The recent corporate and accounting scandals involving Enron, WorldCom, and other companies have resulted in several bills being introduced in Congress. Consider the following:
- The Sarbanes-Oxley Act of 2002 was signed into law by President Bush in 2002. This legislation imposes strict new requirements on issuers of publicly-traded securities. One provision makes it a crime to authorize personal loans to officers or directors. This provision only applies to companies that issue securities that are registered under the Securities Exchange Act of 1934 (publicly traded companies). This legislation will not apply to most churches.
- The American Competitiveness and Corporate Accountability Act of 2002 (H.R. 4095) was introduced in Congress in 2002, and had not been enacted at the time of publication of this newsletter. It contains several provisions that address "executive compensation." If enacted, this legislation would prohibit officers and directors from avoiding tax on funds set aside by their employer in a rabbi trust. This legislation would directly affect churches that have established rabbi trusts for the clergy or lay employees. Any developments will be reported in future issues of this newsletter.
- The National Employee Savings and Trust Equity Guarantee Act (S. 1971) was introduced in Congress in 2002, and had not been enacted at the time of publication of this newsletter. If enacted, it would treat any loan made by an employer to an officer or director as taxable compensation in the year the loan is made, unless the loan is evidenced by a promissory note or other written evidence of indebtedness, there is adequate collateral or security for the loan, and there is a fixed schedule of not greater than 10 years over which the loan is to be repaid in substantially equal installments. This legislation would directly affect churches that make loans to a pastor who is an officer or director. Any developments will be reported in future issues of this newsletter.