Ethics of the ownership of church assets

[Ben Zartman]

In the revision and review of our church constitution I've mentioned in other recent threads, it has come to light that our two elders and one of the deacons are the legal officers of the 501c3-equivalent in our state for the incorporation of the church. (Different states have different requirements).
This means that they 3 have legal authority to: determine their own salaries (only one pastor receives a salary: the other receives a stipend, and the deacon is unpaid), sell the building, buy other properties, etc. There is no finacial oversight by anyone but them: they made it very clear to the church at our last business meeting that the elders are not accountable to the assembly for how money is spent. The financial report they publish is just a courtesy.
I have no accusations of wrongdoing to make: per the state, this arrangement is perfectly legal (as long as it's published in the by-laws), but my question is: is it an ethical arrangement for a minister who is the only paid employee of the church to be the one with sole discretion over the bank account which pays his wage? In this case, the paid minister is also the president of the board of 3 who can buy, sell, disburse, and own at their sole discretion.
Am I wrong to be a little leery of an arrangement where a very small group, if the church dissolves (which the 3 can do at their discretion), would find themselves with some very large assets in their hands? Again, I have no suspicions of evil intent, but as a general principle, since this arrangement may carry on into future generations, I'd like to know if this is normal and acceptable.

 

[Ed Walsh]

501c3

Many years ago and to this day I am very very much against churches obtaining 501c3 Incorporation. It basically says that the state grants personhood and life to the church who has sought for their protection. I don't have time to get into it now but I know a lot about it and the potential evil that it can create is like a bomb that could go off anytime our government sees fit to detonate it.

Just consider the symbolism of it, the state grants eternal life to the church. Eternal as long as they keep the rules. One of the rules is that they agree not to speak politically from the pulpit. Another rule is that the church must demonstrate that they serve a public rather than a private cause. Ponder that one for a few minutes.

Besides churches do not need to seek incorporation from the state in order to be tax exempt. Churches by their very nature are tax immune and need no further blessing from the secular state. Look it up. You'll see that I am 100% correct.

I know I didn't address your question directly. But it makes my blood boil every time I think of what churches are exposing themselves to by 501c3 rules.

 

[Jerusalem Blade]

Ben,

I would think that the safest and most equitable thing would be for the congregation to have a substantial say in these matters. The congregation supports and sustains the church. That should be written in the bylaws. As a general principle. Unless the elder and the other two were the ones who purchased and established the church themselves.

 

[J.L. Allen]

I wonder what the Presbytery would say...

In all seriousness, I think Rev. Rafalsky is right about the say of the congregation. Checks and balances are needed in such cases.

I had a friend run into a real ugly financial debate among the leadership at his Baptist church, which led to him leaving that church and eventually changing his opinion on church government (he's now serving a Reformed church). Even though the congregation had set the budget by vote, the slice of the pie was adjusted in a way that cut him out despite his active pastoring duties as an elder. He had no recourse at the end of the day.

 

[Ben Zartman]

Many years ago and to this day I am very very much against churches obtaining 501c3 Incorporation. It basically says that the state grants personhood and life to the church who has sought for their protection. I don't have time to get into it now but I know a lot about it and the potential evil that it can create is like a bomb that could go off anytime our government sees fit to detonate it.

Just consider the symbolism of it, the state grants eternal life to the church. Eternal as long as they keep the rules. One of the rules is that they agree not to speak politically from the pulpit. Another rule is that the church must demonstrate that they serve a public rather than a private cause. Ponder that one for a few minutes.

Besides churches do not need to seek incorporation from the state in order to be tax exempt. Churches by their very nature are tax immune and need no further blessing from the secular state. Look it up. You'll see that I am 100% correct.

I know I didn't address your question directly. But it makes my blood boil every time I think of what churches are exposing themselves to by 501c3 rules.

We aren't 501c3 precisely: there's an equivalent for churches that our state uses, but in my mind it boils down to the same thing: we are allowed to own property tax-free, collect money and pay employees, by incorporating under certain state rules and filing an annual income report to the state. That doesn't bother me: we must render to Caesar his things, and our building is protected from violence by the police, guarded from fire by the Department, and accessed by public roads. The physical nation it's in is defended by public armed forces, and the very currency we use with caesar's image on it has its value upheld by the government.
I would have no problem paying property taxes if the government required it: Jesus gave Peter money out of a fish to supply a tax, and He could supply enough to render to Caesar if necessary.

 

[Ed Walsh]

I would have no problem paying property taxes if the government required it: Jesus gave Peter money out of a fish to supply a tax, and He could supply enough to render to Caesar if necessary.

For what it's worth, the 501c3 law says the churches are tax exempt without filing for tax exemption. The language is tax immune. It was an old president set when church and state were to remain separate entities. I don't know what your State's setup is, so there's that. But I do know that the Federal 501c3 has many many strings attached to it that a minister would not want to swear to abide by. Things a whole lot more detrimental than simply paying property taxes etc. I could look it up and post some links when I get a chance if you or anyone else was interested.

 

[MarrowMan]

For what it's worth, the 501c3 law says the churches are tax exempt without filing for tax exemption. The language is tax immune. It was an old president set when church and state were to remain separate entities. I don't know what your State's setup is, so there's that. But I do know that the Federal 501c3 has many many strings attached to it that a minister would not want to swear to abide by. Things a whole lot more detrimental than simply paying property taxes etc. I could look it up and post some links when I get a chance if you or anyone else was interested.

I'm interested. I've always been uncomfortable with 501c3 and the potential issues it presents (or may already have, I'm woefully undereducated here).

 

[Edward]

There are pluses and minuses to setting up a church as a non-profit corporation. It generally will provide greater, not lesser, legal protection for the members than with an unincorporated association. There are fiduciary duties that come into play, and potentially significant consequences if the board members use assets for personal gain.

That being said, proper controls and a level of transparency are needed to maintain trust.

I'd question either the intelligence or the integrity of a pastor who didn't insist on proper controls for his own protection. Small churches can't afford the level of sophistication that I'd expect at my church. But they should be able to set up basic controls.

Members can always vote with their feet and with their wallets if they don't trust the leadership to properly steward the money.

 

[TheInquirer]

they made it very clear to the church at our last business meeting that the elders are not accountable to the assembly for how money is spent.

If that is as bad as it sounds, I would be extremely concerned. Massive red flag if there is a resistance to financial transparency in my opinion. An honest person welcomes accountability and helps in properly stewarding resources given by God’s people.

 

[Ben Zartman]

If that is as bad as it sounds, I would be extremely concerned. Massive red flag if there is a resistance to financial transparency in my opinion. An honest person welcomes accountability and helps in properly stewarding resources given by God’s people.

There is some transparency in that we are told where it was spent at an annual business meeting, but the assembly is not consulted about upcoming expenses, disbursements, or whether the church should invest in this thing or that. It is simply done, then reported later.

 

[No Other Name]

I'm interested. I've always been uncomfortable with 501c3 and the potential issues it presents (or may already have, I'm woefully undereducated here).

I second this post @Ed Walsh

 

[Edward]

https://www.irs.gov/pub/irs-pdf/p1828.pdf

Generally those who want to steer clear of tax exempt status for their churches fall into two groups - those who want to use the church for partisan political activities (see, generally pages 6-18 of the PDF), and those who want to line their own pockets (page 5 of the PDF).

The unrelated business tax rules generally aren't a problem, if the church is running a profitable business (renting out a parking garage, for example, they just need to keep proper records and pay taxes on what the business generates. So that generally shouldn't be a factor.

Flip side of the matter - most of the churches represented here may not have many members who can take advantage of the deductions for charitable contributions anyway. So some of the incentive to go with a 501(c)(3) designation aren't there.

As another side note, Section 7611 of the Internal Revenue Code places significant restrictions on audits of churches by the IRS. In any event a tax lawyer (and probably a CPA that practices in this area) should be consulted in making any decisions on relationships with the IRS.

Things a whole lot more detrimental than simply paying property taxes

501(c)(3) doesn't have anything to do with property taxes. It's federal, property taxes are going to be governed by state law. (501(c)(3) also doesn't have anything to do with incorporation status).

If a church doesn't want to incorporate, that could hinge on something to do with a particular state's laws - a lawyer that practices in that jurisdiction should be consulted. If a church wants to avoid 501(c)(3) status, I'd suggest a deep dive into what is going on with church leadership.

 

[SolaScriptura]

I'd question either the intelligence or the integrity of a pastor who didn't insist on proper controls for his own protection.

Then you'd LOVE me! I insist on all sorts of controls for my protection!