The federal government recently passed the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act. This Act is the latest in a series of stimulus packages designed to boost the economy during the pandemic. The CARES Act contains help for businesses but that also applies to any organization, including churches, nonprofit organizations, and other charitable organizations.
Any church has its secrets. I don’t mean the “skeletons in the closet” kind. But spiritual life can be a highly personal and even private affair. Pastors and priests come into contact with some highly sensitive information, and they are sought out to provide spiritual counsel and direction in sensitive and confidential situations. The church itself is likely to be privy to information about its members that these individuals may not want shared. In certain circumstances, a church can be held liable for invading privacy. It is therefore important that a church take measures to ensure that certain information is kept confidential.
Passed in 1997, the Federal Volunteers Protection Act (VPA) was crafted with the purpose of limiting the amount of legal and financial liability that volunteers to nonprofit organizations—including unpaid Directors—might have otherwise been subject to for harms caused in the course of their service. In drafting the Act, Congress made explicit its goal to “promote the interests” of churches and nonprofits by providing“certain protections from liability abuses related to volunteers serving nonprofit organizations and governmental entities” (42 U.S.C. § 14501). The passage of the Act was in response to a decrease in volunteerism in society at large, which Congress attributed in part to a belief that church and ministry volunteers were facing financial harm because they were judged to have caused some sort of harm to others in the course of their volunteer efforts.
As part of the 2017 Tax Cuts and Jobs Act, a new tax was imposed on churches and other nonprofits that assigned a value to the concept of providing parking to employees—essentially treating employee parking as a form of “unrelated business taxable income” (UBTI). The Act referred to this provision of parking for employees as a “qualified transportation fringe” (QTF) benefit. This new tax would have resulted in many churches having to file tax returns and pay tax who had not done so previously. This new tax was a surprise to many nonprofits—and immediately sparked a great deal of pushback. The good news is that, because of the backlash, Congress recently repealed this tax.
Sad though it may be, churches are not immune to the threat of lawsuit. Indeed, the ever-increasing litigious nature of our society brings the courts into the business of churches at a rather alarming rate. This may lead churches to think that it is not a matter of whether a church is likely to get sued, but when. The question is: what should you do if you find your church suddenly subject to a lawsuit.
Churches are subject to many external laws and rules but the law, and the Church’s constitutional rights, give a church the ability to define for itself how it will be governed. Another way to put this is to say that churches have the right to set up the rules they will abide by as they go about their business as a church. This self-definition is generally laid out in what are referred to as “bylaws.”
When a director’s action or inaction comes under fire via lawsuit, the question of whether the behavior in question is covered by insurance policies owned by the church can become one of vital concern. The fact is, there are a number of different types of insurance available to churches that cover various forms of director behavior.
It may surprise many to learn that, where the Internal Revenue Service is concerned, there is a difference between how it classifies churches and ministries. It may be confusing on the surface but makes sense once you consider the differences in these two types of organizations.
Child abuse is considered by advocates to be a “hidden epidemic” in our society at large. And Arizona is no exception. We’ve witnessed recently churches and even entire denominations reeling from allegations of abuse cover-ups. One of the top reasons churches end up in court is related to child abuse. The question arises often—what are the obligations of clergy when they learn of allegations or suspect child abuse? Arizona has adopted “required reporting” provisions in Revised Statute section 13-3620(A)-(B)—enumerating those people in specific professions that must report cases of child abuse or neglect. Clergy (as well as Christian Science practitioners) are listed among these mandated reporters.
Most churches in the state of Arizona are incorporated as nonprofit corporations. From time to time a church or religious nonprofit will cease to be necessary, for whatever reason. In that case, the nonprofit will need to be dissolved so that the legal entity ceases to exist and that all its responsibilities are discharged.
