TAXING YOUTH MINISTERS

Most cities, counties, and states would not contest whether in any recognized and established denomination or church a parsonage owned by the local church inhabited by a Youth Minister would be a tax exempt residence.  Indeed, most would not do discovery over whether a Youth Minister was really a “minister” whether ordained or not.  Most would not have the courage to delve into whether religious doctrine permitted women to serve in ministry.  Most courts would not allow such inquiries and would treat them as barred by the Ecclesiastical Abstention Doctrine and the Ministerial Exception.  However, when courts snore, justice remains truly blind and ineffective.

In Trustee of the New Life in Christ Church v City of Fredericksburg, 595 US ___, Slip Op., Dissent of Denial of Certiorari (Gorsuch, Justice) (2022), the City of Fredericksburg conducted all the inquiries described in the introductory paragraph.  The City of Fredericksburg declared that no local church in the Presbyterian Church in America could have a Youth Minister that was not ordained, that no woman could be “ordained” in that denomination, and that only “ordained” ministers residing in parsonages could qualify the church owned parsonage for tax exemption.  The City took the position that “a church’s religious rules are “subject to verification” by government officials.”  The trial court did not reverse the City or otherwise refuse to enforce its edict.  On appeal to the Virginia Supreme Court, that court declined to review the judgment.  The church sought certiorari to the United States Supreme Court but that court refused to hear the case.  The dissent by Justice Gorsuch followed.

On the revenue side, cities, counties, and other levels of government are more like vampires than tax umpires.  Only very brave and dedicated elected officials can stop such nonsense.  The strange thing about the reported case was that as soon as the city government’s obvious effort to rule upon “church rules” became apparent, the local church should have sought, but did not, federal relief in a proceeding based upon §1983 or even the Religious Freedom Restoration Act.

OBTAINING FAVORED TAX TREAMENT

Church and parachurch organizations should be outside of and not liable to most United States tax structures simply because the taxing government would be required to involve itself in church governance to determine what is “income,” “gifts,” “bequests,” or other types of income for tax purposes.  However, and rightly so, the taxing authority must have the church or parachurch organization identified and its status as a church or other non-profit entity verified in an application process.

In Alearis, Inc. v United States, Order and Opinion (US Claims 2022), the federal Court of Federal Claims dismissed the Plaintiff’s challenge to certain actions by the Internal Revenue Service (“IRS”).  The Plaintiff was a parachurch organization and its sole owner and “member” was allegedly a church.  The Plaintiff sought from the IRS a classification as a non-profit foundation and requested an official determination.  After six months without a response, the Plaintiff contacted IRS and learned that IRS was trying to determine why the Plaintiff sought a “reclassification” rather than a classification.  The Plaintiff clarified their application as one for “classification.”  The IRS refunded the fee for the request for classification because the Plaintiff never obtained a formal exemption as a non-profit by submitting the correct form and user fee.  Rather than trying again, the Plaintiff sued in the federal Court of Claims.  The federal court held because the Plaintiff never obtained a determination or a denial as to its classification as a non-profit foundation, there was no IRS decision to review.  The Plaintiff argued that it should be exempt under the Ecclesiastical Abstention Doctrine from completing the IRS application process because to do so would disclose publicly “protected church information.”  The Court held it could not determine whether or not Plaintiff was a “church” as defined by the Internal Revenue Code on the information provided.  Plaintiff sought to have the record of its application permanently sealed but, again, failed to provide so much as an Affidavit alleging that disclosure would harm Plaintiff.  As a result, the record was unsealed and available to the public.

For those who generally disdain taxes, their necessity and the procedures for determining what is owed, nothing said here would be useful.  Generally, while to the uninitiated IRS forms are byzantine, tax and legal professionals are available to assist for reasonable fees.  Secret religious doctrines need not be disclosed.  Typically, even new and alternative religious groups can successfully describe themselves so as to generically qualify for tax exempt status.  Most tax and legal professionals are fully capable of the creative writing it may be required to describe in truthful generic terms a new or alternative religious belief for completion of IRS forms.

TOO LONG THE WAIT

How long does a denomination or local church have to investigate sexual misconduct allegations against personnel?  Most governing documents that address the question, and most are actually altogether silent or do not differentiate such allegations from other matters of discipline, do not set a time limit on investigations or discipline.  Stated another way, must the duration of such an investigation be “reasonable?”

In Taylor v Evangelical Covenant Church, 2022 IL App (1st) 210524, Slip Op., the trial court’s decision to dismiss the case with prejudice was affirmed.  The Plaintiff was suspended by the denomination from pastoral duties in 2017 pending investigation of a sexual misconduct claim alleged to have arisen in the 1970s.  The defendant denomination licensed pastors and had the authority to suspend them.  The defendant denomination investigated during 2017 – 2018 and reinstated Plaintiff’s licensure but did not reinstall him in another local church as pastor by the time suit was filed in 2020.  In the interim the local church that previously employed Plaintiff hired a replacement.  The Plaintiff alleged the denomination violated its governing documents by “keeping Plaintiff in a suspended status for an unreasonably lengthy period.”  The appellate court determined that the substance of Plaintiff’s pled claims related to “internal matters of church governance and discipline” including the claim about undue or unjust delay.  Therefore, the Ecclesiastical Abstention Doctrine precluded court review.

The governing documents need not set time limits on investigations, discipline, or any other matter of internal church governance.  Indeed, it is probably better that they do not.  The actual procedures the denomination used on the fifty year old sexual misconduct allegation were not set forth in the opinion.  Nor was there any report of whether the investigation found the allegations credible.  The reinstatement of the licensure of the Plaintiff seemed to indicate the allegations were not found credible.  That the Plaintiff had not be reinstalled as a church pastor may or may not indicate anything other than supply and demand given the lack of specifics in the opinion.

UNINCORPORATED CHURCH ASSOCIATION DISORDER

Unincorporated church associations are governed, in some states, by a “non-profit organization” statute.  Such a statute may impose on the church association certain requirements to disclose financial records to members of the association.  An unincorporated church association can also have a Constitution and Bylaws.  The trap for the unwary is that such Constitution and bylaws, while not identical to those of an incorporated church, will not be effective as governing documents if they lack specificity similar to corporate cousins.

In the case of In Re Lee Edward Thomas, Slip Op. (Tex. Civ. App. 6th 2022), the Constitution and Bylaws of the unincorporated church association did not specify the procedure for termination of the pastor but did specify the procedure for hiring the pastor.  The same documents also described duties of a finance committee but did not disclose the method or procedure for appointment of finance committee members.  When the church split spilled into the street, each faction claimed it represented the congregation.  At stake was control of the church property and several hundred thousand dollars.  The bank holding the money threw up its hands and sought to interplead the money.  The trial court held the issue of the employment, or unemployment, of the pastor was outside the jurisdiction of the court because of the Ecclesiastical Abstention Doctrine.  Because the Constitution and Bylaws did not specify the method of selection of the finance committee members, their appointment was a matter of church governance, claims about which were barred by the Ecclesiastical Abstention Doctrine.  The court could not determine whether the allegedly voting members were in fact members because the church had not maintained an official membership roll.  However, embezzlement, conversion and breach of fiduciary duties claims were retained to the extent they could be decided by Neutral Principles of Law.

Unincorporated church associations have the same needs for governing documents and membership rolls as do incorporated churches.  The governing documents can certainly be inspired by the religious beliefs of members but the practical, secular, and, yes, worldly aspects should be drafted by a lawyer consistent with state statutory requirements.  Governing boards of unincorporated church associations should keep minutes just like incorporated churches and for the same reasons, such as documenting adoption of an annually updated membership roll and amendment of governing documents.  Without such, the unincorporated church association will fall into disorder which will be laid bare in an internal dispute.