Richard Hammar on Churches, Taxes, Donations, and Liability
Date: April 6th, 2014

Houses of worship are legal organizations and, as such, are subject to a wide variety of laws and regulations regarding taxation, charitable contributions, and liability issues.  Alas, most congregants, and even a significant number of clergy, don’t pay much attention to the legalities of running such an organization.  Richard Hammar, an attorney and certified public accountant who specializes in legal and tax issues for clergy as well as running Christianity Today’s Church Law and Tax Report, joins us to discuss a smattering of these issues.

We begin our discussion talking about the National Association of Church Business Administration (NACBA), which serves as an umbrella organization for a variety of churches seeking to share information about management issues facing religious groups.  While we often think of churches or denominations existing in relative isolation, or only branching out ecumenically on theological issues, the existence of the NACBA is one example of a fairly large cross-denominational infrastructure that has developed to assist churches in navigating a variety of management issues.

To celebrate Tax Day (April 15th), we take up the issue of church and clergy taxes.  Tony naively asserts that church tax lawyers have very little to do since houses of worship are tax exempt, unlike houses of pancakes.  However, Mr. Hammar sets Tony straight by providing a long, yet incomplete, list of the multiple ways in which religious organizations are taxed, including property tax, income tax, sales tax and on and on.  This leads to a discussion of the recent controversy over the tax-exempt status of parsonages (houses for clergy on church property) and how this differs from housing allowances paid to ministers who live off-property.  (Hint: the latter are taxed.)  We also cover the recent spate of tax scams hitting religious workers, most notably in the Archdiocese of Seattle, and Rich explains how these problems can be avoided.

Our next topic covers the issue of large bequests to religious groups.  Using the case of Curran v Building Fund of United Church, Rich talks about some of the difficulties a church can find itself in when a wealthy individual suddenly changes his/her will and diverts millions of dollars away from relatives who were expecting it.  Not surprisingly, the relatives get mad and sometimes take the matter to court arguing that church leaders exerted “undue influence” in getting the person to alter their estate planning.  Rich details a variety of legal conditions that must be met to prove “undue influence” and talks about how churches can protect themselves from such legal challenges (e.g., allowing an outside party to manage the elderly person’s estate rather than a member of the church).  This leads to a bit of discussion about the litigious environment facing churches and how appearances in court may or may not tarnish the reputation of religious groups.

This discussion then transitions nicely to the issue of liability facing churches.  Mr. Hammar is quite aware of the large number of liability claims that face churches, anything from claims of sexual misconduct to personal injuries resulting from hayrides and aquatic events.  We note how the clergy are in a particularly vulnerable position when dealing with individuals who may be experiencing very difficult times in their lives and how this may lead to inappropriate conduct on the part of the ministers/counselors and/or false accusations being leveled against clergy members.  Rich explains how churches can minimize this impact.  We also cover a number of other liability issues that extend to pastoral outreach programs designed to take the congregation to the community.  Rich warns against the dangers of trampolines, yet acknowledges that everything we do involves risk and churches must think carefully about their pastoral programs, particularly youth groups.

We end with some general reflections about the legal environment facing religious organizations.  Despite the seemingly unending flow of problems confronting clergy and congregants, Mr. Hammar explains how his own personal faith keeps him optimistic.  Recorded: March 27, 2014.


Richard Hammar’s bio over at the Church Law & Tax blog at Christianity Today.

Pastor, Church & Law, by Richard Hammar.

Church and Clergy Tax Guide, by Richard Hammar.

Compensation Handbook for Church Staff, by Richard Hammar.

National Association of Church Business Administration.


David Wills on Religious Charity and Taxes.

Dan Hungerman on Religious Charity and Crowding Out.

Erik Stanley on Clergy and Free Speech.

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