Pastors have been publishing their sermons for centuries. Talented worship leaders often record and share their music. One might assume that the person who creates a work owns all rights to it. But copyright law isn’t that simple. Learn how your ministry can avoid costly misunderstandings over intellectual property rights.
Let’s say that a church’s full-time worship leader writes songs that are used during worship services. Later, she decides to sell a collection of her lyrics. Who owns the rights to publish them?
If you chose option “2,” you are correct!
Generally, ministries own the rights to creative works that full-time employees develop for ministry use, unless there’s a written agreement transferring ownership to the employee. There are exceptions, but much of the material a ministry employee prepares could be considered “work for hire.”
A section of copyright law that deals with “works made for hire” can apply to a wide variety of material, including written works, music, art, and sculpture. Basically, the law says an employer holds the copyright to works an employee prepares within the scope of his or her job. A ministry would also hold the copyright to work it specifically orders an outside contractor to create, such as a sculpture or painting.
Courts generally look at how much control an employer has over employees and their work when determining if someone would be considered an “employee” under copyright law.
“The closer an employment relationship comes to regular, salaried employment, the more likely it is that a work created within the scope of that employment will be a work made for hire,” the U.S. Copyright Office states.1
Even if pastors were to write sermons at home, outside of office hours, an argument could still be made that those sermons are works for hire, according to Richard R. Hammar, senior editor of Church Law & Tax Report. That’s because creating sermons is one of the most important functions a pastor performs on behalf of an employing church, Hammar writes.2 For more, see the Essential Guide to Copyright Law for Churches.3
Before any disputes arise, consider creating a ministry policy about intellectual property ownership that employees must read and sign. Such a policy could be incorporated into your ministry’s employee handbook. After employees read the handbook, have them sign a form saying that they understand and agree to follow all of the handbook’s policies.
A definitive agreement between the ministry and its employees about who owns the works employees create could help your ministry avoid costly misunderstandings—and lawsuits.
Let’s say that a pastor would like to own the sermons he has developed, so he can use them later for a podcast. A ministry could use a signed agreement to transfer its ownership rights to the pastor.
Any agreements to transfer the intellectual rights to the works must be very clear as to what exactly is being transferred. A ministry may wish to retain a license to use the works in some manner, such as streaming the content on the ministry's website. Otherwise, the ministry could face a copyright infringement claim if it were to use a sermon or song that it no longer owned.
Transferring intellectual property rights can involve some complex tax and legal issues.
Since intellectual property is an asset belonging to the ministry, transferring it to employees could be considered compensation for tax purposes. If so, it may need to be included as part of an employees’ wages, tips, and compensation.
Not only that, but a ministry could run into tax trouble if the copyright transfer appears to benefit someone with authority or influence over the ministry, such as a pastor.4
It’s a good idea to have professional help. Ask a local attorney experienced with intellectual property law to draft a contract transferring copyright ownership while protecting the ministry’s rights.
Let’s say that your ministry produces and sells a Bible study based on a sermon series your pastor has preached. The ministry retained ownership rights to the content, so there’s no dispute over who gets the royalties. People across the country fall in love with the study, creating a huge demand for it. This generates a nice stream of income for your ministry. It also jeopardizes your tax-exempt status.
The royalty fee that a ministry receives from a copyright may be subject to unrelated business income tax (UBIT). If the ministry earns a substantial amount of its gross revenue from unrelated business income, it can lose its tax-exempt status.
If the ministry decides to give Bible study royalties back to the pastor who created the work, it could run into tax trouble by benefiting someone with authority or influence over the ministry.
Consider having a local tax attorney explore the implications of earning royalties from the sale of copyrighted material. You may also wish to visit the IRS microsite, www.stayexempt.irs.gov, which provides online training and information for nonprofits.
1. “Works Made for Hire.” Circular 09. U.S. Copyright Office. September 2012. https://copyright.gov/circs/circ09.pdf
2. Hammar, Richard. “Do Pastors Own Sermons?” Managing Your Church. February 13, 2014. https://www.churchlawandtax.com/blog/2014/february/do-pastors-own-sermons.html
3. Hammar, Richard. Essential Guide to Copyright Law for Churches. Christianity Today International, 2010. http://store.churchlawtodaystore.com/esgutocolawf.html
4. “Inurement and Private Benefit.” Tax Guide for Churches & Religious Organizations. Publication 1828. Internal Revenue Service. Revised August 2015. Page 5. https://www.irs.gov/pub/irs-pdf/p1828.pdf
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