaws.

Meanwhile, Advantage Members get 20 percent off Hammar’s Church Governance – What Leaders Must Know to Conduct Legally Sound Church Business when purchased through the Church Law & Tax Store.

More States Legislate Mandatory Sexual Harassment Prevention Training for Employers

Mandatory sexual harassment training for employers, including churches, is a growing trend in the United States and its territories.

In June 2020, Church Law & Tax summarized the emerging nationwide trend of sexual harassment prevention training laws mandated by states for private employers. 

Since then, that trend has doubled. Whereas seven states put such laws on the books as of 2020, 14 now do so midway through 2024, as do the District of Columbia, and Puerto Rico.

And religious employers, including churches, aren’t explicitly exempted from these requirements by the laws in these jurisdictions: 

California

Colorado

Connecticut

Delaware

District of Columbia

Hawaii

Illinois

Maine

Massachusetts

New York

Ohio

Puerto Rico

Rhode Island

Vermont

Washington

West Virginia

In addition, administrative or regulatory agencies in 12 more states strongly recommend private employers provide anti-harassment training to all employees, particularly those in supervisory positions..

The states that mandate training require employers to cover several core topics. But these laws also vary in several significant ways by jurisdiction. 


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


Many state courts will likely apply these statutes to any claims brought against church employers unless those courts recognize a religiously based exception to the statutes. Until such a development occurs, churches located in these places will need to determine how to best comply.

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

1. California

All California employers with five or more employees must regularly provide two hours of training regarding sexual harassment to all supervisorial employees, and one hour of training to other employees. 

While California exempts nonprofit religious corporations from its fair employment laws in most instances, churches that employ five or more people in taxable unrelated business are not exempt from this regulation. However, most churches do not engage in taxable unrelated business and thus are not mandated to provide sexual harassment prevention training.

Even so, churches may wish to consider voluntarily providing training in this area. Harassment claims are not uncommon in churches, and having a training program may provide evidence of the church’s diligence with training should a future allegation arise. It may also prevent other forms of harassment. 

For those churches and other religious organizations that are subject to the law because they employ five or more individuals in taxable unrelated business activities, the training must take place at least once every two years. The training must be provided within six months of hire, or promotion to a supervisory position. For individuals who will be employed for less than six months, the training must take place within 30 days or 100 hours of work from their starting date. 

In determining whether the employer has five employees, all persons under the direction and control of the employer are counted, including out-of-state employees, volunteers, and unpaid interns, even though the actual training is only provided to California-based paid employees. 

Notably, all employers–including churches and religious nonprofits–that provide sexual harassment training must include training on the prevention of abusive conduct, and that includes harassment based on gender identity, gender expression, and sexual orientation as part of the training. Cal. Gov. Code §§12950-12950.1.

2. Colorado

Colorado statutes do not specifically require employers to provide sexual harassment training. However, the Colorado Civil Rights Commission, which adopts rules for enforcing Colorado’s Civil Rights Act, states in its rules and regulations that employers are encouraged to “take all steps necessary” to prevent discrimination and harassment, including affirmatively raising the subject, expressing strong disapproval, promulgating and distributing an anti-discrimination policy, and training. 

3 CCR 708-1, Rule 20-6. Rule 85.1(G) provides that an affirmative defense to a claim of workplace harassment includes the fact that “the employer exercised reasonable care to prevent and correct promptly any harassing behavior.” 

In light of this, there are compelling grounds for churches to require such training.  

3. Connecticut

All employers in Connecticut with three or more employees must prominently post in the workplace a notice regarding the illegality of sexual harassment, as well as remedies. They must also provide employees with written materials on the subject within three months of their hiring, and two hours of training within six months of hire. The training need not be repeated.

Connecticut’s law requires that employers with fewer than three employees still provide the same training within six months to employees who take on supervisory roles. 

If an employee has received training provided by the state’s commission on human rights while employed by a different employer within the two years preceding the date of hire, an employer may consider that prior training to satisfy the training requirements of Connecticut’s law. 

Conn. Gen. Stat. Ann. §46a-54. Regs. Conn. State Agencies §46a-54-204.

4. Delaware

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

5. District of Columbia

Washington, D.C., does not have mandatory training requirements that would include churches or ministries generally. 

However, the District does mandate training for employers of tipped employees, which can affect some services ministries provide to the public.

Under the Tipped Wage Workers Fairness Act, employers must provide training to all employees that includes how to respond to, to intervene in, and to prevent sexual harassment. The training must be repeated every two years. For new hires, the training must be completed within 90 days of hire unless the employee received the training within the previous two years. Employers must also follow the document submission compliance requirements of the Act. D.C. Code § 2-1411.05a(f)(4). 

6. Hawaii

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

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

7. Illinois

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

Additionally, restaurant and bar owners must provide–in both English and Spanish–written industry-specific sexual harassment training to all employees within one week of hire (775 ILCS 5/2-110).

While “restaurant” is defined as a business “primarily engaged in the sale of ready-to-eat food,” and thus would not likely extend to churches that provide the sales of food, churches or ministries that operate food sale services as separate corporations may come under this requirement. 

8. Maine

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

9. Massachusetts

Massachusetts General Law “encourages” employers to educate and train their employees within one year of hire, with additional training also required for supervisory positions. The content of that training is not explicitly set forth. Employers are also annually required to provide a written copy of their policy against sexual harassment to all employees. M.G.L. c. 151B § 3A(e).

10. New York

Every employer must adopt a sexual harassment prevention policy. It must be a policy that:

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

The training must be given annually. 

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

11. Ohio

Acccording to Ohio law, employers “should” take all reasonable steps to prevent sexual harassment from occurring, including “developing methods to sensitize all concerned.” Ohio Adm. Code 4112-5-05(J)(6).

12. Puerto Rico

All employers in Puerto Rico are required to educate employees on the prohibition of sexual harassment and bullying in the workplace. Puerto Rico’s code is not explicit on how often this education is to occur or how many hours are required. Act 90-2020.

13. Rhode Island

Employers in Rhode Island are encouraged under the state’s law to provide a training program to all employees within one year of hire. Additionally, the code encourages additional training for supervisors to be given within one year of hire. The law is not explicit on the content or length of the training. R.I. Gen. Laws § 28-51-2(c).

14. Vermont

Vermont employers are “encouraged” under state law to provide training to all new employees within one year of hire. The training should be completed annually with all employees. Additional training is encouraged for supervisory positions that should be completed within one year of hire and should include the specific responsibilities of supervisors and managers. 21 Vt. Stat. Ann. § 495h (f)(1)-(3).

15. Washington

Washington does not mandate training that would bind churches or ministries generally.

However, Washington requires that all hotel, motel, retail, security guard entities, and property services contractors provide mandatory training to all employees who spend the majority of their working hours alone. Since “retail” is a potentially broad, expansive term, ministries that engage in sales of products or goods should be aware of this requirement and ascertain whether their activity falls within the scope of regulations. 

The training must cover the prevention of sexual assault and harassment as well as the prevention of sexual discrimination. 

It must also educate employees on protection for individuals who report violations. 

As the statute in Washington is designed to protect isolated workers who may spend most of their working hours away from other employees, the state also requires that all covered employees be provided a panic button or emergency assistance device which would immediately summon assistance from another employer or security guard. 

All employers with 50 or fewer employees must adhere to harassment guidance published by Washginton’s Department of Labor and Industries. RCW 49.60.515.

16. West Virginia 

West Virginia is another state that “encourages” employers to do what is reasonable to prevent sexual harassment, including educating their employees. W. Va. Code R. § 77-4-3.5.

States that recommend sexual harassment training

The following states do not specifically require sexual harassment training of their employers; however, they each have an administrative or regulatory agency that recommends some degree of training. The authority of each agency varies, as some are tasked with enforcement of the state’s civil rights laws and others are not. Additionally, some of these agencies have prepared a free prevention training program for their state’s employers. 

Idaho 

Human Rights Commission Harassment Prevention

Iowa

Iowa Civil Rights Commission Harassment Fact Sheet

Kansas

Kansas Human Rights Commission Harassment Fact Sheet

Montana

Montana Department of Labor and Industry Sexual Harassment Prevention

Nebraska

Nebraska Equal Opportunity Commission Statement on Eliminating Harassment

Nevada

Nevada Equal Rights Commission Discrimination Prevention

North Dakota

North Dakota Department of Labor Brochure on Sexual Harassment in the Workplace

Oregon

Bureau of Labor and Industry Sexual Harassment Prevention

Pennsylvania

Pennsylvania Human Relations Commission Guidelines on Sexual Harassment

South Dakota

South Dakota Department of Labor and Regulation Brochure on Avoiding Sexual Harassment 

Texas

Texas Workforce Commission Recommendation Regarding Employment Discrimination

Wisconsin

Wisconsin Department of Workforce Development, Equal Rights Division Statement on Harassment in the Workplace


Jessica Frieberg is a paralegal at the Church Law Center of California. She has dedicated the past 14 years of her legal career to serving nonprofits and has extensive experience working with churches and other religious organizations. 

Myron Steeves is founder and senior attorney at the Church Law Center of California, and dean emeritus of Trinity Law School. Steeves serves charities, religious organizations, trade associations, political organizations, and higher education institutions through his practice by offering sound legal guidance from a faith-based perspective.

Steeves is an active member of the nonprofit committees of both the California Lawyers Association and the American Bar Association (ABA), and chairs the ABA’s Religious Organizations Subcommittee. He frequently speaks on a wide array of issues involving Christianity and the law, including the integration of faith and law, legal careers as tools for Christian ministry, law and public policy, and law and theology.

He earned his law degree from Georgetown University Law Center and his undergraduate degree from Biola University.

Immanuel Baptist Church Split Highlights Need for Sound Governing Documents

Immanuel Baptist Church in Little Rock is grappling with a host of complex issues, including how to govern itself in the midst of a split.

A growing conflict within Immanuel Baptist Church, one of Arkansas’s largest and best-known churches, spotlights what happens when a church doesn’t have strong governing documents in place.

The absence of a corporate charter, constitution, or bylaws has complicated the controversy at the Little Rock-based church.

Immanuel Baptist was founded in 1892 and is a part of the Southern Baptist Convention (SBC). 

Without these documents, the church faces an uphill battle regarding the status of Lead Pastor Steven W. Smith.


Does your church lack a charter, or bylaws? We can help – church incorporation and bylaw creation are covered extensively in Richard Hammar’s Church Governance – What Leaders Must Know to Conduct Legally Sound Church Business.


Rooted in child abuse allegations

Smith faces criticism for how he handled a pair of child abuse allegations. A 2015 case involved a former staff member and came to light a year after Smith took the pulpit in 2017. The other, from 2020, involved a former music ministry volunteer.

A seemingly even-split congregation, coupled with its high-profile status, has led to ongoing coverage by the Arkansas Democrat-Gazette, the state’s largest newspaper. Its membership ranks over the years have included former President Bill Clinton. 

About 200 people have recently left the church, which averages 925 in weekly attendance, the paper recently reported.

In January, expenses exceeded receipts by more than $100,000.

The value of governing documents

Governing documents typically include both a corporate charter and a constitution or bylaws.

A corporate charter, born out of an incorporation process with the state’s secretary of state, deals mostly with a church’s physical location, founding members, and doctrinal tenets. 

A constitution or bylaws lay out the rules governing a church’s internal affairs. Those rules guide, among other things: 

  • Membership qualifications
  • Voting rights and privileges
  • Meetings, including notices, timing, and quorum requirements
  • Hiring or terminating staff members, including pastors
  • Formation of committees, such as personnel and finance
  • Selection of individuals and scope of authority for the church’s governing board

Some denominations use a hierarchical structure, meaning bylaws are set by the national organization and followed by its local churches. 

Other denominations and associations of churches, including the SBC, leave governing structures up to their local churches.

When a nonprofit or church lacks formal rules, or remains silent on specific ones, a state’s Model Nonprofit Corporation Act often fills in gaps. It can also be used by courts to determine whether decisions made by an entity were proper. 

However, First Amendment considerations prevent such gap-filling when issues related to doctrine or theology arise. This includes who a church calls to serve as its pastor.

Immanuel Baptist’s challenge

Without governing documents, and with a congregation that is evenly split, what happens next at Immanuel Baptist is uncertain. 

The church’s website describes Immanuel Baptist’s structure as a “congregational polity.” 

“In a congregational structure, the larger decisions are made by the congregation,” it continues. “Larger issues would include the approval of the annual budget, the approval of the quarterly financial statement, the calling of the pastor, and the purchase of property.” 

However, specific rules regarding the processes for formally making those decisions are not stated. This ambiguity has led to turmoil.

Some of the church’s 61 deacons have called for Smith’s resignation. A “no-confidence” vote—first tabled in early February, prompting eight deacons to resign—eventually took place on February 19 and slightly favored Smith. 

Meanwhile, some Immanuel members have filed complaints with the SBC’s Credentials Committee.

The committee is responsible for determining whether churches are in “friendly cooperation” with SBC causes and doctrine, according to the Arkansas Democrat-Gazette.

A possible solution

Since the matter involves Smith’s role as a pastor, the Arkansas Nonprofit Corporation Act cannot be used to create a decision-making process regarding his employment. 

And any ensuing legal action taken by either side to challenge the outcome will almost certainly get dismissed by a court under the ministerial exception doctrine

However, one possible solution exists, said Sarah Merkle, an attorney and senior editorial advisor for Church Law & Tax.

Markle is one of a only a few Certified Professional Parliamentarian-Teachers and Professional Registered Parliamentarians in the country. 

“I would have the congregation get together and adopt a set of rules to govern the process,” Merkle said. “They could do that by giving notice of the rules ahead of the meeting where they are proposed and requiring a super majority for adoption.”


Church Law & Tax partnered with Sarah Merkle in 2023 to bring you “Mastering Meeting Basics,” a five-step guide for planning, scheduling, and managing official church meetings.


A super majority would require approval by two-thirds of the votes cast by voting members present at the meeting.   

“If members can agree on a fair framework for making a decision, they can likely find their way out of this situation,” Merkle added.

Matthew Branaugh is an attorney and editor for Church Law & Tax.

Advantage Members

Making a Case for Church Trademarks

Making a case for church trademarks is not only about sound legal principles, but marking differences in church doctrine.

Imagine buying a can of Kapow!, cracking it open, tipping it to your mouth and tasting something oddly unfamiliar—dissimilar from every can of Kerpow! that you have ever purchased.  

The cans look alike and promise a similar effect. You did not notice a couple letters’ difference in the name. Confidence shaken, you hesitate to buy another can the next time you are thirsty and instead look for a substitute. This dilemma is what trademarks and service marks are intended to avoid. 

Why churches should consider trademarks

Consumers begin to associate marks with particular kinds and qualities of products and services not only in the for-profit sector, but also the non-profit sector. 

The mark relieves the consumer of the inconvenience of undertaking due diligence on every product and service available. 

Which is to say, the consumer can defer to the mark owner the obligation (i) to ensure its can of Kerpow! will look and taste the same as every other can, and (ii) to police imposters and knock-offs.  

Like it or not, the public comes to associate the names and logos of churches, associations of churches, and denominations with certain doctrinal, liturgical, worship, and other distinctives just as it associates them with secular products and services.  

Some see religious “brands” as commercializing that which is holy, which is sacrilegious. But there are important reasons why churches, associations, and denominations may want to look at word marks and design marks from a different vantage point.  

A word mark is just that, a word or set of words used to identify goods or services, ranging from a product on a store shelf to a particular association, organization or denomination. If a potential parishioner were to see a sign that says “Presbyterian Church,” they should know what to expect when they walk inside.

Design marks are logos or symbols that serve as shorthand brand signals.  Often, logos are designed to catch a potential customer’s (or congregant’s) eye as they pass by.

Doctrinal implication for churches

The most important distinctive and theological apologetic for a word mark may be doctrinal.  

A churchgoer will be as surprised as the consumer purchasing a can of Kapow! if the experience proves unfamiliar. The consequences may be similar to when the visitor considers returning the following week. Just as counterfeit products may have different ingredients, churches with confusingly similar names may adhere to different statements of faith, moral commitments, and worship styles.  

Recognizing this, a federal court ruled that the Episcopal Church in South Carolina is the rightful owner of the names “Diocese of South Carolina,” “The Episcopal Church,” and “The Episcopal Diocese of South Carolina,” as well as the Episcopal shield and the diocesan seal. Ordered to cease using the names, the “Anglican Diocese of South Carolina” has now come to stand for more conservative theology. 

Even small congregations have challenged alleged usurpation of trademarked terms like “Mighty Men” or defended against efforts by commercial brands to cancel their mark and use similar ones.


Explore copyright basics, duration, rights and remedies in Richard Hammar’s Essential Guide to Copyright Basics.


Four elements of trademarking

Churches interested in trademarking must consider four elements.  

1. The mark must be distinctive.  

Marks can be “word marks” in standard character format without regard to the font, style, size, or color, or they can be “design marks” comprising a graphic design or image with or without wording such as a stylized logo. The term “church” is not distinctive and cannot be monopolized as a word mark, but can be disclaimed as part of a phrase with other unique words or when presented as part of a logo to give a “distinct commercial impression.”  

2. A trademark or service mark cannot conflict with any other mark because of confusing similarity.  

Marks do not have to be identical to violate this requirement.  All that is required is for marks to share elements of spelling or style that would lead a reasonable observer to believe the marks such as Kapow! and Kerpow! are related.

3. The mark must be used in commerce. 

“Use in commerce” means bona fide use of a mark in the ordinary course of trade, and not merely to reserve a right in a mark. Churches engage in commerce along with other nonprofits when advertising, buying, selling, and offering products and services as on the church marquee, in the church bookstore, or online. When mark usage is de minimis (or trivial), churches risk challenges to the mark to cancel it.  

4. A mark must be a source identifier for products or services.  

Put another way, the mark must represent the church, such that every time a churchgoer visits a church utilizing the word mark or design mark, the distinctive aspects of that church are present. Some modern church attendees will never have physically attended a church and know it only by its published name, logo, and image. 

Church plants

Viewed as intellectual property, marks are an important tool to ensure churchgoers are not confused. This is especially true with church plants as they establish themselves in their communities.  

The ® symbol indicates that a word, phrase, or logo is a registered trademark for the product or service.  

The ™ symbol is used in connection with an unregistered mark to provide notice to potential infringers that rights in the mark are claimed in connection with specific goods or services.

Because marks can be licensed, a mark licensor such as The Episcopal Church in South Carolina has the legal right to prevent a member church that fails to adhere to the licensor’s standards from continuing to use the mark.  

By analogy, if a franchise operator does not follow a franchisor’s recipes, purchase the franchisor’s ingredients or products, conform with the franchisor’s staffing and management models, or maintain its facility according to the franchisor’s standards, then the franchisor will prevent the franchisee from continuing to use its mark. 

Churches, associations and denominations

Churches, associations, and denominations can utilize the same licensing rights to police sound doctrine and other standards.

Intellectual property rights in connection with a mark can arise by usage under the common law specific to a geographic area. 

Some states also enable organizations to register marks statewide. But the surest way to protect a mark nationally and internationally is to register it with the United States Patent and Trademark Office. Registrants also need to defend and police their registration, meaning that they will need to review or hire counsel or others to make sure new applicants for marks or users of marks do not infringe their own marks.

Imposters, knockoffs, copycats, counterfeits, and fakes are not unique to the commercial sector—churches are also vulnerable to them.  

Trademarks and service marks are intellectual property rights that can confer the same beneficial rights on churches as other organizations. They are an effective means of (i) distinguishing themselves from other religious institutions and commercial enterprises and (ii) deterring fraud, while (iii) preserving their doctrinal and worship distinctives.

Intellectual Property Attorney Thomas W. Brooke contributed to this article. He is a partner in Holland & Knight’s Washington, D.C. office.

Dr. Nathan A. Adams IV is a partner at Holland & Knight. His practice includes representing nonprofit and religious organizations on a variety of matters, including the First Amendment, the ministerial exception, church autonomy, and board and governance issues.

Asked, Answered: Expense Reimbursements for Church Employees

In this two-minute video, Matt Branaugh highlights why expense reimbursements for church employees require special attention and care.

Last Reviewed: March 21, 2024

A recent Legal Development out of federal tax court highlights the importance of properly handling expense reimbursements for church employees.

In it, a pastor and his wife, though acting in good faith, claimed about $37,000 in unreimbursed business expenses for items such as vehicle mileage, travel expense, business meals.

However, after examination their claim, the IRS disallowed the deductions.

The primary reason? The couple failed to properly substantiate their expenses.

Meanwhile, as Matt Branaugh explains in this short video, churches and church employees can avoid wallet—and heart—breaking scenarios like these through the use of accountable reimbursement plans.

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If you’re not up to speed on accountable reimbursement arrangements (which are sometimes also called accountable reimbursement plans), don’t worry, Church Law & Tax members enjoy plenty of access to resources on this topic, including:

For Basic and Advantage Members: Understanding four specific requirements for setting up an accountable reimbursement arrangement.

For Advantage Members: A Q&A with Senior Editorial Advisor, CPA, and attorney Frank Sommerville about how tax reform has affected accountable reimbursement arrangements.

7 Keys to Pastoral Retirement Planning

A wide range of legal, financial, and tax issues come into play in the area of pastoral retirement planning.

Last Reviewed: July 24, 2024

Sometimes churches, having failed to establish a formal retirement plan, attempt to support a retiring pastor by making direct payments.
While well-intentioned, this practice—known as an informal retirement agreement—raises significant legal and tax issues that must be handled carefully.


What Is an Informal Retirement Agreement?

An informal retirement agreement is an unenforceable promise by a church to make lump sum or periodic payments to a retired minister (or their surviving spouse) without a formal plan in place.


Key Topics Covered

Jump ahead to a topic:

  1. Are informal retirement plans legally enforceable?
  2. Taxable income or tax-free gift?
  3. Nonqualified deferred compensation
  4. More on Section 409A
  5. Section 403(b) tax-sheltered annuities
  6. Excess benefit transactions
  7. Housing allowances

1. Are Informal Retirement Plans Legally Enforceable?

Consideration Requirement

Contracts require consideration—something of value exchanged between parties.
Without it, agreements (including informal retirement promises) are not legally enforceable.

Example:
In Cochran v. Robinwood Lane Baptist Church, 2005 WL 3527627 (Tenn. App. 2005), a widow sued when the church stopped retirement payments.
The court ruled the agreement was unenforceable due to a lack of consideration.

Statute of Frauds

  • Contracts that cannot be performed within one year must be in writing to be enforceable.
  • Verbal retirement promises extending beyond a year are unenforceable under this law.

Authority of Signatories

  • Even a written agreement may be invalid if signed by someone without legal authority to bind the church.

2. Taxable Income or a Tax-Free Gift?

Churches sometimes present retirement gifts as lump sums or annual payments.
But are they taxable compensation or tax-free gifts?

Historic Cases Favoring Tax-Free Treatment

Courts have ruled in favor of tax-free gifts when:

  • No enforceable agreement existed.
  • The pastor was not required to render further services.
  • The payment was motivated by gratitude and affection.

Notable cases:

  • Schall v. Commissioner (1949)
  • Mutch v. Commissioner (1954)
  • Kavanagh v. Hershman (1954)
  • Abernathy v. Commissioner (1954)

(See also IRS Revenue Ruling 55-422.)

IRS Current Position

  • The IRS still recognizes these cases but may argue retirement gifts are taxable compensation unless all conditions of Revenue Ruling 55-422 are met.

Caution:
Churches should consult a tax professional before treating retirement gifts as non-taxable.


3. Nonqualified Deferred Compensation (NQDC)

Section 409A of the tax code governs NQDC plans, including many informal retirement arrangements.

Key points:

  • Plans must meet complex IRS requirements to avoid penalties.
  • Violations result in immediate taxation and a 20% penalty on employees.
  • Compliance must be both “in form and operation.”

Tip:
Always seek legal or tax advice before deferring compensation beyond the current year.


4. More on Section 409A

NQDC arrangements must comply with Section 409A regulations, which include:

  • Strict rules on timing of elections and payments
  • Reporting failed deferrals separately (Form W-2, Box 12, Code Z)
  • Substantial penalties for noncompliance

Important:
Even minor errors can trigger tax penalties and back taxes for employees.


5. Section 403(b) Tax-Sheltered Annuities

A 403(b) plan offers major retirement savings advantages:

  • Contributions and gains are tax-deferred.
  • Churches can designate part of distributions as housing allowances for retired ministers.
  • Eligible ministers aged 50+ can contribute up to $30,500 in 2024.

Key takeaway:
Because of 403(b)’s benefits and flexibility, churches should prioritize these plans over informal retirement arrangements whenever possible.


6. Excess Benefit Transactions

Under Section 4958, if a church pays excessive compensation to a disqualified person (like a pastor):

  • The individual may face excise taxes up to 225% of the excess amount.
  • Board members may also be penalized.

Warning:
Unreported retirement payments can trigger automatic excess benefit penalties unless properly reported as taxable income.


7. Housing Allowances

Can informal retirement payments qualify as housing allowances?

According to Revenue Ruling 72-249:

  • Payments to a retired minister can be designated as a housing allowance, if made under official church action.
  • Payments made to a surviving spouse are taxable, unless the spouse is also a minister.

Conclusion

Supporting retired pastors is honorable, but informal retirement payments are fraught with legal and tax risks.

To protect your church:

  • Put all agreements in writing.
  • Ensure consideration is present.
  • Consult legal and tax professionals before finalizing any retirement arrangements.
  • Understand the rules around taxable income, deferred compensation, excess benefits, and housing allowances.

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

Dept. of Labor Rolls Back Independent Contractor Test Rules

The new rules undo the Trump-era independent contractor test, and focus on economic independence as the “ultimate inquiry.”

The US Department of Labor (DOL) recently adopted new regulations that again change the independent contractor test under the Fair Labor Standards Act. 

The new regulations essentially undo Trump administration regulations enacted in 2021.


Upgrade to a Church Law & Tax Advantage Membership which includes a complimentary copy of the Church & Clergy Tax Guide every year, along with unfettered access to our unmatched content, exclusive cohorts, and Store discounts!


New rule stresses economic independence

The DOL test is effective March 11, 2024. 

In many respects, it reverts the test to its pre-2021 status. 

The 2024 rule stresses that economic dependence is the “ultimate inquiry.” 

This means that a worker is an independent contractor if the worker “is, as a matter of economic reality, in business for themself.” 

This determination is made by looking at the totality of the circumstances to determine whether the worker is economically dependent on the company, and no one factor is controlling. 

The factors include:

  1. the degree of the hiring entity’s right to control how the work is to be performed;
  2. the worker’s opportunity for profit or loss depending upon their managerial skill;
  3. the worker’s investment in equipment or materials required for their task or their employment of others to assist with the work;
  4. whether the service rendered requires a special skill;
  5. the degree of permanence of the working relationship; and
  6. the extent to which the service is rendered is an integral part of the hiring entity’s business.

Most employers do not realize that federal and state employment laws offer differing definitions for separating employees from independent contractors

And the IRS still has a different test. 

ABC test

The practical problem is that most employers will classify workers as independent contractors without considering the differing tests. 

If the worker is an independent contractor for tax purposes, it will issue a Form 1099-NEC and ignore the other tests. 


Fun Fact: The Internal Revenue Code contains 16 different definitions of employee for differing purposes. 


Since the DOL and IRS tests are challenging to apply, most states have adopted the ABC test. 

The ABC test is designed to make most workers employees. 

This test looks at (A) the degree of control the company exerts over the details of the work being performed, (B) whether the service performed is integral to the company’s business, and (C) whether the worker regularly performs a similar service for other companies.   

Churches and ministries will be best served using the ABC test. 

Is a worker considered an employee under the ABC test? If so, it’s likely they’ll be classified that way under all employment and tax laws.

Frank Sommerville is both a CPA and attorney, and a longtime Editorial Advisor for Church Law & Tax.

Advantage Members

Video: Seven Common Tax Errors

In this exclusive video, Matt Branaugh and Rich Hammar discuss the seven common tax errors many churches and pastors make.

Attorneys Matt Branaugh and Rich Hammar hopped on camera to tackle seven common tax errors churches and church leaders make.

In this 20-minute companion video, Branaugh and Hammar call on case law, IRS guidance, and practical experience as they discuss why these errors are so common. They also touch on why they carry such large implications for church boards, pastors, and lay leaders. And they share a few helpful hints on correcting, if not avoiding, these errors in the future.


Church Law & Tax’s popular 2025 Church & Clergy Tax Guide is on sale now! Grab yours today.


By the way, the seven common tax errors are:

  • Failing to Set a Housing Allowance
  • Not Having an Accountable Reimbursement Plan
  • Not Treating Clergy as “Self-Employed” for Social Security
  • Trying to Avoid Paying FICA
  • Treating Non-Ministers as Ministers for Tax Purposes
  • Ignoring the Tax Implications of “Love Gifts”
  • Ignoring the Tax Implications of “Loans”
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Five Key Tax Developments for Churches and Clergy in 2024

These tax five developments for churches and clergy included inflation adjustments and redefining highly compensated employees.

Church Law & Tax identified five key tax developments in 2023 that will affect church and clergy taxes for 2024

They are:

No change to the housing allowance

In March 2019, a federal appeals court rejected an atheist group’s challenge to the constitutionality of the housing allowance. The atheist group did not appeal this ruling, and there have been no further legal challenges. 

Revoking an exemption from Social Security

Congress has created three limited windows of time since 1977 to allow ministers who exempted themselves from self-employment taxes by filing a timely form 4361 with the IRS to revoke their exemption. The latest was in 1999. Congress did not pass any bills in 2023 that would have authorized ministers to revoke an exemption from Social Security. 


Save 25% when you order both a print and downloadable .pdf versions of our 2024 Church & Clergy Tax Guide. For 35 years, this easy-to-understand guide has helped church leaders and pastors navigate US tax laws.


Working after retirement in 2024

Many churches employ retirees who are receiving Social Security benefits. People younger than full retirement age may have their Social Security retirement benefits cut if they earn more than a specified amount. 

Full retirement age (the age at which you are entitled to full retirement benefits) for people born between 1943 and 1954 is 66 years. 

IRS to stop unannounced taxpayer visits

The IRS announced a major policy change in July 2023. The change ends most unannounced visits to taxpayers by revenue officers (ROs). This was done to reduce public confusion and enhance overall safety measures for taxpayers and employees.

ROs will no longer make unannounced or unscheduled field visits. Instead, they will send an appointment letter to schedule an initial or follow-up meeting with the taxpayer. 

IRS addresses inurement, intermediate sanctions, and the definition of a church (PLR 202317022)

A private letter ruling (PLR) issued by the IRS in 2023 to a tax-exempt entity claiming to be a church while providing behavioral health services addresses three important topics:

  • Inurement
  • Excess benefit transactions
  • What is a church?

Upgrade to an Advantage membership today to unlock all ten key tax developments with expanded information for each, along with an interview with Church Law & Tax Senior Editor and Co-Found Rich Hammar. In it, he covers the most common tax mistakes he sees pastors and churches make.

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