If your church or organization reported withheld taxes of $50,000 or less during the most recent lookback period (for 2023, the lookback period is July 1, 2021, through June 30, 2022), then withheld payroll taxes are deposited monthly. Monthly deposits are due by the 15th day of the following month.
Note, however, that if withheld taxes are less than $2,500 at the end of any calendar quarter (March 31, June 30, September 30, or December 31), the church or organization need not deposit the taxes.
Instead, it can pay the total withheld taxes directly to the IRS with its quarterly Form 941. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes, and the employerโs share of Social Security and Medicare taxes.
If your church or organization reported withheld taxes of more than $50,000 during the most recent lookback period (for 2023, the lookback period is July 1, 2020, through June 30, 2021), then the withheld payroll taxes are deposited semiweekly.
This means that for paydays falling on Wednesday, Thursday, or Friday, the payroll taxes must be deposited on or by the following Wednesday. For all other paydays, the payroll taxes must be deposited on the Friday following the payday.
Note further that large employers having withheld taxes of $100,000 or more at the end of any day must deposit the taxes by the next banking day. The deposit days are based on the timing of the employerโs payroll. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes, and the employerโs share of Social Security and Medicare taxes.
August 10, 2023: Employerโs quarterly federal tax returnโForm 941
Churches having nonminister employees (or one or more ministers who report their federal income taxes as employees and who have elected voluntary withholding) may file their employer’s quarterly federal tax return (Form 941) by this date instead of July 31 if all taxes for the second calendar quarter have been deposited in full and on time.
Note: If a date listed for filing a return or making a tax payment falls on a Saturday, Sunday, or legal holiday (either national or statewide in a state where the return is required to be filed), the return or tax payment is due on the following business day.
Note: You must use electronic funds transfer to make all federal employment tax deposits. This is generally done using the Electronic Federal Tax Payment System, a free service provided by the US Department of Treasury. If you donโt wish to use EFTPS, you can arrange for your tax professional, financial institution, or payroll service to make deposits on your behalf. Failure to make a timely deposit may subject you to a 10-percent penalty.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Getty/Constantine Johnny
Crafting a Church Employee Discipline Process
An employee discipline process is a solid first step addressing performance-related issues.
Crafting and implementing an employee discipline process at your church is does not demonstrate poor confidence or some admission of anticipated failure. Rather, it is a way of building solid ground rules for when employee performance issues inevitably arise.
Every employer has the best of intentions when they hire someone, and employers always try to hire the most qualified individuals who will fit within the employerโs culture and immediately exceed expectations. Churches are no exception.
But the reality is some new employees do not performโor fit inโas expected. Other employees miss the mark even years after their start dates.
Whether the โnirvanaโ of a new hire fades, a veteran employee begins repeatedly falling short, personality conflicts arise, or an outside factorโsuch as an arrestโsurfaces, the employer must address poor performance or missed behavioral standards.
Hereโs what to do when discipline is needed.
Employee discipline requires solid ground rules
A church should first clearly communicate the rules it intends to enforce against employees who fail to meet expectations.
The job description and employee handbook establish these expectations. The job description describes performance expectations of the position, while the employee handbook describes the behavioral rules applicable to all employees.
Caution. When the church communicates through job descriptions and an employee handbook, it must be careful not to unintentionally create a contractual obligation with employees.
The employee handbook should also contain the disciplinary rules applicable to all employees.
Employee discipline begins by addressing minor infractions and progresses to more serious ones.
A typical employee handbook provision might say:
Violation of church policies and rules might warrant disciplinary action. Forms of discipline that the church may elect include verbal corrections, written warnings, final written warnings, and/or suspensions and terminations. The system is not formal, and the church may, in its sole and absolute discretion, deviate from any written disciplinary policy and utilize appropriate forms of discipline under the circumstances, including immediate termination. The churchโs disciplinary policy does not limit or alter the employeeโs at-will status.
Disciplinary systems
While a progressive discipline system remains the most popular disciplinary system, smaller employers frequently favor a corrective disciplinary system.
In other words, the supervisor selects the type of discipline based on the facts and circumstances of the situation. While this system is more flexible than the progressive discipline system, churches must use extra caution to ensure that similarly situated employees get treated similarly.
Read more about how a religious school could be sued for unlawfully terminating the employment of an unmarried pregnant teacher after the court determined the school lacked a policy regarding sex outside marriage and failed to investigate past treatment of similarly situated employees accused of similar conduct.
The disciplinary system also should avoid certain words that require a church to act in a certain way.
When an employee fails to meet expected levels of performance or behavior, the church typically uses one of four types of discipline.
Verbal counseling. This method allows the supervisor to address the issue immediately with the employee. In every case, the supervisor should create a written memo or note for placement in the employeeโs file. This documentation is critical. If it is not in the employeeโs file, it is as if the issue never happened.
Written warning.The supervisor should meet with the employee and another employer representative to discuss the issue. The church should allow the employee to review the formal written warning. The written warning should have a place for the employee to sign, demonstrating that the employee received a copy. If the employee refuses to sign, the other employer representative should sign as a witness that the employee refused to sign the written warning.
A written warning should include, at a minimum: the date of the warning, the employeeโs name, the name of the supervisor, a factual description of the misconduct or inadequate performance, the exact date of the misconduct or inadequate performance, the signature line for the employee, the signature line for the supervisor, and the signature line for the witness.
As a separate document, the supervisor may attach an action plan for correcting the issue.
The action plan should include a statement of the policy or practice that was violated, the steps the employee agrees to take to correct the problem, any commitments the supervisor makes to assist the employee in achieving the correction, the timeframe for correcting the problem, and the consequences for failing to correct the problem within the set timeframe.
Suspension.If the suspension is the prelude to a subsequent termination, the supervisor should include a written warning and an action plan with the notice of suspension.
Termination. Before terminating an employee, senior management should review the entire personnel file of the employee. Under some limited circumstances, the church should immediately terminate the offending employee.
For example, if the employee exhibits violent behavior or drug or alcohol use while working, the employer should immediately terminate the employee. Termination should occur through an in-person meeting.
Senior management and the supervisor should be present. Senior management should request that the information technology team change all of the employeeโs passwords and computer and network access during the meeting.
In the meeting, senior management should request the return of all the churchโs property. Ideally, senior management should present the employee with his or her final paycheck during the meeting.
Selecting the right discipline
When selecting a course of disciplinary action, the supervisor should consider the facts and circumstances surrounding the need for discipline. The supervisor should evaluate both mitigating and aggravating factors.
Mitigating factors may include:
Long tenure
Long history of satisfactory performance
Prior commendations or awards
Any excuses offered by the employee
Aggravating factors could include:
Short tenure
History of unsatisfactory performance
Prior discipline
The degree to which the employee has responded with a denial of responsibility
The supervisor should check with senior management or the human resources department, if applicable, before disciplining an employee.
Senior management should review the employeeโs prior disciplinary history, if applicable.
Employee discipline should be as consistent as possible for similar infractions. Senior management should search the churchโs records to determine how it has addressed similar situations with other employees, past and present.
Senior management should consider any harm associated with discharging or severely disciplining the employee for a particular offense.
They should also consider whether the employee is part of a protected class of employees and whether the employee might have a claim that the discipline is retaliation for protected activities, such as whistleblowing.
If any of these factors are present, senior management should consult with an attorney.
Releases
If the termination option is selected, the church should consider whether the release agreement is appropriate. A release is probably unnecessary if the employer has appropriately executed and documented the discipline.
If severance pay is provided, the church should consider a release.
Frank Sommerville partnered with Church Law & Tax to develop a seven-part series dedicated to helping you navigate several employee issues that are unique to churches. Find them all here:
Not long ago, few knew the term โgenerative AI (artificial intelligence).โ
Fewer could define it.
Today, itโs leading the conversation. OpenAIโs fast-spreading ChatGPT and DALL-E, Googleโs Bard, Metaโs LLaMA, and Microsoftโs ChatGPT-powered Bing have quickly put these language-based chatbots into the mainstream.
With such a revolution underway, church leaders should keep some legal and risk management considerations in mind, including intellectual property, misinformation, privacy, defamation, cybersecurityโand even hiring.
Another toolโbut not just any tool
Technology in ministry has evolved a lot over the past 25 years. Some leaders recall debating how their churches should build their websites.
From there, text-based messaging and church management software appeared.
Soon after, social media sites and online giving tools popped into focus.
Then came smart phone apps to handle anything from communications to donations to administrative tasks.
Generative AI is different not only for what it does, but also in how quickly it evolves.
โGenerative AI systems fall under the broad category of machine learning,โ notes global consulting giant McKinsey & Company. McKinsey then asked ChatGPT to describe itself: โThis nifty form of machine learning allows computers to generate all sorts of new and exciting content, from music and art to entire virtual worlds,โ the resulting response said.
Learning as it goes
In other words, chatbots learn from questions and information submitted by users through a simple chat box, the chatbots’ own online searches, and user feedback. They then create new and better content for future queries.
The process is a self-perpetuating, iterative loop.
For instance, ChatGPT 3.5โlaunched in November of 2022โwas already significantly inferior when ChatGPT 4 released just four months later.
To illustrate, ChatGPT 3.5 scored in the 10th percentile for the Uniform Bar Exam used by many states to license attorneys. ChatGPT 4 scored in the 80th percentile.
Such rapid change has triggered much wonder regarding storytelling, art, music, and more.
Church leaders should start thinking now about how these content-creating chatbots will shape their ministries, whether driven through their own initiatives or thrust upon them by outside forces.
Here are some early considerations to note:
Intellectual property
Churches and pastors create lots of original content. Sermons. Childrenโs plays. Worship music. Website fodder. Social media posts.
Looking to generative AI chatbots for help requires extreme caution, though. Chatbots arenโt necessarily pulling together fully original creations. As they scour sources provided by a user, as well as readily available information online, they can easily grab material verbatim as they go.
That means chatbots most likely are grabbing and using pieces of works owned by other people or companies. Any resulting uses very likely violate copyright lawโand courts have found that can be true even if duplications involve only a few notes or phrases.
Leaders must recognize the potential perils involved with instructing a chatbot to create a sermon about, say, The Beatitudes. Or to orchestrate a worship song based on the influences of current chart-setters. Or to generate a script for a Christmas pageant.
Not a โsuper search engineโ
In a white paper, OpenAI openly discusses the way ChatGPT โhallucinatesโ as it worksโanother way of saying the chatbot sometimes creates fictitious details to support the task it was given.
One New York lawyer learned this the hard way. He asked ChatGPT to write a brief on behalf of a client suing an airline. He submitted the document. When the airlineโs lawyers couldnโt locate any of the cases, the court asked for more information. Turns out, the brief cited fabricated cases and statutes to try and support the clientโs case.
The attorney, facing sanctions, said he believed ChatGPT operated like โa super search engine.โ It doesnโt. Leaders again must carefully vet what a chatbot produces for most any task.
Subtle inaccuracies are as much a threat as outright fabrications, too.
Here’s an example:
We asked ChatGPT 4 to write about NFL quarterback John Elwayโs greatest game. The chatbot quickly answered Super Bowl XXXII, the hall-of-famerโs first championship win. It supported its response with his game statistics, but erroneously listed ones he earned a year later during his teamโs Super Bowl XXXIII victory.
In June of 2023, a Georgia radio host sued ChatGPT. A journalist-generated query produced a ChatGPT response that included a legal complaint about the host, and allegations he embezzled from a gun-rights group. The legal complaint, though, was fake, another example of a chatbot providing unpredictableโif not falseโinformation.
This situation also reveals other ways churches and pastors may encounter less-than-ideal situations with the technology, says Jonathan Smith, president of technology consulting firm MBS, Inc., and director of technology for Faith Ministries in Indiana.
A generative AI query using your churchโs name, or your pastorโs name, will draw from myriad sources, including negative posts, comments, or social media across the web.
It also could do damage in unexpected ways. โGenerative AI has no intuition, no understanding,โ Smith says, adding โit will draw the conclusion your church or your pastor is bad.โ
Privacy
OpenAI discovered a bug with ChatGPT that exposed user chat histories along with payment and contact information for some of OpenAIโs premium subscribers. The problem was fixed. But when users now sign up, they see an onscreen message warning them about the sharing of any sensitive or personal information.
For churches, this again provides an important reminder about getting consent from congregants before publicly sharing prayer requests.
A well-meaning pastor or staff member, crafting the next church website update or e-newsletter, might contemplate pouring the text of requests into a chatbot to create the message. Doing so places potentially sensitive information about individuals into the chatbot. The public disclosure of private facts is the basis of an โinvasion of privacyโ lawsuit.
Lack of user support and feedback
There isnโt an immediate remedy available.
A user can submit feedback indicating a response contains faulty or false information. But, as Smith points out, other platforms like Facebook, Twitter, and Instagram struggle to keep up with user feedback, and ChatGPT and its peers likely will, too.
But leaders should still note this added concern from generative AIโs unpredictability. Exercise extreme caution especially before using any AI-generated responses containing information about other church and ministry leaders.
Cybersecurity
The powerful learning fostered by generative AI offers possibilities for good, including medical imaging and weather forecasting. There are also possibilities for more sophisticated crime. One cybersecurity company executive told the ABA Journal โyouโre going to see phishing emails that are so believable you donโt know youโre talking with a machine.โ
These schemes use an email to impersonate someone with authority and trick the recipient to click a malicious link or transfer funds to an unauthorized bank account. A misstep can prove costly. Education, training, and best practices can help pastors and staff thwart these attempts.
On the positive side, new generative AI tools are available to determine whether a message originated from a person or a chatbot, including one from OpenAI (note, however, that it requires a minimum of 1,000 characters to analyze).
Job applications, references, and schoolwork
Does your church ask job applicants for responses to short-answer questions? What about recommendations from past employers or professional references?
Does your church run a school and regularly grade schoolwork?
Note the developing tools for sorting out original content from computer-generated content, which is becoming an industry unto itself.
Editors’ Note:We updated this content onJuly 25, 2023, with additional information along with comments from Jonathan Smith, president of technology consulting firm MBS, Inc., and director of technology for Faith Ministries in Indiana.
Matthew Branaugh is an attorney and editor for Church Law & Tax.
Image: AdobeStock/Tadeusz
A Pair of Noteworthy Supreme Court Decisions For Church Leaders
A pair of Supreme Court decisions are noteworthy for church leaders and bivocational pastors.
The Editors
A pair of noteworthy Supreme Court decisions are worth reviewing for church leaders, and bivocational pastors and church planters working secular jobs.
The first, Groff v. DeJoy, represents a significant shift in the way employers treat religious accommodation requests under Title VII of the Civil Rights Act of 1964. Bottom line? Employers face a higher standard when rejecting such requests, meaning employees enjoy greater protection when they come across work situations that clash with their religious beliefs and convictions.
Meanwhile, the Supreme Court ruled 6-3 in favor of a Colorado web designer who worried the state would use its anti-discrimination laws to force her to create websites celebrating marriages she does not endorse (303 Creative LLC v. Elenis). It’s an outcome that underscores the possible ways a church can assert First Amendment defenses if the church falls under a state or local public accommodations law and gets penalized for violating the law due to its religious activities.
For members, Church Law & Tax Co-Founder and Senior Editor Richard Hammar, and Church Law & Tax Editor and Attorney-at-Law Matthew Branaugh joined forces to highlight what these important cases mean for churches and church leaders, alike:
The First Amendmentโs guaranty of free speech prohibits a Colorado public accommodations law from forcing a website designer with Christian beliefs to create messages with which she disagrees, the United States Supreme Court ruled.
A 6-3 majority favored the designer in its decision published in June of 2023 (303 Creative LLC v. Elenis, 600 U.S. 570). Although the ruling drew from speechโrather than religiousโprotections found in the First Amendment, the outcome represents another in a long line of victories for religious liberty proponents dating back more than a decade.
Churches and church leaders will find the 303 Creative ruling important in at least one way. It demonstrates the possible ways a church can assert First Amendment defenses if the church falls under a state or local public accommodations law and gets penalized for violating the law due to its religious activities.
โA credible threatโ of penalty
The Colorado Anti-Discrimination Act (CADA) bars places of public accommodation from discriminating based on disability, race, creed, color, sex, sexual orientation, gender identity, gender expression, marital status, national origin, or ancestry in the provision of goods and services to the public.
The law first drew attention from the Supreme Court several years ago. That’s when Coloradoโs civil rights division sanctioned a bakery owner for refusing to make a cake for a same-sex coupleโs wedding. Lower courts affirmed the stateโs actions.
But in 2018, a 7-2 ruling from the Supreme Court reversed the lower court decisions and returned the case to Colorado for reconsideration. The court said the record showed the civil rights division exhibited hostility toward the bakerโs religious beliefs, violating his constitutional rights (Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Commโn, 138 S. Ct. 1719 (2018)).
During the Masterpiece Cakeshop litigation, the website designer filed her lawsuit. She became worried CADA would require her to create wedding websites for same-sex couples, which goes against her religious beliefs.
The state had yet to sanction her. But her lawsuit was allowed to proceed because she established โa credible threat that . . . Colorado will invoke CADA to force her to create speech she does not believe or endorse,โ wrote Justice Neil Gorsuch in the Supreme Courtโs majority opinion.
Threat of forced speech violated free speech rights
Such a threat violated the designerโs free speech rights, the Court decided.
โ[I]n this particular case Colorado does not just seek to ensure the sale of goods or services on equal terms,โ the Court held. โIt seeks to use its law to compel an individual to create speech she does not believe.โ
The Court also ruled that โno public accommodations law is immune from the demands of the Constitution . . . and when a state public accommodations law and the Constitution collide, there can be no question which must prevail.โ
Creating customized messages
The designer operates a graphic design business. She wanted to expand it to include services for couples seeking websites for their weddings. Her websites will provide couples with text, graphic arts, and videos to โcelebrateโ and โconveyโ the โdetailsโ of their โunique love story.โ
A created website will be โexpressive in nature,โ designed โto communicate a particular message.โ That message includes how the couple met, their backgrounds, and their families. It also includes their future plans and information about their upcoming wedding.
All text and graphics will be โoriginal,โ โcustomized,โ and โtailoredโ creations.
The designerโs company name will also appear on every web page created.
The designer said her graphic design business is open to customers regardless of their race, creed, sex, or sexual orientation.
But by expanding her companyโs services to include wedding websites, she worried Coloradoโs public accommodations law would โforce her to convey messages inconsistent with her belief that marriage should be reserved to unions between one man and one woman,โ the Court noted.
The designer acknowledged her views about marriage may be unpopular.
But, the Court said, she insisted the Constitution protects such a view.
A district court rejected the designerโs claims. A federal appeals court affirmed the district courtโs decision. The designer then appealed to the Supreme Court.
The Supreme Courtโs decision
The Supreme Court began its majority opinion by noting if there is any โfixed star in our constitutional constellation,โ it is the principle that the government may not interfere with โan uninhibited marketplace of ideas.โ West Virginia Bd. of Ed. v. Barnette, 319 U. S. 642 (1943).
The Court continued:
The First Amendment protects an individualโs right to speak his mind regardless of whether the government considers his speech sensible and well-intentioned or deeply โmisguided,โ and likely to cause โanguishโ or โincalculable grief.โ And equally, the First Amendment protects acts of expressive association. . . . Generally, too, the government may not compel a person to speak its own preferred messages.
The Court noted the designerโs unique, customized wedding websites qualified as โpure speech,โ entitling her to the maximum protection under the First Amendment guarantee of free speech, and concluded:
In this case, Colorado seeks to force an individual to speak in ways that align with its views but defy her conscience about a matter of major significance. In the past other States … have similarly tested the First Amendmentโs boundaries by seeking to compel speech they thought vital at the time. But, as this Court has long held, the opportunity to think for ourselves and to express those thoughts freely is among our most cherished liberties and part of what keeps our Republic strong. Of course, abiding the Constitutionโs commitment to the freedom of speech means all of us will encounter ideas we consider โunattractive,โ โmisguided, or even hurtful.โ But tolerance, not coercion, is our Nationโs answer. The First Amendment envisions the United States as a rich and complex place where all persons are free to think and speak as they wish, not as the government demands. Because Colorado seeks to deny that promise, the [district courtโs] judgment is reversed.
Why church leaders should take notice
This case protects Christian business owners from potential liability under public accommodations laws when goods or services involve speech.
But there is another aspect of this ruling that may be of even greater importance to churches. The Court majority emphasized that constitutional protections will prevail anytime they โcollideโ with a state public accommodations law. This is especially notable, given the uncertainties that often arise for churches whose activities may or may not fall under state and local public accommodations laws.
The first public accommodations laws were enacted by a few states in the late 19th century. That number has steadily increased and by 2023 most states have enacted such a law.
Public accommodations laws vary by state
But public accommodations laws vary by state. To illustrate:
All public accommodation laws bar places of public accommodation from discriminating against patrons based on several enumerated categories, including some, or all of, the following: race, color, national origin, gender, religion, disability, marital status, and sexual orientation.
In recent years, a growing number of state public accommodation laws have banned discrimination based on marital status, sexual orientation, and sexual identity. According to the National Conference of State Legislators, โ18 jurisdictions prohibit discrimination based on marital status, 25 prohibit discrimination based on sexual orientation, [and] 24 prohibit discrimination based on gender identity.โ
Some state laws exempt religious organizations, but others contain no explicit exemption.
Many pastors employed by conservative congregations worry public accommodations laws may be used to compel them to accommodate persons who do not share the churchโs biblical worldview or values.
Learn more: Search public accommodations laws, including ones affecting your church, through Church Law & Taxโs 50-State Public Accommodations Laws Report, a downloadable resource.
An oft-mentioned concern among church leaders
An oft-mentioned concern pertains to the use of church property. To illustrate, assume that a church with an orthodox view of marriage and human sexuality rents its sanctuary to the public as a means of raising revenue.
A gay couple contacts the pastor requesting use of the sanctuary for their wedding.
Does the fact that the church rents its sanctuary to the public make it a place of public accommodation and subject the church to liability if it rejects the gay couple?
After the 303 Creative decision, if a state or local public accommodations law is defined to include churches, or if such a law is construed by a court or administrative agency to include them, churches now can assert a constitutional defense to coverage based on the First Amendmentโs free exercise or nonestablishment of religion and free speech clauses.
Dig Deeper: โPublic Accommodations Lawsโโpart of Church Law & Taxโs series on โ15 Things Richard Hammar Wants Pastors to Know,โ looks more closely at the application of public accommodations laws to churches and clergy.
Consider these seven questions
Prior to any actions taken by a court or administrative agency, though, church leaders should review the following seven questions, preferably in consultation with qualified legal counsel. Doing so will help identify potential legal liabilities, and possible ways to minimize those liabilities:
Is there a public accommodations law in my city or state?
If so, what types of discrimination does it prohibit?
Does the law provide an exemption for churches?
If the law provides an exemption for churches, are there any conditions that must be satisfied?
If the law does not contain an explicit exemption for churches, what is the official position of the civil rights agency tasked with enforcement of the law? Does the agency take the position that churches are exempt? And if so, do any conditions apply? For example, does the exemption apply to churches that rent their properties to raise revenue?
If a state or local civil rights agency tasked with enforcement of a public accommodations law claims that it applies to churches that are engaged in commercial or other activities unrelated to exempt religious purposes, does church coverage only apply during the use of church property for the unrelated purpose, or more broadly to include all uses of church property?
Does the churchโs constitutional rights of religion and speech take priority over a public accommodations law?
303 Creative LLC v. Elenis, 600 U.S. ___ (2023)
Matthew Branaugh, attorney and editor of Church Law & Tax, contributed to this report.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Getty/Bloomberg Creative
Supreme Courtโs ‘Groff’ Decision Makes It Harder to Reject Religious Accommodations Requests
Bivocational pastors and church planters working secular jobs should pay attention to what the Groff decision means.
Employers must now make a stronger case before denying religious accommodation requests under Title VII of the Civil Rights Act of 1964.
The U.S. Supreme Court clarified, through a unanimous decision in 2023, that denials must be based on a โsubstantial burdenโ to the employerโs businessโnot just a minimal inconvenience.
What Title VII Protects
Title VII prohibits employment discrimination based on:
Race
Color
National origin
Gender
Religion
It also requires employers to โreasonably accommodateโ an employeeโs religious practices, unless doing so causes undue hardship to the business.
A Stronger Standard for Religious Requests
For more than four decades, lower courts allowed employers to reject religious accommodations using a low threshold: the โde minimisโ standardโmeaning any small burden was enough.
But in Groff v. DeJoy (2023), the Supreme Court changed that. The justices made clear that employers must now demonstrate a substantial, real burden if they want to deny a religious accommodation.
This decision offers stronger protections for religious practices in the workplace, including:
Wearing religious attire
Observing a Sabbath
Other sincerely held beliefs
This is especially meaningful for bivocational pastors and church planters working both in ministry and secular jobs.
Who Is Covered?
This ruling only applies to employers subject to Title VII, which means they are:
Engaged in interstate commerce, and
Have 15 or more employees
๐ Many state civil rights laws provide similar protections, often with lower employee thresholds.
The Courtโs Clarification
Writing for the Court, Justice Samuel Alito emphasized:
โMost lower courts have incorrectly latched on to โde minimisโ as the governing standard.โ
He noted that the 1977 case Hardison v. Trans World Airlines used โundue hardshipโ as the core conceptโbut lower courts focused instead on the fleeting mention of โde minimis.โ
Even the Equal Employment Opportunity Commission (EEOC) has moved away from โde minimis,โ acknowledging that the law requires more than a minor cost.
Alito warned that prior interpretations made it harder for minority faiths to seek fair treatment:
โThe โde minimisโ test … has blessed the denial of even minor accommodation in many cases.โ
The Groff Case: Sundays Off
Gerald Groff, an Evangelical Christian, worked for the U.S. Postal Service (USPS) in Pennsylvania.
In 2013, USPS began delivering Amazon packages on Sundays.
Groff transferred to a location that didnโt yet require Sunday work.
When that location later began Sunday deliveries, Groff sought a religious accommodation.
Groffโs lawyer said the request wasnโt formally rejectedโbut in practice, Groff was disciplined for not working Sundays.
The USPS argued Groffโs request created staffing conflicts and caused disruption. Eventually, Groff resigned and sued.
What the Court Decided
The Supreme Court did not decide whether USPS met the new โsubstantial burdenโ standard. Instead, it sent the case back to lower courts to reconsider under the clarified rule.
The Court also didnโt define a precise test for employersโbut pointed back to the original Title VII language:
โA hardship is, at a minimum, something hard to bear,โ Alito wrote.
He added that relevant considerations include:
The specific accommodations requested
The nature, size, and costs of the business
The practical impact of granting the request
Bias Is Not a Justifiable Burden
The Court made clear that prejudice or hostility toward a religious accommodation extended to an individual, such as severely diminished staff morale or staff conflicts, cannot be used to claim hardship.
โA hardship that is attributable to employee animosity to a particular religion โฆ cannot be considered โundue,โโ Alito said.
Real-World Examples
Example 1: Pastor Craig applies to be a delivery driver for Amazon. He canโt work Sundays due to his church responsibilities.
Old rule: Amazon could argue that even a small inconvenience was enough to deny his request.
New rule: Amazon must now show that giving Craig Sundays off would cause substantial difficulty or cost to the company.
Example 2: Same situationโbut this time, Craig applies at a local business with only 10 employees.
Title VII does not apply, since the business has fewer than 15 workers.
However, state laws may still protect Craig, depending on the jurisdiction.
Contributing Author:Richard R. Hammar, Church Law & Tax Co-Founder and Senior Editor
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/Adventure_Photo
Colorado Supreme Court Overturns Part of Sexual Abuse Claims Law
The Colorado Supreme Court says the Child Sexual Abuse Accountability Act goes against the state’s constitution.
In June of 2023, the Colorado Supreme Court ruled that a portion of the stateโs Child Sexual Abuse Accountability Act (โCSAAAโ or โthe Actโ) violates the stateโs constitution.
The court specifically struck down a portion of the law allowing certain lawsuits otherwise barred by the statute of limitations.
Prior to CSAAAโs passage, Colorado law only permitted claims for six years after they occurred or for the six years after a victim either turned 18 or discovered (often through counseling) that they had been abused.
Law expanded victimsโ rights
Colorado lawmakers passed the CSAAA in July of 2021 for victims of sexual misconduct while participating in a youth-related activity or program. It took effect on January 1, 2022.
Victims can bring civil claims for damages against their abusers and the organizations that managed the activities or programs if the organizations knew or should have known about the risk of sexual misconduct.
CSAAA also established a three-year window for victims to bring forward claims that allegedly occurred between January 1, 1960, and January 1, 2022. The Act said claims could be made between January 1, 2022, and January 1, 2025, regardless of whether previously available causes of action were barred by a statute of limitations.
As state and federal lawmakers understandably expand abuse victims’ rights, Church Law & Tax examines what it all means for churches.
Additionally, the law established other significant rights.
First, the Act said โ(t)here is no limitation on the time to bring a claim for sexual misconduct that occurs on or after January 1, 2022.โ Second, the law voids โpurported pre-incident waiversโ as a matter of public policy, meaning victims no longer can be asked by an alleged abuser or organization to waive their rights to bring civil actions. And third, the act waives immunity for any claims brought under it against government employees and government entities.
Victims can seek up to $387,000 against public entities and up to $1 million against private entities.
โNew right of reliefโ
Some lawmakers found that many civil claims brought by adults who were sexually abused as children are often dismissed due to the statute of limitations. The Colorado Attorney General estimated that most adult survivors donโt come forward on average until the age of 53, according to the Associated Press.
In drafting the law, lawmakers wanted the CSAAA to create โa new right for relief for any person sexually abused in Colorado while the person was participating in a youth-related activity or program as a child,โ while not attempting to revise โany common law cause of action that is time-barred.โ
The latter issue raised concerns during the lawmaking process.
Questionable constitutionality
Before CSAAAโs passage, a law professor told Senate Judiciary Committee members the bill was, in his opinion, unconstitutional, retrospective legislation.
“By creating a whole new cause of action,โ the professor testified, the bill โimposed new obligations on past actions, which is literally what the Supreme Court has said is forbidden.โ
CSAAA supporters pointed to the need for giving victims a remedy, despite questions about the lawโs constitutionality.
Almost instantly challenged
Soon after CSAAA took effect, plaintiffs โA.S.โ and her husband, โB.S.,โ brought a claim against a former high school athletic coach and a school district. The plaintiffs alleged the coach sexually abused A.S. between 2001 and 2005, when A.S. was a minor.
Without CSAAA, the claim would have otherwise been time-barred by the statute of limitations.
A lower court ruled against the plaintiffs. The plaintiffs appealed to the Colorado Supreme Court.
Supreme Court expresses concerns about retrospective legislation
The Colorado Supreme Court ruled that the CSAAA violates article II, section 11 of the Colorado Constitution (the โretrospectivity clauseโ). This section prohibits the legislature from passing any law โretrospective in its operation.โ CSAAA, the supreme court continued, โamounts to unconstitutional retrospective legislation as applied to the plaintiffsโ claims under the Act against the defendants [and] and accordingly, we affirm the district courtโs order granting the defendantsโ motions to dismiss.โ
The Court observed:
We certainly understand the General Assemblyโs desire to right the wrongs of past decades by permitting such victims to hold abusers and their enablers accountable. But the General Assembly may accomplish its ends only through constitutional means.
The retrospectivity clause of the Colorado Constitution prohibits retroactive legislation that creates a new obligation, imposes a new duty, or attaches a new disability with respect to past transactions or considerations. By creating a โnew right for reliefโ that attaches liability for conduct predating the Act and for which any previously available cause of action would be time-barred, the CSAAA does just that. The CSAAA is therefore unconstitutional as applied to the plaintiffsโ claim in this case. Accordingly, the district courtโs order granting the defendantsโ motions to dismiss is affirmed.
The supreme court also noted that other portions of the law remain valid:
We do not hold that the CSAAA is unconstitutional in its entirety, or that all claims made under the CSAAA are precluded by the retrospectivity clause. Our holding does not affect claims brought under the CSAAA for which the previously applicable statute of limitations had not run as of January 1, 2022.
The purpose is clear and compellingโto provide a โsecond chanceโ to victims of childhood sexual abuse who, for whatever reason, were unable to bring a civil claim against their abuser prior to the expiration of the statute of limitations.
These laws have widespread public support.
But these same laws might put churches and denominations into an indefensible position.
In decades-old abuse claims, memories have faded, and personnel have changed. Often few if any staff or members are even aware of the alleged incident or the perpetrator. Moreover, church leaders don’t know if the church had liability insurance coverage at the time of the incident that may be implicated.
With this trend in state laws, this case demonstrates that, in some cases, the equities still may tip in favor of defendants.
This case also demonstrates the ways that states are more aggressively pursuing rights for victims. The Colorado Supreme Court emphasized the CSAAA was not struck down in its entirety. The law still includes language effectively attempting to eliminate time bars for alleged acts occurring after January 1, 2022. It also voids any waivers signed by victims that attempt to take away their rights to seek civil remedies.
Church leaders should understand state laws
Church leaders should be aware of any extension or amendment of the statute limitation for sexual abuse claims in their state. They also should note the increased efforts by legislatures to afford more rights to victims. This means the church may have to defend against cases that are many years and even decades in the past.
Church leaders should also recognize expanded rights to victims for acts perpetrated in the recent past and in the future.
Sound risk management, and permanent retention of all liability insurance policies, are imperative practices.
Aurora Public Schools v. A.S., (Colo. 2023).
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Getty/Design Pics
Off-Campus Liability and Churches
Off-campus liability is an ongoing question for churches and church leaders to address in light of these key cases.
Doing so helps churches evaluate their potential liability for off-site activities.
Case Study 1: Church Picnic ATV Accident
A Sunday School teacher organized a picnic on a memberโs property. While the pastor attended, he did not help plan the event.
Key facts:
Invitations were shared during Sunday School.
Church members brought food and recreational equipment, including rifles and an ATV.
A 15-year-old drove the ATV on a public road, injuring a passenger.
Legal Outcome
The injured partyโs parents sued the driverโs parents and the church. The court ruled:
The churchโs insurance policy did not cover the incident.
Policy language clearly limited coverage to activities performed on behalf of or at the direction of the church.
The church had no role in authorizing the ATVโs use.
Key takeaway: A church may be liable only when an activity is directed, requested, or carried out for its benefit.
Case citation:ASI Insurance Company, 2022 WL 2760479 (N.D. Fla. 2022)
Case Study 2: Halloween Hayride Injury
A woman was seriously injured while preventing a child from falling off a church-sponsored hayride.
Legal Findings
The appellate court reversed a trial court dismissal based on:
Overloading: The church allegedly decided ride precautions, lighting, and passenger limits.
Negligent Supervision: Poor lighting and a lack of control over rowdy children on the trailer.
The court found the church owed a duty of care to children it was supervising.
Key takeaway: Inadequate supervision, overloading, and poor planning can create church liability.
Case citation:Clontz v. St. Markโs Evangelical Lutheran Church, 578 S.E.2d 654 (N.C. App. 2003)
Case Study 3: Deadly After-School Party
A church-operated school faced a lawsuit after two students died following an off-campus, unsanctioned party where alcohol was consumed.
Verdict Breakdown
The school and its principal settled for $1.1 million.
A jury assigned 25% fault to the school and awarded $55+ million in damages.
The appellate court ruled the party was neither school-sponsored nor school-related.
Key takeaways:
Liability requires more than just awareness of an off-campus event.
Courts distinguish between sponsored and related activities.
Case citation:Archbishop Coleman F. Carroll High School, Inc. v. Maynoldi, 30 So.3d 533 (Fla. App. 2010)
Case Study 4: Youth Soccer Club Carpool Crash
A 16-year-old, at a coachโs direction, transported teammates to practice and caused a major crash.
Court Decision
Though 83% of fault was assigned to the driver, the soccer club was ordered to pay the full verdict due to the coachโs control over logistics.
The court confirmed the legal principle of respondeat superiorโan organization may be liable for the actions of volunteers acting under its authority.
Key takeaway: Direction and control over a volunteer’s actions can trigger liabilityโeven without formal employment.
Case citation:Bartell ex rel. Hoesel v. Mesa Soccer Club, 2010 WL 502993 (Ariz. App. 2010)
Additional Cases Highlighting Liability Factors
Baseball Game Carpool Tragedy
A 16-year-old volunteer driver caused a fatal crash. The court said a jury must decide if the sponsoring organization (the American Legion) was liable.
Case:Daniels v. Reel, 515 S.E.2d 22 (N.C. App. 1999)
Christmas Cookie Delivery Accident
A church volunteer struck a motorcyclist while delivering cookies. The court found the church may be liable due to its control over the volunteerโs actions.
Case:Trinity Lutheran Church, Inc. v. Miller, 451 N.E.2d 1099 (Ind. App. 1983)
School Officials Aware of Underage Drinking
A student died in a crash after an unsanctioned party. Although school officials were aware of the drinking, the court ruled the school had no duty since the party was not officially sanctioned.
Case:Rhea v. Grandview School District, 694 P.2d 666 (1985)
Hazing at Club Meeting
A student was injured during a hazing incident at a school-sponsored, off-campus club meeting. The court found the school liable.
Case:Rupp v. Bryant, 417 So.2d 658 (Fla. 1982)
Unauthorized Teacher Excursion
A college was not liable when a teacher led a student outing after classes had ended. The outing was not authorized or affiliated with the school.
Case:Fernandez v. Florida National College, Inc., 925 So.2d 1096 (Fla. App. 2006)
Final Takeaways for Church Leaders
Liability for off-campus activities isnโt automaticโbut itโs possible.
When Is a Church More Likely to Be Liable?
The activity is directed, requested, or benefits the church.
The church officially endorses, promotes, or provides resources for the event.
Staff or leaders attend in an official capacity.
Questions to Ask Before Off-Site Events
Was the event planned by a recognized church committee or group?
Did planners seek permission or resources from the church?
Has the church helped coordinate logistics?
Was the event promoted in church channels?
Will staff attend as official representatives?
If the answer to any of these is โyes,โ the event may be viewed as church-relatedโand liability increases.
Risk Mitigation Strategies
To reduce risks during off-campus events:
Assign trained staff or volunteers.
Ensure adequate lighting and safety precautions.
Limit crowd size or participation.
Screen and select drivers carefully.
Hire professionals for high-risk activities.
Consult with legal counsel and your insurance provider before the event.
Consider a Non-Sanctioned Event Policy
A clear policy stating the church will not be liable for events it does not officially sanction may help demonstrate your position.
While not a complete legal shield, it may reduce exposureโespecially when coupled with:
If your church or organization reported withheld taxes of $50,000 or less during the most recent lookback period (for 2023 the lookback period is July 1, 2021, through June 30, 2022), then withheld payroll taxes are deposited monthly.
Monthly deposits are due by the 15th day of the following month. Note, however, that if withheld taxes are less than $2,500 at the end of any calendar quarter (March 31, June 30, September 30, or December 31), the church or organization need not deposit the taxes.
Instead, it can pay the total withheld taxes directly to the IRS with its quarterly Form 941. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes, and the employerโs share of Social Security and Medicare taxes.
Semiweekly requirements
If your church or organization reported withheld taxes of more than $50,000 during the most recent lookback period (for 2023 the lookback period is July 1, 2021, through June 30, 2022), then the withheld payroll taxes are deposited semiweekly. This means that for paydays falling on Wednesday, Thursday, or Friday, the payroll taxes must be deposited on or by the following Wednesday. For all other paydays, the payroll taxes must be deposited on the Friday following the payday.
Also note that large employers having withheld taxes of $100,000 or more at the end of any day must deposit the taxes by the next banking day. The deposit days are based on the timing of the employerโs payroll. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes, and the employerโs share of Social Security and Medicare taxes.
July 28, 2023: File employer exemptionโForm 8274
Churches hiring their first nonminister employee between April 1 and June 30 may exempt themselves from the employerโs share of Social Security and Medicare taxes by filing Form 8274 by this date (nonminister employees are thereafter treated as self-employed for Social Security purposes). The exemption is only available to churches that are opposed based on religious principles to paying the employerโs share of Social Security and Medicare taxes.
July 31, 2023: File Form 941
Churches having nonminister employees (or one or more ministers who report their federal income taxes as employees and who have elected voluntary withholding) must file an employerโs quarterly federal tax return (Form 941) for the second quarter of 2023 by this date. Enclose a check in the total amount of all withheld taxes (withheld income taxes, withheld Social Security and Medicare taxes paid by the employee, and the employerโs share of Social Security and Medicare taxes) if less than $2,500 on June 30, 2023.
Note: If a date listed for filing a return or making a tax payment falls on a Saturday, Sunday, or legal holiday (either national or statewide in a state where the return is required to be filed), the return or tax payment is due on the following business day.
Note: You must use electronic funds transfer to make all federal employment tax deposits. This is generally done using the Electronic Federal Tax Payment System, a free service provided by the US Department of Treasury. If you donโt wish to use EFTPS, you can arrange for your tax professional, financial institution, or payroll service to make deposits on your behalf. Failure to make a timely deposit may subject you to a 10-percent penalty.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Part 1 of 4: Prepping for a Church Meeting
Preparation is key in holding an effective church meeting.
Editorโs Note: Prepping for a church meeting is as important as the meeting itself. Continuing her look at effective business meetings through the hypothetical lens of Liz Jones, an experienced business administrator at First Church, Sarah E. Merkle walks us through the three-step process of planning, defining, and ordering a meeting agenda.
An effective church meeting can go a long way toward healthy and effective decision-making. Planning the meeting, therefore, is key.
Planning a church meeting: The problem
Liz Jones needs an effective business meeting plan.
Last year, First Churchโs annual business meeting didnโt go so well. This year, Pastor Steve Hayes has asked Jones to fix that.
Jones, an experienced business administrator, knows preparation will be key. The congregationally led church is 16 years old and recently surpassed 500 members.
As the church grows, the need for meetings to go well only grows, too.
A few things went wrong at last yearโs annual meeting:
It ran too long.
Discussion over pricey upgrades to the churchโs audio/visual equipment went in circles.
A key decision related to making a minor tweak to one of the churchโs bylaws got delayed because proper notice wasnโt given ahead of time to members.
The next annual business meetingโplanned for Sunday, January 8, 2023, at 12:30 p.m.โ is still several months away, but Jones knows she needs to work fast to plan and organize it well.
A general search online yielded some ideas. Then she came across a Church Law & Tax article series by Sarah E. Merkle, an attorney with impressive credentials and experience helping churches, nonprofits, businesses, and organizations run meetings.
The article covering meeting preparation especially caught her eye. On a whim, she sent Merkle an email explaining her circumstances. A short while later, Merkle emailed back.
Creating an effective church meeting plan
Merkle couldnโt provide specific advice to Jones because legal ethics donโt allow it when an attorney-client relationship doesnโt exist.
But Merkle generally described steps Jones can take to put a better plan together.
Step 1: Get your to-do list in order
Put the churchโs articles of incorporation, bylaws, and policy manuals all within armโs reach, and read through them to note any dates by which things must happen. Whether nominating new board members or approving an annual budget or adopting a pastorโs housing allowance, these dates create deadlinesโand to-do lists that should get completed by the appropriate meeting before the corresponding deadline.
For the annual business meeting, recurring dates include submitting board nominations whenever one or more members finish their terms, and getting congregational approval for the next yearโs fiscal budget. This year, only the latter needs to happen.
Step 2: Define the agenda.
Merkle explained that initial formalities need to be addressed, such as approving the minutes of the last business meeting, plus adopting the agenda for this one.
From there, First Church needs its next fiscal budget approved. It also typically uses the annual business meeting to share updates from the churchโs ministries, facilities, and financial health committees. This year, it also faces several other important decisionsโitโs about to call a new associate pastor. It is also contemplating repaving its parking lot.
In the past, First Church has typically saved the biggestโand often most controversialโdecisions for the end of its annual business meetings.
Thatโs what happened last year when the church wrestled with the audio/visual proposal. It was costly, members wanted to debate it, and, given that the meeting was already running long, frustrations mounted as a vote was pushed through.
Merkle cautioned Jones about prioritizing the agenda a certain way only because itโs โhow the church has always done it.โ
With the list of agenda items defined, Merkle said she asks these questions to further understand the potential flow for the agenda:
Who should speak or present on behalf of any of the agenda items? The chair of the associate pastor search committee, for instance, should plan to talk about the candidate and explain the process used for the search, including the qualifications sought and the other people interviewed.
All presenters should be identified and contacted early to get them started with their respective presentations.
What resources do these individuals need to succeed with their remarks? This might include PowerPoint and other audio/visual supportโand it may require staff time to assist the presenter, especially if he or she is a volunteer.
What information about an issue can be given to members ahead of time to help them learn and understand what the issue is about? For the associate pastor role, that might include a biography of the candidate. For the parking lot project, it might include an explanation about why itโs needed, the potential costs, and the ministry impact it can deliver.
What notice is required under the churchโs governance to ensure an issue can be voted on? Last yearโs bylaw change didnโt provide proper noticeโand this year, the churchโs governance requires notice before members can vote to call any pastor.
Step 3: Ordering the agenda
The last major step is to order the agenda.
โThereโs no right or wrong answer here,โ Merkle wrote. โItโs more important to ask certain questions to decide how to do it. What are you ultimately wanting to accomplish at this meeting? Prioritize the agenda based on what needs to be decided for the healthy functioning of the church over the next 30 to 45 days.โ
One evaluation is to anticipate controversies.
โIs everyone coming to the meeting because they are already angry about the issue? If so, then it needs to be earlier in the agenda,โ Merkle wrote. โIs everyone coming calm, but an issue on the agenda may anger them? If so, then donโt schedule anything afterward that is heavy or seriousโkeep it straightforward.โ
Another evaluation is the pros and cons of each item happening at specific times on the agenda.
With the associate pastor role, there are positives to placing it early on the agenda. Most people likely will attend because of this specific decision, and theyโll have more energy early in the meeting. One negative, though, is that updates about ministry and financial health may shape how people decideโand those reports would likely come later.
Relatedly, there are pros and cons to placing the item later in the agenda, too. The pro is that all information should be in hand. The con is that people are tired.
For Jones, the order is starting to take shape. Leading the agenda with the ministries, financial health, and facilities reports should start things on a positive note. The facilities report will then include the parking lot project.
From there, the agenda will shift into the associate pastor discussion and decision, since the meeting is still relatively young and the new roleโs impact on the churchโs mission and operations will be better understood.
Plus, adding the position directly influences the churchโs healthy functioning within the next 45 days.
Lastly, the agenda will address approval of the next annual budget.
Jones now can begin working on contacting the individuals she needs to speak on the various topics, and the timetables needed to notify the congregation about the associate pastor vote.
โIโm really glad you reached out,โ Merkle wrote. โThe thought put into an annual business meeting can turn it into something invigorating. The time youโre using now to prepare can make a massive difference in how people feelโhelping them see the big picture and celebrate the churchโs direction.โ
Holding an effective church meeting includes knowing who should be keeping minutes and how they should be kept.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
Image: Getty/Kameleon007
Correcting Improper FICA Withholdings
What to expect when correcting improper FICA withholdings for a pastor.
Q: Our church has been withholding FICA for its pastors, in some instances for yearsโor even decades. We recently learned this is a mistake. How do we fix this?
Wages paid to ministers are not included in the definition of wages for the purposes of withholding FICA/Medicare tax. This includes the related employer matching of these taxes by the church.
Instead, ministers must pay into the Social Security/Medicare systems through self-employment tax calculated on Schedule SE with their personal tax returns (unless they obtain an exemption).
Improper FICA withholdings is not uncommon. Churches often incorrectly withhold and match the FICA/Medicare taxes on ministers. If the IRS determines this treatment has occurred, it takes the position that the church has determined the employee is not a minister for payroll tax purposes. This may affect the taxation of other benefits. That’s because it’s impossible to claim to be a minister for one portion of the rules but not for another.
For an example of how the incorrect withholding of a ministerโs payroll taxes can prove so consequential, look no further than the housing allowance that qualifying ministers are eligible to receive.
The housing allowance is one of the most valuable tax benefits available to ministers. If a church treats a minister incorrectly and withholds and matches the ministerโs FICA/Medicare taxes, then the IRS views him or her as an employee, not a minister. The IRS then would tax the housing allowance paid by the church for the minister, representing a sizable financial loss for the minister.
Correcting Improper FICA Withholdings
Churches that have improperly withheld/matched a minister’s FICA/Medicare taxes should amend the payroll reports for the three tax years open under the statute of limitations.
This requires amending quarterly Forms 941 and annual Forms W-2. Taxes paid will be refunded to the church. And, because it mistakenly overpaid its taxes, the church will not face any penalties.
The minister will need to report the compensation as self-employment income for the past three years. This is done by amending the related Forms 1040.
The minister also needs to pay the related self-employment tax owed. Interest will be calculated on the tax owed when he or she amends the Forms 1040.
These amendments can be complicated, so a church may require professional assistance in filing the related amended reports and returns.
Editorโs Note:Minding meeting minutes is both an oft-misunderstood and under-appreciated part of a church business meeting. Continuing her look at effective business meetings through the hypothetical lens of Liz Jones, an experienced business administrator at First Church, Sarah E. Merkle shows the important roles that meeting minutes play.
Long before First Churchโs annual business meeting arrived, Liz Jones mapped out a plan for getting the meetingโs minutes taken, too.
Before proceeding, though, she first needed to clear up some misconceptions about who should take minutes. Some assumed it would be the church secretary. Others assumed it should be Jones as the church business administrator.
Neither assumption was correct.
Instead, the responsibility of taking minutes falls to the church boardโs secretary.
Jones reached out to Tom Erickson, the board secretary, and scheduled a meeting ahead of time to go over his duties.
โIโm nervous about this task, to be honest,โ Erickson confided to Jones when they met. โI have a hard time capturing everything said in a conversationโthereโs so much to keep track of.โ
โDonโt worry,โ Jones responded. โIโll help you understand exactly what we need. And remember, Iโm attending the meeting, too. There should always be someone backing you up at a meeting, and I can do that for this meeting.โ
โYouโre not recording the meeting, and you’re not transcribing the meeting,โ she explained. โYouโre recording what was done, not what was said.โ
Erickson nodded but looked slightly confused.
โBut to record what was done, donโt we need to know who said whatโwho supported what, who opposed what, that kind of thing?โ he asked.
โNoโthatโs a common mistake many church leaders make,โ Jones answered. โSo much of what happens just needs to be a brief, general description. For instance, when Cindy Martinez gets up to give the facilities report, it doesnโt have to be detailed. It should just say, โThe facilities chair gave a report on behalf of the facilities committee, including details on proposed projects for the parking lot, childrenโs ministry wing, and HVAC system.โ Thatโs it.โ
Jones paused as Erickson jotted down some notes.
โIs there ever a time when specific details need to be included, though?โ Erickson asked.
โYes,โ Jones responded. โMainly when votes are taken. You need to record the outcomes. If specific counts are made, you need to capture the votes for and the votes against.โ
Holding an effective church meeting includes understanding the four basic types of votes, and knowing which one is best.
โSo, this is really about just making sure ultimate decisions and directions are recorded for future referenceโnot a play-by-play,โ he said.
โExactly,โ Jones responded. โAnd when the next business meeting comes, theyโre already prepared and ready to be presented for approval as a way to formally document those decisions and directions.โ
A closer look at the minutes
Erickson heeded Jonesโs advice. Because he wasnโt focused on recording every word said, he found the task much more manageableโand capturing highlights and high-level details came more easily than he expected.
This especially proved true during the extensive discussion about the proposed facilities projects. Erickson knew he would have gotten flustered trying to note each perspective shared about support or oppositionโand objectively representing the remarks would be next to impossible anyway.
After First Churchโs annual business meeting, he cleaned up the notes he typed during the meeting. To his credit, he needed Jonesโs backup notes for only one thingโthe official vote count (243 to 13) in favor of the candidate for the new associate pastor role.
Ericksonโs draft minutes looked like this:
First Church
Annual Business Meeting
January 8, 2023
12:30 p.m.
Board Chair Terry Christensen called the annual business meeting of First Church to order at 12:35 p.m.. A quorum was present.
Agenda
By unanimous consent, the agenda was adopted as presented.
2022 Annual Business Meeting Minutes
By unanimous consent, the minutes of the January 9, 2022 annual business meeting were approved as distributed.
Ministry Update
Outreach Coordinator Joy Allman provided an update on the progress of various ministries of the church, noting that the childrenโs ministry was experiencing significant growth and that the church leadership was exploring a new missions opportunity in Ecuador.
Finance Committee
Alex Armstrong, chair of the Finance Committee, provided an overview of the financial reports distributed to the membership, noting that member giving has been steady and that the building and property loan from 2016 remains the churchโs only outstanding debt.
Facilities Committee
Cindy Martinez, chair of the Facilities Committee, provided an update on the state of the Churchโs facilities. On behalf of the Committee, Ms. Martinez moved that the Facilities Committee obtain bids to begin the following capital projects during the next fiscal year: repave the parking lot, and replace the HVAC system; and, that the Facilities Committee be authorized to proceed with these projects, provided they do not exceed a combined total cost of $200,000. The motion was adopted as amended.
Associate Pastor Search Committee
Russ Moore, chair of the Associate Pastor Search Committee, provided an overview of the associate pastor search, including the Committeeโs process for identifying and vetting candidates. On behalf of the Committee, Mr. Moore moved that First Church call Karl Miller to be associate pastor of First Church. The motion was adopted, with 243 in favor and 13 opposed.
2023โ2024 Budget
On behalf of the Finance Committee, Alex Armstrong moved that the 2023โ2024 budget be adopted as distributed. The motion was adopted.
Adjourn
By unanimous consent, the meeting adjourned at 2:00 p.m.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
Part 3 of 4: Making Every Vote Count
Holding an effective church meeting includes understanding the four basic types of votes, and knowing which one is best.
Editorโs Note:Making every vote count in a church business meeting takes many forms. Continuing her look at effective business meetings through the hypothetical lens of Liz Jones, an experienced business administrator at First Church, Sarah E. Merkle illustrates the various types of votes that can be taken at a business meeting, and the methods for calculating their outcomes.
Before First Churchโs annual business meeting, Liz Jones met with Terry Christensen, the church boardโs chairwoman, to go over the four types of votes that can be conducted. The two looked closely at each option, weighing their benefits and drawbacks and assessing when they might prove most useful.
The homework pays off as the annual business meeting unfolds.
Vote Type 1: General or unanimous consent vote
โThis type of vote is great for noncontroversial matters,โ Jones told Christensen during their prep. โIt also speeds up the meeting.โ
The two agreed sheโd use them for the first items on the agenda: adopting the agenda for this meeting and approving the last business meetingโs minutes. She followed that plan in the meetingโs first moments.
โFirst, we will approve the agenda for this meeting. Are there any objections to todayโs agenda as presented?โ she asks. Then, as Jones coached her, she pauses and counts to three. โHearing no objection, the agenda is approved.โ
Christensen clears her throat, then leans into the podium microphone again. โNext is approving the minutes from the last business meeting. Are there any corrections to the minutes as distributed?โ
Three more seconds pass with silence. โHearing no objection, the minutes are approved,โ she says.
Jones told Christensen the likelihood of objections to either of these agenda items was very small. Had one arisen, though, she would have simply resorted to a voice vote.
Vote Type 2: Voice vote
Like Jones predicted, members discussed the proposed motion from the facilities committee with zeal.
A proposed amendment to that motionโin which bids would be sought for projects involving the churchโs parking lot and HVAC system, but not for repainting the childrenโs ministry wingโwent through lengthy discussion.
After nearly 20 minutes, Christensen senses itโs time to move things along. To do so requires a motion to close debate, followed by a second to that motion, then followed by approval by a two-thirds majority. With 300 members present, Christensen opts to use a voice vote.
โAll of those in favor of closing the debate on the amended motion as presented, say โAye.โโ
The โayeโsโ boom across the room.
โAll opposed, say โNo.โโ
Only a smattering of โnoโsโ arises across the sanctuary. Christensen feels confident that two-thirds voted in favor.
Now itโs time to see if enough support exists to approve the motion as amended with the childrenโs ministry project removed.
This time, only a majority is needed. Christensen again opts for a voice vote.
โAll of those in favor of the motion as amended, say โAye.โโ Christensen says.
Another hearty round of โayeโsโ fills the sanctuary.
โAll opposed, say โNo.โโ
A strong number of โnoโsโ spread across the sanctuary, too.
Itโs too close to call.
Vote Type 3: Raised hand or standing vote
During the prep, Jones told Christensen about the usefulness of a โraised hand or standing voteโ option. โYou use this when a voice vote is too close to call. You can also use it if you need the exact vote count noted in the meetingโs minutes,โ Jones explained. โItโs a really effective way to keep things moving when the vote itself doesnโt need to be kept in secret.โ
With the voice vote on the parking lot and HVAC projects too close, and no apparent need for secrecy involved with either decision, Christensen chooses a standing vote.
โThe chair was uncertain, so weโll conduct a standing vote,โ she says into the microphone. โAll of those in favor, please stand.โ
A large contingent of individuals across the sanctuary rise.
โPlease sit down,โ she says. โNow, all of those opposed, please stand.โ
Another sizable group rises. Itโs still too close to call, even visually.
Christensen asks those standing to sit. She then asks those in favor to stand again.
Two tellers attending the meeting to count votes then proceed to count off those who are standing. Upon finishing, Christensen asks supporters to sit, then asks those opposed to stand. The two tellers then have those who are opposed count off.
The result: Those in favor measured 102, while those opposed measured 101โthe closest margin possible.
โThe motion as amended passes,โ Christensen says.
Vote Type 4: Ballot vote
Going into the annual business meeting, Jones knew the calling of an associate pastor would need a ballot vote. Not only is it a significant decision, and one that members may not wish to openly vote about, but the churchโs bylaws require at least two-thirds of those present and voting to approve a decision like this.
A ballot vote ensures an accurate and official count is taken and documented with the meetingโs minutes.
Anticipating this, Jones worked ahead of time with Russ Moore, chair of the Associate Pastor Search Committee, to review the churchโs membership roll.
She made certain enough notice was provided to all members about the expected vote during the meeting. And she made certain enough ballots were created and available on the day of the meeting.
Jones also ensured the ballots were printed with the actual question and appropriate responses for members to select. It didnโt have to be fancyโit just simply read, โI am in favor of calling Karl Miller to be associate pastor of First Church,โ followed by boxes with โYESโ and โNOโ next to them. No signature was required since the bylaws didnโt require one and the desire for secrecy weighed heavily.
Counting votes
The ballots for Millerโs candidacy were collected. Two tellers quickly went through them.
Among the 300 members present at the meeting, 256 cast votes.
Jones recalled Sarah E. Merkleโs article on voting and the formula needed for determining at least a two-thirds majority. Here, since there were 256 members present who voted, the tellers would take 256, multiply it by 2, then divide it by 3 to determine the number of votes needed for a two-thirds approval. Since the mathematical result to this formulaโ170.6โwasnโt a whole number, the tellers rounded up to the nearest whole number, which is 171.
Tip: The formula for determining a two-thirds majority is (N x 2)/3 where N is the number of people present who voted. When the result is not a whole number, the number is rounded up to the nearest whole number.
For Miller, the members overwhelmingly approve his call by a margin of 243 to 13.
Christensen breathes a sigh of relief, partly because of the need to get Miller started soon, and partly because the controversy with the facilities projects earlier in the meeting was much closerโand almost didnโt pass.
Part of the reason why was because the calculation for a majority vote works differently from the formula for calculating a two-thirds vote. With a majority, the number of members voting is multiplied times 0.5. If a whole number results, then a 1 gets added. If a fractional number results, then it gets rounded up to the nearest whole number.
Tip: The formula for determining a majority vote is N x 0.5, where N is the number of people voting. If a whole number results, add 1. If a fractional number results, round up to the nearest whole number.
In the facilities motion as amended, 203 people voted. Multiplied by 0.5, the result was 101.5, and rounded up to the next whole number, the figure was 102. That meant the motion barely passed.
But it passed nonetheless, and as the meeting headed toward the home stretch, Christensen and Jones believed no major obstacles remained in the way. The churchโs budget information was presented well in advance, and support already existed for the variance built in for the facilities projects.
Christensen and Jones were right: A voice vote on the approval of the budget overwhelmingly passed.
The meeting finished. Pastor Hayes considered it a major success.
Holding an effective church meeting includes knowing who should be keeping minutes and how they should be kept.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
Part 2 of 4: Managing Meeting Motions
Knowing how to makeโand manageโa motion is a crucial aspect of a successful church business meeting.
Editorโs Note:Managing motions during a church business meeting is essential to ensuring the meeting accomplishes its intended purposes. Continuing her look at effective business meetings through the hypothetical lens of Liz Jones, an experienced business administrator at First Church, Sarah E. Merkle explains how to plan, draft, and make a meeting motion.
Liz Jones spent months preparing the agenda for First Churchโs annual business meeting. As her work progressed, it became apparent that the facilities committeeโs report would suggest more potential work would be needed than just repaving the churchโs parking lot.
One motionโand possibly moreโwould likely come up for facilities-related needs.
Cindy Martinez, the facilities committeeโs chair, sent an email to Jones several weeks prior to the meeting warning her as much.
Martinez detailed the parking lot project. She also relayed desires from some individuals to repaint the childrenโs ministry wing, as well as preliminary concerns from others about the churchโs aging HVAC system (though some contend the concerns are premature).
The primary tension point?Next yearโs proposed annual budget doesnโt account for the expenses to do all three.
โWe already know there will be differing opinions about which projects need to be addressed, and which should get priority,โ Martinez wrote to Jones. โAt least a few also believe the church should borrow some money now and do all three projects, with the goal to have the loan paid off in two years.โ
Planning the motion
Working through Sarah E. Merkleโs article on motions, Jones decides the smart approach will be to have Martinez present the facilities committee report, including the three possible projects. But Jones gets nervous about the ensuing discussion and how things might bog down in the meeting.
She again reaches out to Merkle with an email. Merkle replied soon after, reminding her she couldnโt provide legal advice but could generally help.
โIn general, itโs smart to come to a meeting with a proposed motion drafted,โ Merkle wrote. โYou donโt want all the information presented about all the projects, say all three need to happen, and stop there. At that point, someone will just present a motion that isnโt well-crafted.โ
Jones confers with the finance committee chair, Alex Armstrong, about how next yearโs annual budget is taking shape. He tells her a potentially reasonable budget amount for the developing projects based on current financial projections, pending bids for the projects.
Jones then proceeds to help Martinez craft a draft motion that reads as follows:
RESOLVED, that the Facilities Committee obtain bids to begin the following capital projects during the next fiscal year:
Repave the parking lot;
Replace the HVAC system;
Repaint the childrenโs ministry wing; and,
that the Facilities Committee be authorized to proceed with these projects, provided they do not exceed a combined total cost of $200,000.
Making the motion
The annual business meeting day arrives and 300 voting members show up, more than enough to satisfy the quorum requirement for First Churchโs annual business meeting.
As planned, the agenda begins with the ministries, financial health, and facilities reports.
The ministries report includes exciting developments for First Church, such as big growth in its childrenโs ministry and a new missions opportunity in Ecuador.
Armstrongโs financial health report reads mostly positive, too. First Churchโs only debt is the loan it received to purchase its building and property from another church about seven years ago. Giving over the past year remained steady, a welcome development after years of local and national economic uncertainty.
Then itโs Martinezโs turn to provide her committeeโs report on the facilities. She references the packet of information sent out to members a couple of weeks before the meeting.
Martinez uses the PowerPoint that Jones helped create to provide descriptions and photos detailing the parking lotโs rapid deterioration, which was already evident when First Church bought the property seven years ago. She also explains the childrenโs ministryโs growth, and the childrenโs ministry directorโs desire to freshen things up. Then she discusses some of the HVAC systemโs recent problems, including an unexpected breakdown last winter that left the building colder than usual for worship one Sunday.
Martinez finishes and makes the motion that Jones helped her prepare. Since it comes from the committee, the motion doesnโt require anyone to second it.
โIs there any discussion?โ asks Terry Christensen, the churchโs board chairwoman.
Jones shifts uncomfortably in her first-row seat. This would be the first opportunity for the meeting to go off the rails.
Lively discussion
The discussion was as lively as Jones and Martinez anticipated. Thankfully they warned Christensen ahead of time so that presiding over it wouldnโt surprise her.
Some members express immediate opposition to the repainting. โThe wing doesnโt look that bad, and the money should be used for the HVAC,โ an older man opines.
Another member jumps in: โI move we strike the childrenโs ministry wing repainting from the motion.โ
โIs there a second to the amendment?โ Christensen asks. Since the amendment didnโt come from the committee, a second to this motion is needed. The older man seconds the motion.
โIs there discussion about the amendment?โ Christensen asks.
A young mother raises her hand. โI know repainting may seem unnecessary. But weโve heard about how the childrenโs ministry has grown,โ she says. โAnyone who serves downstairs knows how dingy everything looks.โ
Other members speak up. Some support the repainting. Others oppose it. One suggests doing all three but borrowing money, which elicits a somewhat snarky response from a longtime member who boasts how the church has historically avoided debt beyond its mortgage. Eventually, a majority votes to adopt the amendment.
Discussion then resumes on the motion as amended. Nearly 20 minutes pass. Sensing itโs time to move things along, a longtime member makes a motion to close debate that gets seconded and then approved by a two-thirds majority of the votes cast.
Now itโs time to see if enough support exists to approve the motion as amended with the childrenโs ministry project removed. Another voice vote must be done, but this time, only a majority is needed to approve it.
Holding an effective church meeting includes knowing who should be keeping minutes and how they should be kept.
Sarah E. Merkle is a professional parliamentarian and presiding officer. One of five lawyers worldwide to have earned the credentials Certified Professional Parliamentarian-Teacher (CPP-T) and Professional Registered Parliamentarian (PRP), she helps boards, associations, corporations, and public bodies navigate rules applicable to governance and business meetings.
Four Steps Needed For An Effective Church Meeting
Parliamentarian Sarah E. Merkle partners with Church Law & Tax to show church leaders how to hold an effective church meeting.
โMany church members and leaders don’t know the risk to churches that do not understand parliamentary procedure or carefully follow it,โ Merkle says. โThere can be legal implications for not keeping minutes of actions taken by the church. Churches that donโt think through quorum or are careless about voting or the election of officers will often find themselves in a procedural mess. And spiritually, a congregation may experience strife and contention if there is a lack of good leadership or poor member involvement in church business. Avoid problems by following principles of parliamentary procedure and good governance.โ
In this companion to “Mastering Meeting Basics,” Merkle offers this hypothetical case study, a four-part series on how to plan, hold, and document an effective church meeting. From planning the meeting to making motions, and from taking votes to capturing minutes, this series can offer valuable insights.
Any church leader responsible for planning and holding effective church meetings should bookmark this resource.
If your church or organization reported withheld taxes of $50,000 or less during the most recent lookback period (for 2023 the lookback period is July 1, 2021, through June 30, 2022), then withheld payroll taxes are deposited monthly.
Monthly deposits are due by the 15th day of the following month. Note, however, that if withheld taxes are less than $2,500 at the end of any calendar quarter (March 31, June 30, September 30, or December 31), the church or organization need not deposit the taxes.
Instead, it can pay the total withheld taxes directly to the IRS with its quarterly Form 941. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes (7.65 percent of wages), and the employerโs share of Social Security and Medicare taxes (an additional 7.65 percent of employee wages).
Semiweekly requirements
If your church or organization reported withheld taxes of more than $50,000 during the most recent lookback period (for 2023 the lookback period is July 1, 2021, through June 30, 2022), then the withheld payroll taxes are deposited semiweekly.
For paydays falling on Wednesday, Thursday, or Friday, the payroll taxes must be deposited on or by the following Wednesday.
For all other paydays, the payroll taxes must be deposited on the Friday following the payday.
Large employers having withheld taxes of $100,000 or more at the end of any day must deposit the taxes by the next banking day. The deposit days are based on the timing of the employerโs payroll. Withheld taxes include federal income taxes withheld from employee wages, the employeeโs share of Social Security and Medicare taxes (7.65 percent of wages), and the employerโs share of Social Security and Medicare taxes (an additional 7.65 percent of employee wages).
June 15, 2023: Quarterly estimated tax payments for certain employees and churches
Filing for certain ministers and self-employed workers
Ministers who have not elected voluntary withholding and self-employed workers must file their second quarterly estimated federal tax payment for 2023 by June 15. A similar rule applies in many states to payments of estimated state taxes.
Nonminister employees of churches that filed a timely Form 8274 (waiving the churchโs obligation to withhold and pay FICA taxes) are treated as self-employed for Social Security. They are subject to the estimated tax deadlines with respect to their self-employment (Social Security) taxes unless they ask their employing church to withhold an additional amount of income taxes from each paycheck that will be sufficient to cover self-employment taxes (use a new Form W-4, Step 4(c), to make this request).
Payments for unrelated business income tax liability
A church must make quarterly estimated tax payments if it expects an unrelated business income tax liability for the year to be $500 or more. Use IRS Form 990-W to figure your estimated taxes. Quarterly estimated tax payments of one-fourth of the total tax liability are due by April 15, June 15, September 15, and December 15, 2023, for churches on a calendar-year basis. Deposit quarterly tax payments electronically using the Electronic Federal Tax Payment System (EFTPS).
June 30, 2023: Review housing or parsonage allowance designations
Now is a good time to review the 2023 housing or parsonage allowances designated for all ministers on staff. If an allowance designated for 2023 is clearly below actual housing expenses, then the church board should consider declaring a larger portion of the ministerโs remaining compensation as a housing or parsonage allowance.
A church is free to designate any portion of a ministerโs compensation as a housing allowance but remember that clergy who own their home cannot claim a housing allowance exclusion greater than the fair rental value of the home (furnished, including utilities).
Therefore, the allowance ordinarily should not be significantly more than this amount.
Note: If a date listed for filing a return or making a tax payment falls on a Saturday, Sunday, or legal holiday (either national or statewide in a state where the return is required to be filed), the return or tax payment is due on the following business day.
Note: You must use electronic funds transfer to make all federal employment tax deposits. This is generally done using the Electronic Federal Tax Payment System, a free service provided by the US Department of Treasury. If you donโt wish to use EFTPS, you can arrange for your tax professional, financial institution, or payroll service to make deposits on your behalf. Failure to make a timely deposit may subject you to a 10-percent penalty.
Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Image: Getty/Andrii Dodonov
IRS Again Alerts Employers to Improper ERC Claims
Third parties are using aggressive tactics and lucrative promises related to ERC claims.
The Editors
Editor’s Note: On September 14, 2023, the Internal Revenue Service (IRS) announced it has immediately stopped processing new Employee Retention Credit (ERC) claims “amid [a] surge of questionable claims.”
Concerns raised by tax professionals, coupled with aggressive marketing to ineligible applicants, “highlights unacceptable risk to businesses and the tax system,” the agency said.
The IRS will continue processing previously filed claims and pay out claims it approves, it said, but processing times will take longer as the agency applies more scrutiny to address fraud concerns.
The IRS also said it is finalizing details to help entities victimized by “aggressive promoters” who have used repeated advertising and direct-contact methods to entice claim applications without carefully evaluating whether an entity truly qualifies for the credit.
Taxpayers who already have a claim submitted, but fear they were misled–including churches and small businesses–will be eligible for a special withdrawal option as well, the IRS said. It plans to announce details for the option soon.
The IRS said more than 600,000 claims remain unprocessed.
Church Law & Tax will continue to monitor developments.
The Internal Revenue Service (IRS) is again warning employers, including churches, to exercise caution if theyโre contacted by a third party regarding the Employee Retention Credit (ERC).
The ERC is legitimate. However, third parties are using aggressive tactics to try and entice employers to seek it, and sometimes, the third parties arenโt carefully evaluating an employerโs eligibility, putting the employer in jeopardy with the IRS.
In other instances, the third parties have fraudulent intentions altogether.
How to navigate the governmentโs $2.2 trillion stimulus plan responding to COVID-19โs economic fallout.
Many churches may be eligible for the ERC, a provision providing employers relief due to hardships experienced in the early days of the COVID-19 pandemic. Specific criteria must be met, however.
โThe aggressive marketing of the Employee Retention Credit continues preying on innocent businesses and others,โ said IRS Commissioner Danny Werfel, in the agencyโs latest alert. โAggressive promoters present wildly misleading claims about this credit. They can pocket handsome fees while leaving those claiming the credit at risk of having the claims denied or facing scenarios where they need to repay the credit.โ
Join Church Law & Tax today for access to thousands of helpful articles, resources, expert analysis and live webinars.
The IRS provided a list of โwarning signsโ that employers should look for when dealing with a third party about the ERC, including:
Unsolicited calls or advertisements mentioning an โeasy application process.โ
Statements that the promoter or company can determine ERC eligibility within minutes.
Large upfront fees to claim the credit.
Fees based on a percentage of the refund amount claimed. This is a similar warning sign for everyday taxpayers, who should always avoid a tax preparer basing their fee on the size of the refund.
Aggressive claims from the promoter that the business receiving the solicitation qualifies before any discussion of the groupโs tax situation. The ERC is a complex credit that requires careful review before applying.
Wildly aggressive suggestions from marketers urging businesses to submit the claim because there is nothing to lose. Those improperly receiving the credit could have to repay the creditโalong with substantial interest and penalties.
โThese promoters may lie about eligibility requirements,โ the IRS added. โIn addition, those using these companies could be at risk of someone using the credit as a ploy to steal the taxpayerโs identity or take a cut of the taxpayerโs improperly claimed credit.โ
Image: Getty/blackred
WATCH: The Dangers of Raising Money For One ThingโAnd Spending It On Another
Church leaders would do well to pay attention to this fraud lawsuit against a Michigan archdiocese.
In this update, Church Law & Tax Editor and Attorney-at-Law Matthew Branaugh highlights a fraud lawsuit out of Michigan to explain the risks of churches raising money for one thing, only to spend it for something else.
Child abuse scandals continue to garner widespread media attention as well as the attention of lawmakers nationwide. As more victims come forward, they learn that their stateโs statute of limitations prevents them from seeking damages.
In many cases, this includes claims against the perpetrator or, when relevant, the perpetratorโs employer through civil lawsuits. States are helping victims by changing or even removing these barriers.
This four-part series focuses on this continuing trend, helping churches and church leaders understand the potential ramifications.
This part looks specifically at the โdiscovery rule,โ an exception to statutes of limitation long available to victims. This is especially relevant to churches in states that have not extended or removed statutes of limitations. This rule also applies in states where extensions have been granted, but deadlines still exist.
Under this rule, the statute of limitations does not begin to run until a person โdiscoversโ that his or her injuries were caused by a particular event or condition, or, with the exercise of reasonable vigilance, should have discovered the connection. It does not matter how long ago the injury occurred.
The discovery rule has been applied most often in the following three situations:
1. Medical malpractice.
In some cases, medical malpractice is difficult, if not impossible, to recognize until after the statute of limitations has expired. Under the discovery rule, the statute of limitations begins to run when the patient knew or should have known of it.
2. Child molestation.
Some courts have applied the discovery rule in cases of child sex abuse. These courts have concluded that young children may โblock outโ memories of molestation for many years. The statute of limitations does not begin until the victimโs eighteenth birthday, or until the victim knew or should have known that his or her emotional or physical injuries were caused by the acts of molestation. Some courts that have applied this rule have limited it to victims who were very young at the time of the molestation. Adults who claim that they repressed memories of abuse occurring when they were adolescents often have a difficult time convincing juries that they are telling the truth.
3. Seduction of adult counselees.
Some courts have applied the discovery rule in cases of sexual contact between a minister and an adult counselee. These courts have concluded that adults who engage in such acts with a minister may attempt to repress their memory of them. They may also be intimidated to the point that they lack the capacity to file a lawsuit.
Key point. Any rescission or extension of the statute of limitations in child sex abuse cases, or any โrevivalโ of child abuse claims barred under prior law, presents extraordinary difficulties for a church that is sued as a result of an alleged incident of sexual misconduct that occurred many years ago. In some cases, church leaders cannot even remember the alleged wrongdoer, much less the precautions that were followed in selecting or supervising this person.
Several courts have been reluctant to apply the discovery rule in cases of child abuse. This is because of the difficulty of repressing knowledge of such events, especially for victims who were adolescents when the alleged abuse occurred. As one court noted, โThe discovery rule does not generally apply to claims from a violent assault because the plaintiff is usually aware of the assault.โ Doe v. Jesuit College Preparatory School, 2022 WL 2352953 (Tex. App. 2022).
Example.
A federal court in Vermont ruled that an adult who claimed to have been sexually abused by a nun some 40 years earlier could sue a Catholic diocese for his alleged injuries.ย
An adult male (the plaintiff) began receiving intensive psychotherapy for what he alleges were severe emotional problems. As a result of this therapy, the plaintiff claimed that he discovered he was the victim of โchildhood sexual abuse, physical abuse and psychological abuse.โ These things allegedly happened when he was a resident of a church orphanage.
The plaintiff filed a lawsuit against โSister Jane Doe” and various religious organizations allegedly responsible for hiring and supervising her.
The plaintiff alleged in his lawsuit that he had โused all due diligence, given the nature, extent, and severity of his psychological injuries and the circumstances of their infliction, to discover the fact that he has been injured by the sexual abuse.โ The diocese urged the court to dismiss the case on the ground that the statute of limitations had expired.
Under Vermont law, when a plaintiff sues to recover damages for injuries โsuffered as a result of childhood sexual abuse,โ the lawsuit must be brought within โsix years of the act alleged to have caused the injury or condition, or six years of the time the victim discovered that the injury or condition was caused by that act, whichever period expires later.โ
The diocese claimed that since the alleged abuse occurred over forty years ago it is reasonable to assume that the plaintiff should have discovered the cause of his injuries long ago. It also argued that forcing it to defend against an alleged injury occurring so long ago violates the very purpose of a statute of limitations, which is to relieve defendants of the difficult if not impossible task of defending against such claims.
The court rejected these arguments and ruled that the statute of limitations had not expired on all but one of the plaintiffโs claims. It also excepted assault and battery, which the court deemed to be unrelated to childhood sexual abuse. The court observed that under Vermont law, the test is when the plaintiff in fact discovered that his injuries were caused by childhood abuse, and not when he reasonably could have made this discovery. Barquin v. Roman Catholic Diocese, 839 F. Supp. 275 (D. Vt. 1993).
โActive Concealmentโ and fraud can also extend statutes of limitations
Some courts have permitted the statute of limitations to be suspended in limited circumstances. This includes fraud or the โactive concealmentโ of the existence of a civil claim against a wrongdoer.
Example.
A Tennessee appellate court ruled the trial court wrongly dismissed a complaint against church entities involving sexual abuse by a pastor. The court found victims claimed church leaders hid the abuse and created a โwhitewash,โ amounting to fraudulent concealment. Because of this alleged concealment, the statute of limitations had not begun before the lawsuit was filed.
Doe v. Presbyterian, 2022 WL 1837455 (Tenn. App. 2022).
Editorโs Note: Child abuse scandals continue to garner widespread media attention as well as the attention of lawmakers nationwide. As more victims come forward, often years or decades after suffering alleged abuses, they learn their stateโs statute of limitations prevent them from seeking damages from the perpetrator or, when relevant, the perpetratorโs employer through civil lawsuits. These time bars have become subject to changesโand in some instances, outright removalsโby state legislatures in an effort to help victims.
This four-part series focuses on this continuing trend, helping churches and church leaders understand the potential ramifications. This part looks specifically at changes made by Congress as a way to offer victims a path to seek legal remedies if their statesโ statutes of limitations have not been extended.
Certain activities relating to material involving the sexual exploitation of minors
18 USC 2252
Certain activities relating to material involving the sexual exploitation of minors
18 USC 2252A
Production of sexually explicit depictions of a minor for importation into the United States
18 USC 2260
Transportation generally
18 USC 2421
Coercion and enticement
18 USC 2422
Transportation of minors
18 USC 2423
It remains to be seen how effective this legislation will be since most sex abuse claims are brought in state court. However, it likely will benefit victims of child sexual abuse whose claims are barred by state statutes of limitation.