Quick-Reference Checklist
Here are key points churches should keep in mind:
- A “work made for hire” is any book, article, or music created by an employee during the course of employment.
- This includes work created on church property, during office hours, or using church equipment.
- In such cases, the employer owns the copyright.
- The employer can transfer copyright back to the employee, but only in a signed writing.
- Doing so may risk the church’s tax-exempt status due to possible “inurement.”
- It may also expose employees to intermediate sanctions.
- Sermons may not be considered works made for hire, even if created during work hours, although legal clarity is lacking.
Understanding Works Made for Hire
Church employees often create written or musical works on the job. But they may not realize they don’t automatically own the copyright.
Under the U.S. Copyright Act:
“In the case of a work made for hire, the employer is considered the author and owns the copyright unless otherwise agreed in writing.”
To Qualify as a “Work Made for Hire,” Two Conditions Must Be Met:
- The creator is an employee.
- The work is made within the scope of employment (i.e., during work hours, at the church, with church equipment or staff help).
Even if a staff member is considered self-employed for tax purposes, courts may still deem them employees under copyright law.
Real-World Examples
- Rev. B, the senior pastor, writes a devotional book at church during work hours using church equipment. There is no agreement about copyright. Result: The church owns the copyright.
- Rev. T, minister of music, writes songs at the church, using church instruments and supplies. Again, no agreement exists. Result: The church owns the songs.
- Rev. T writes music at home on weekends, using her own equipment. Result: She owns the copyright—it was created outside the scope of employment.
- Rev. T splits her work between home and church. In such mixed scenarios, courts examine factors like:
- Where most of the work occurred
- Which equipment was used
- When it was created (on/off hours)
- Whether she kept adequate records
Without strong documentation, courts rely on testimony from staff and witnesses.
Tax-Exempt Risk: Inurement
Transferring a copyright to an employee could be seen as inurement—a violation that may jeopardize a church’s tax-exempt status.
1. Transferring Copyright = Risk
Giving a copyright to an employee without reporting it as compensation may be viewed as diverting church assets.
The IRS forbids use of nonprofit resources for private gain unless compensated fairly.
Even if rare, the consequences of revocation are severe, so the risk should be taken seriously.
2. Church Retains Copyright + Bonuses Employee
A safer approach:
- Church retains the copyright.
- Royalties go to the church.
- Church pays a bonus to the employee, reported as taxable income.
✅ This avoids inurement and keeps tax-exempt status safe.
3. Encourage Staff to Create at Home
Churches can minimize risks by encouraging staff to:
- Do personal creative work off-site, outside work hours.
- Avoid using church resources for personal projects.
This clearly separates church and personal work.
4. Sermons May Be Different
While sermons written at church could be considered works made for hire, no court has directly ruled on this. A relevant precedent from academia (Williams v. Weisser, 1969) found that lecture notes created at a university belonged to the professor—not the school.
This may support the argument that sermons are not works made for hire.
Compensation Limits and Intermediate Sanctions
When a copyright is transferred to a staff member, and that work generates income, the IRS may treat it as excessive compensation.
Consequences:
- 25% excise tax on the excess amount
- 200% penalty if the excess isn’t returned to the church
- 10% tax (up to $10,000) on board members who approved the transaction
Who’s at Risk?
- Only “disqualified persons” (those with substantial influence) are liable.
- In most churches, this includes senior pastors but not necessarily junior staff.
Key Takeaways
- A church typically owns copyright in works created by staff during employment.
- Transferring copyright to the creator must be carefully considered, preferably with legal counsel.
- To avoid legal and tax risks:
- Use written agreements.
- Keep creative work separate from ministry duties.
- Report bonuses for creative work as taxable income.
By understanding copyright and compensation implications, churches can safeguard their legal standing and tax-exempt status.
