One of the persons considered most knowledgeable on legal matters for churches and ministers is Richard R. Hammar. An attorney and CPA, Hammar not only serves as general counsel for the Assemblies of God, he also authored the respected reference book Pastor, Church, & Law, writes the bimonthly Church Law & Tax Report, and speaks frequently on church legal issues. What are the most significant legal developments for churches? Hammar reviews some recent cases.
Law is more a turbulent stream than a quiet pool. And those who don’t foresee where legal currents are flowing may fail to gain its benefits or-worse-find themselves awash in legal trouble.
Where once most pastors and churches remained reasonably unaffected by legislatures and courts, today that is no longer the case. The law has found the church, and the meeting hasn’t always been amicable.
Here are several important developments to keep in mind.
Big Dollars for Childcare
Your church could be eligible to receive significant funds for daycare ministry.
In October 1992, the Child Care and Development Block Grant Act of 1990 made substantial federal funds available to both nursery schools and moderate- to low-income parents, yet hardly anybody knows about it. According to provisions in the act, parents and school operators are supposed to have access to these funds, but government offices seem to be sitting on the money.
Here’s how the act is supposed to work: Working parents with lower incomes will be eligible to receive certificates they can exchange for childcare at approved providers. What is revolutionary about this law is that churches can be among those approved facilities. Yes, parents can pay for their children’s care with federal certificates-even in schools with a religious component to the education. Preschools will also be eligible to receive direct grants through this program, although this second kind of aid will not be given to religious schools.
Studies show both secular and Christian parents overwhelmingly prefer a church daycare center for their children. Once word of the program gets disseminated, churches with daycare likely will see a dramatic increase in interest from families who before couldn’t afford the costs. Churches may want to look into this to plan for next fall’s enrollment by calling their state legislators for information.
The Safest Place in Church
Churches may be at risk if they don’t carefully screen nursery workers.
Many churches use volunteer workers who may be selected without an interview or background check. Should an incident of abuse or molestation occur, however, the church faces substantial legal liability on the basis of “negligent hiring” or “negligent supervision.”
A 1991 Alaska Supreme Court case-Broderick v. King’s Way Church-dealt with the case of a three-year-old girl, left in the church nursery, who showed signs of being molested and identified the head nursery attendant as “the mean lady … who hurt me.”
Although a counselor and psychologist agreed that the child had been sexually abused, the police concluded their investigation without bringing charges. The mother then filed a lawsuit against the attendant and the church, claiming the church was responsible for the child’s injuries. A trial court dismissed the case on the grounds of insufficient admissible evidence.
The Alaska Supreme Court reversed the trial court’s ruling and ordered the case to proceed to trial, giving credence to the testimony of both the professional counselors and the child.
Next the court turned its attention to the liability of the church. The mother claimed the church was negligent by failing to investigate the attendant’s background, which included sexual abuse as a child. The court held that dismissal of the case should have happened only if the church “could not have reasonably known about any propensity of [the attendant] to abuse children.”
The court observed: “We consider it self-evident that the selection of individuals to whom the care and safety of young children will be entrusted requires a relatively high level of care before it may be considered reasonable.” The church hadn’t exercised due care in screening the attendant, according to the court.
The fact that the attendant was an unpaid volunteer was no excuse.
Although this ruling isn’t binding in courts outside Alaska, the decision nevertheless may be given special consideration by other courts because of its extended discussion of church liability. Here’s what we learn:
The testimony of very young children may be admissible in court.
A church may be liable for acts of child abuse even if the perpetrator is not prosecuted criminally.
Churches need to check the backgrounds of volunteers as well as employees.
Churches have a legal duty to exercise a “high level of care” in hiring children’s workers, and this duty includes at least two components: (1) An interview to determine if the worker was a childhood victim of abuse and if that affects the person’s competency, and (2) an adequate “background check.”
The court didn’t define a background check, but it would be safe to assume such a check would require at least the completion of an application that includes church-membership history, prior church work with minors, and the identification of references. Churches and references identified in the application should be contacted to determine the applicant’s suitability for working with minors.
Let me offer three further strong suggestions:
Use the two-adult rule, which requires that two adults be present in the nursery (or during any children’s activities) at all times.
Apply the six-month rule, a policy that restricts eligibility for positions involving the custody or supervision of minors to people who have been members for at least six months.
Exercise adequate supervision of nursery workers. Screening can protect the church against the charge of negligent hiring, but churches must also supervise workers to avoid claims of negligent supervision. Regular, unannounced visits by a supervisor should be the minimum supervisory practice.
When Is Arbitration Impartial?
Many churches are embracing arbitration as a way to spare the excessive money, time, and acrimony of litigation. The problem, however, is that both parties must agree on the arbitration arrangements. That wasn’t the case with a church in California.
A local Assemblies of God church voted in 1989 to disaffiliate from the denomination because it considered new bylaws by the district council adversely affected the sovereignty of affiliated churches. The district insisted that the church agree to arbitrate the dispute, relying on a provision in the existing bylaws that required submission to binding arbitration of disputes.
The bylaws, however, required that the panel of three arbitrators be ordained ministers in good standing-active, cooperative, and financially current with the district. The congregation refused to arbitrate the dispute with such a panel of “non-neutral arbitrators,” and the district filed a petition with a civil court to compel arbitration. The trial court agreed with the church, and the district appealed.
The California state appeals court refused to enforce the binding arbitration procedure, relying on a 1981 decision of the California Supreme Court. That court decision had stated that “some minimum levels of integrity” are required for an arbitration procedure to be accepted and enforced. That level isn’t met when one of the parties in the dispute (or someone “whose interests are so allied with those of the party that, for all practical purposes, he is subject to the same disabilities which prevent the party himself from serving”) is named arbitrator. The district’s panel of arbitrators composed of members in good standing was considered unfair to the interests of the local church.
The importance of this decision (Southern California District Council of the Assemblies of God, Inc. v. Sonlite Tabernacle) represents one of the only court rulings to address directly the enforceability of a church arbitration procedure. The case illustrates that such procedures, to be legally enforceable, must satisfy some “minimum levels of integrity,” including the selection of arbitrators who are impartial and not closely related to one of the parties.
This requirement should present little difficulty for religious organizations desiring to implement arbitration policies. Consider the court’s ruling a clarification rather than a setback.
Taxes: More or Less Taxing?
New tax developments may affect your wallet. I especially urge ministers to consider these factors:
The earned income credit has been liberalized for 1992. This important benefit is available to many younger clergy earning less than $22,370 annually (including a housing allowance). Pastors with modest income and at least one child living at home should look into the instructions on IRS Schedule EIC. The credit can lower taxes by as much as $1,000 or more, yet many who qualify for this benefit are not claiming it.
The United States Tax Court reaffirmed the so-called Deason rule in a 1992 decision (McFarland v. Commissioner). This rule states that a minister cannot deduct unreimbursed business expenses to the extent that they are allocable to his or her tax-exempt housing allowance. For example, if a pastor earns $40,000, made up of $20,000 in salary and $20,000 in housing allowance, or he or she can deduct only half of the unreimbursed expenses.
This is a disturbing decision, because it perpetuates an erroneous position. Pastors cannot pay for business expenses using tax-exempt housing-allowance money because that money must be used entirely to provide housing. Thus, none of the business expenses should be allocable to the allowance; the complete amount should be deductible from salary. As things stand now, however, pastors must abide by the IRS ruling, like it or not.
Fortunately, the problem can be rendered moot if churches reimburse pastors’ business expenses through an accountable reimbursement plan. In this plan, the pastor submits validated receipts of legitimate business expenses to the church, and the church reimburses the pastor. As long as the place, time, date, business purpose, and people involved are noted on the receipts, the reimbursements are not counted as income, and no reports or deductions are necessary.
–Richard R. Hammar, Springfield, Missouri
with James D. Berkley, LEADERSHIP contributing editor
Adapted with permission, from Church Law & Tax Report. (c) 1992 Church Law & Tax Report.
Pastors don’t need to become lawyers to practice their ministry, but keeping an eye on the legal climate can help them avoid calamities. One way to do this is by subscribing to Church Law & Tax Report, which, six times a year, covers the most salient legal and tax matters for church leaders. Christian Ministry Resources (P.O. Box 1098, Matthews, NC 28106; 704-841-8066) makes it available for $39 a year.
Copyright © 1993 by the author or Christianity Today/Leadership Journal. Click here for reprint information on Leadership Journal.
