Gain Knowledge about Church Documents

The following is an excerpt from Church Law & Tax Report's Four-Hour Legal Training Program for Church Boards:

Becoming knowledgeable about church documents is a critical responsibility for any church leader.

Church Charter

If your church is incorporated, the document you submitted to a court or to the Secretary of State is generally referred to as the “articles of incorporation.” It is a short document that contains the church's name, address, years of existence, initial board of directors, and a statement of purpose. When this document is recognized by the state and the church's corporate status begins, the articles of incorporation is called the “church charter.”

There are four things that church board members should know about their church charter:

• The church charter is the most authoritative legal document that the church has. In the event of a conflict between the charter and any other legal document, the charter will control.
• The charter may contain restrictions or limitations that the board should be aware of. For example, some charters impose restrictions on the sale or use of church property, the number of people who can serve on the board, or the amount of debt the church can assume. Others contain a reversion or dissolution clause specifying what happens to church property if certain events occur.
• The IRS requires the inclusion of certain provisions in the church charter. These include prohibitions on political activities and the payment of unreasonable compensation. Review your charter to ensure that this language is included.
• The length of your church's corporate life is established in the church charter. Many churches were incorporated years ago for a specified number of years. In some cases, this period expires without anyone's knowledge. The result is a lapse in corporate status and exposure to personal liability for board members. Your church charter should state that the organization's duration is perpetual. If it doesn't, you may want to consider amending your charter.

Church Bylaws

The church constitution, or bylaws, is the document that contains the church's rules of internal administration. Since it encompasses so many issues of church organization and administration, church members, as well as board members, you should be familiar with this document. Church bylaws often contain ambiguous language, and that ambiguity is a major source of church disputes. For this, and other reasons, it's good practice to have your bylaws reviewed occasionally by a local attorney.

Accounting and Financial Records

The third legal document with which church board members should be familiar is the organization's accounting and financial records. Remember, church board members owe a fiduciary duty to their church. It is the board member's responsibility to ensure that appropriate safeguards are implemented with regard to the handling of contributions, that cash and expenses are properly recorded and presented in the financial statements, and that the church is properly issuing receipts to donors for their contributions. Board members should review the finances of the church at each board meeting and ask questions about anything they don't understand or that seem irregular.

List of Members

In most churches, important questions of church administration are decided by the members. A current list of active, voting members can be a critical legal record, especially if members are empowered to elect pastors or vote on the purchase or sale of property. In addition, many churches have bylaw provisions that require a periodic review of the membership list to determine if it is up-to-date.

Minutes of Meetings

Your church records should include a complete set of all board and committee meetings. In addition, most churches conduct an annual business meeting and occasionally hold special meetings. Your church should also maintain a complete set of the minutes for these meetings.

Insurance Policies

Church leaders should be aware of where the church's property and general liability policies are filed. They should maintain copies of all insurance policies indefinitely. Claims sometimes arise from events that occurred many years ago. If the church cannot document the insurance carrier and coverage on the date of loss, it may be impossible to obtain insurance coverage for the claim.

Tax Records

Tax records that church leaders should be familiar with include payroll tax forms, housing allowance designations for your pastors, contribution records, and any other forms you have filed with the federal government or you state or local government. For example, you may have records to confirm your church's exemption from property taxes or from state sales tax.

Corporate Annual Reports

In many states, incorporated churches are required to file an annual report with the Secretary of State's office. This simple form takes only a few minutes to complete, but failure to comply with this requirement can jeopardize the church's corporate status and expose board members to personal liability. If you are not sure if your church has consistently filed an annual report, contact a local attorney or the Secretary of State's office in your state capitol.

Employment Records

Your church should keep a set of well-organized employment records for each employee. These should include applications for employment, reference checks, information concerning disciplinary actions, attendance records, changes in employee status, the I-9 immigration form, and any other document relating to employees.

Property Deed

The deed to your church property may contain vital information for your church. For example, many church deeds include restrictions on the sale of church property. A common example is a donor who gives property to a church with the stipulation that it will belong to the church as long as it is used for church purposes. Many years later, when the church decides to sell the property and relocate, leaders discover the restriction.

As you can see, there are many documents that affect the life and administration of your church. Becoming knowledgeable about those documents is a critical responsibility for any church leader.
About the Author

Richard Hammar is an attorney and CPA for Church Law & Tax Report, specializing in church legal and tax issues. He writes the Church Law & Tax Report and Church Treasurer Alert newsletters. He is the author of 25 books on legal and tax issues for churches and ministries.

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