Pastors Do Not Own Their Own Sermons!

By Raul Rivera

Most Pastors Are Unaware That They Do Not Own Their Sermons!

Many pastors have their sermons recorded on Sundays.  They are normally saved in church archives and later used to create sermon series that the pastor sells when he travels.  However, they are not aware that it is very likely that the pastor does not own these sermons, nor does he have a right to sell them for personal profit.  Why?  Aren't those his sermons?  Did he not preach them?  Aren't they his intellectual property?  Those are good questions.  Under current tax regulation, Treasury Regulation 53, if the sermon was recorded at a church service, using church funds, then it belongs to the church.  Any sales of sermons made by the pastor are classified as an excess benefit transaction and will result in penalties of 200% of any sermon sales.  Moreover, board members may also be liable for penalties of up to $10,000.00 each. 

Why is it an Excess Benefit Transaction?

Section 501(c)(3) prohibits any personal private gain from the church (this does not mean that you cannot earn a salary from the church).  This applies to all churches without regard to their 501(c)(3) status (Internal Revenue Manual - 4.76.7.11(1)).  When the pastor has his sermon recorded during a church service, it is usually done at a church service where he pastors.  In most cases, it is recorded with church owned equipment and church money.  At this point, if he takes his recorded messages and reproduces them, he is getting personal private inurement. Because of many other abuses that were taking place in the non profit and church worlds, Congress passed Section 4958.  It defines any personal private inurement as an excess benefit transaction.  Excess benefit transactions are defined as an special private benefits, outside of normal compensation, that are received by any person who is a member or exercises substantial influence or control over the church (4958(f)(1) and (2)).  Taking the sermons that you preached at the church's expense is personal private inurement and a violation of Section 4958(c)(1)(a).

Is There a Right Way For Me to keep My Own Sermons?

YES! As a matter of fact, getting this right is simpler than you might think.  A minister is described as a self employed individual under Section 3401(a)(9).  This section of the code allows for the minister to negotiate a creative license agreement with the church.  Under this agreement, the pastor retains his right to keep the copyright to his own intellectual property, and if the church records his sermons, he will be allowed to keep a copy.  In order to avoid an excess benefit transaction, the written agreement must describe how the church will transfer the recorded sermons to the pastor in a way that establishes that such transfer is in keeping with the purposes of the church.  Generally, churches have a clause in the purpose statement of their articles of incorporation which states that the church will spread the good news of the Gospel.  That clause is enough to allow for a sufficient agreement to be written which honors that clause.  Following are three different ways it can be done.
1.  Pastor that is on a salary: in order for the pastor to be on salary at the church, he must sign a compensation agreement.  As part of that compensation agreement you will want to include an article titled Creative License.  That article needs to state that the pastor retains his rights to any and all intellectual property he produces while employed by the church, and that he may use it as he sees fit in order to spread the good news of the Gospel.  It must also state that the pastor will reimburse the church X amount for each of the sermons of which he wishes to receive a copy.  As we teach in all of our conferences, the board of directors must hold a board meeting and approve the contract.
2.  Pastor that is not on a salary:  When a pastor is not on salary, an independent Creative License Agreement, covering the points in step one above, is signed between the pastor and the church.
3.  Pastor that is coming into an existing church:  When a minister is going to become the pastor of an existing church, at the time that an agreement is being signed for him to come, he has a little more negotiating power.  This is because he is not considered to be someone of substantial influence until he actually becomes the pastor and, therefore, at the time of signing the agreement he is not subject to the requirements of Section 4958.  As a result, the Creative License Agreement does not have to state that he will pay X amount for each of the sermons for which he wishes to receive a copy.  So long as that original contract is in place, he can continue to get copies at no charge.

How Much Should the Church Charge?

In my opinion, the charge for each sermon ought to be one that, when interpreted by an outside individual, seems fair.  Keep in mind that the charge is just a reimbursement to the church for wear and tear on church equipment.  Therefore, $3.00 to $10.00 for each copy should suffice.

I Have Never Given Thought to This Before; What Do I Do Now?

Correcting the problem may not be easy.  While the sermon is yours, the actual recording is not.  At this point, if you have already been using some of your sermons, a slightly different Creative License Agreement needs to be signed.  This agreement needs to mention the date in which the first sermon was preached, and should also state that you reserve your right to retain copyrights to all of your sermons. Furthermore, state that a fee of "x" will be paid to the church for each copy you receive. This guarantees that your sermons, from that day forward, are fully yours to use as you please.  It does not guarantee that the sermons you produced and sold before the date of the agreement will meet Section 4958 requirements.

The Church Board, Adding, Removing and Must Sign Documents

By Raul Rivera

Is there any special paperwork that has to be filed in order for someone to officially serve on the board of directors of a church?  How about a social procedure to join or to remove someone from the board?  Those are common questions that many pastors and leaders ask. 
These questions have been asked by so many pastors in recent months that we have added a whole new topic to our conferences for the upcoming seminar schedule.  We will cover in detail the letter of invitation to a board member, how to officially appoint members to the board, the documents that each member should sign when joining, and the follow-up annual statements that must be signed.  Additionally, we will cover the difficult topic of removing a divisive board member: the correct procedure to make sure that retaliatory legal attacks fall harmless on your ministry.
In the mean time, below are three documents that must be signed by board members.  If you are on the board of directors and you have never signed any of the big three documents, today would be a good day to learn about them.  We have added these documents to our conference manual (Pages 75-77) to make sure you maximize your church's level of compliance.
Conflict of Interest Statement:  To ensure that the board of directors follows best practices, each board member must annually sign a conflict of interest statement.  This is a supporting statement to the conflict of interest policy that must be in the church's corporate records.  In essence, this document contains 4 declarations, as follows. 1). The board member has a copy of the conflict of interest policy, 2). The board member has read and understood the policy, 3). The board member agrees to comply with the policy, and 4).  The board member understands that the church/ministry is a tax-exempt, charitable organization and that it must engage in activities that accomplish its purpose in order to maintain tax-exempt status.

Acceptance to Serve on the Board:  When a church/ministry adds a new board member, it is very important for that board member to sign an incoming board member statement.  This statement is composed of three declarations, as follows. 1).  The board member accepts the appointment, 2).  The board member will actively participate on the board, and 3). The board member agrees to submit to and abide by the constitution and bylaws of the church/ministry.  This is really important because the bylaws should have certain clauses such as common interest clause and the standard of living clause that protect the church in case the board member turns against the church and pastor.  Unfortunately, these things happen more often than one may think.

Waiver of Notice:  In order to avoid any issues with board meetings, every board member should sign a waiver of notice before a board meeting begins.  This is a particularly important document because it is defensive.  Many churches have had their board meeting legally nullified by courts because they failed to meet the proper notice requirements when conducting them.  In essence, the waiver of notice is a signed statement by each board member where they waive the proper notice requirements and attend the board meeting waiving that right.

Get it right before the year ends

It is in your heart to make sure that your church operates within the requirements of the law.  That is why you read this article.  However, do not wait for the New Year to make a resolution to do better with the church's legal compliance.  Start today, study, and invest time and money in acquiring knowledge so that when the New Year comes, you hit the ground running.  If you wait until January to start, it will be too late and you will probably quit by February.  Do not put off for tomorrow that which can and ought to be done today.

Pastor Duped Into Tax Fraud Scam Pleads Guilty

By Raul Rivera

It was late in the afternoon on a Monday morning in July and Pastor Tom was sweating bullets over the offering on Sunday.  "No matter how hard I try to prepare myself, summers are always tough on me", said the pastor.  "Attendance is up and down and finances always hit rock bottom . . . God, I need a miracle."  He shut off the light in his office and locked up for the day.

Summers can feel heavy on pastors

Being a full-time schoolteacher, Pastor Tom had 10 weeks off in the summer, which he always tried to use as an opportunity to serve the church in more of a full-time capacity than the usual school months enabled. Yet, during these precious summer weeks, it continually seemed that he had more time and plans that the church had finances to support. The drive home was lonely and quiet. There was no radio, praise and worship CD, or prayer. The only volume he could hear was the one created by his own negative thoughts.

From hopelessness to hope

Tuesday morning came really early and Pastor Tom was awake before the sun rose.  As he sat down in his den and looked out the window, he aimlessly reminisced about the days that led up to the launch of the new church...until his thoughts were focused on the doubts he was harboring regarding the call to start a church.  In what seemed like a minute, he was brought back to reality when he noticed his cell phone's ding reminding him it was time to head to the office.  Grabbing his keys, Pastor Tom left without saying goodbye to his wife and headed out of the door.  When he arrived in the office there was a voicemail on the church phone from a man who said he wanted to help the church in a big way.
Without delay, Pastor Tom called him back.  The man on the other line said he wanted to know if the church had any special needs with which he could be of assistance.  Of course, Pastor Tom shared how summers were hard on the church, and that without a miracle next Sunday, they would probably miss the rent payment that was due for August.
The man followed up on Pastor Tom's words by saying, "Well, it seems that I must have heard from the Lord, because I want to give to a great work, and one that has a need.  Here is what I want to do.  I have a sum of money-up to $20,000.00-that I want to give to your church."  Upon hearing those words, Pastor Tom tried to keep his composure as he responded enthusiastically, "That would be a tremendous blessing to our church!" "I need for your church to become our company's consultant and then bill us for it," the man on the other line continued,  "Don't worry, you won't actually have to spend any real time consulting; just bill us and we will pay it." Pastor Tom was so excited about the $20,000.00 that he instantly said, "Sign us up!" As the conversation neared its end, the man on the other line told Pastor Tom to just bill him over the next several months and his company would pay the church.  "To make it easier, the man offered, "I will come to your office with the invoices already prepared for you."  

The church gets its money

Sure enough, just like the man had promised, he came to the church office with several post-dated invoices and a check.  "All you have to do is mark it paid and deposit the check," he explained to Pastor Tom.  "It's simple," he continued, "Just wait for the funds to clear and then refund us 95% of the invoice in cash."  Time revealed that the man was true to his word and the church made $20,000.00.  Pastor Tom had to admit; with the church bills paid he sure did feel much better about pastoring.

A couple of years later

"Guilty, Your Honor!" Those words rang throughout the courtroom, as Pastor Tom pled guilty to tax fraud in a plea deal to reduce his sentence to less than one year.  The man who was supposedly a "blessing" to the church was sentenced to six years for tax fraud.  What happened?  What did Pastor Tom do?  While we do not know the facts concerning what happened in his heart, we do know that he participated in a tax scam and his church profited from it.  The man that perpetrated the scheme was trying to create fraudulent expenses on his business by paying invoices to the church and using them to substantiate an expense that was not real.  The church then reimbursed him 95% of the invoice in cash, which he took and used as he pleased.  He was able to evade over $200,000.00 in taxes, with Pastor Tom helping him, and Pastor Tom's church profiting from it.

Why these things happen

If you are like most pastors, you probably have entertained thoughts of God pouring out His blessing on your church by miraculously providing thousands-maybe millions-of dollars in ways that are inexplicable by human means.  Moreover, you have probably been struggling over the finances of the church and wondering if you will be able to make the budget this month.  That tension mixed with a little doubt can punch holes in your character and leave you vulnerable to scammers dressed in sheep's clothing.  Let me share with you three reasons why these things happen.
We are particularly vulnerable because we believe in miraculous provision:  As I mentioned earlier, there is a tension between miraculous provision and patient anticipation in the midst of unmet budgets.  There is a great mystery as to when the Lord chooses to move in our behalf with abundant provision and when He chooses to tell us to wait in anticipation.  Because we often live with the expectation of a miraculous provision, the propensity to believe that an otherwise strange proposition is from God is highlighted to the degree that we throw off the discipline of due diligence.
It is easy to be blinded to the details when the bank account is empty:  An empty bank account brings a pastor stress like no other.  It goes against everything we know and believe about God.  It is easy to remember the times that God provided for His people, but hard to accept that in most circumstances He did it when all else seemed hopeless.  This is the crucible of every pastor.  During this time a pastor must be even more diligent to be patient and not make a decision as a reaction to stress, which usually does not end well.
The feeling of exclusivity is tempting:  Let's face it.  We all love being a part of something exclusive.  Time after time, perpetrators of scams present them as exclusive offers that will soon be closed to the public; they want you to feel you have a short window of time to join.  Those who target churches do so on Christian affinity.  They invent elaborate stories of how God revealed to them a special secret to investing, or something of the like, that they want to share with you as a way to give back to the Kingdom.  The only problem is that the kingdom of which they speak is their own.

A shepherd's call

I have received countless calls from pastors who have entertained propositions that sounded too good to be true.  Whether it be through and unsolicited email, and offer to hold cash for a while, or and investment in Iraqi Dinars, a shepherd is to be disciplined in diligence.  After all, the life you save may be your own.

How to avoid being scammed

Pastor Tom could have avoided this issue had he set up a church government that provided for better accountability.  The church should have a simple, yet powerful, written policy on how income-producing activities are handled.  The policy should have the following elements:
1.     Who and how an income producing opportunity is approved
2.     No private inurement
3.     Due diligence and consultation
4.     What percentage of excess cash can be invested

Invest in your future

Many pastors across the US that have attended our conferences have received the empowerment needed to best position their churches for success.  Protecting your church's assets is more important than ever.  I invite you to attend one of our conferences this season.  We continually bring to you the latest information.  Our conference agenda and manual have been updated for the 2011/2012-tax year.  Not only will you get up-to-date information and strategies, you will also receive the newly released "church investment policy". 

Five Awesome Housing Allowance Tips to Keep You Out of Trouble

By Genel Rivera

It is not news to anyone that a minister of the gospel can designate some or all of his/her salary from the church as a housing allowance and then exclude it from gross income so that, in essence, he/she receives it tax-free.  Though this law has been in the books since 1921, many churches still largely misunderstand it.  This is mostly due to the inherent imagery that the words "HOUSING ALLOWANCE" create in the minds of church leaders.  What I mean is that when most ministers hear the words "housing allowance" they immediately think of a portion of money gifted to them to cover their housing needs.  This misconception causes ministers to think they are not on salary if they are getting paid a housing allowance.  Moreover, not only do they think they are not on salary; they are also unaware of the specific record keeping requirements.
While the housing allowance was designed to be a tremendous blessing to ministers, it can actually be an awful thing if it is not done right.  The IRS' Minister Audit Technique Guide has it listed as one of the top income issues facing ministers today!  Because of the persistent misunderstanding about the housing allowance, many ministers have been assessed major fraud fines and penalties for their failure to properly report it.
Such was the case with a minister whose tax return was audited.  The IRS denied his housing allowance for the previous two years because it did not meet all the requirements set forth in the regulation.  So instead of a tax savings, he was assessed penalties and interest that consumed most of his housing allowance.  With that in mind, following are three tips that will help you perfect your housing allowance.  We also discuss this topic in full and comprehensive details at all of our compliance conferences.
1.    Correctly document the housing allowance:  The regulation requires that the church properly document the housing allowance according to the prescribed rules.  Intention of the heart will not help you here.  In order for the housing allowance to be valid, it must be documented in writing "pursuant to official action" of the church.  That is done by the board of directors approving the housing allowance and documenting it in its minutes.  There is very specific wording that should be used in documenting it to make sure it meets the requirements of the regulation (Section 1.107-1(b)).  In particular, the wording must mention what I call the "least of three rule."  See tip No. 2.
2.    Know the "least of three rule":  This special rule is what may make or break the validity of your housing allowance.  The IRS regulation requires that a cap be clearly required and documented in housing allowance records.  This means that the maximum a minister can claim on a housing allowance is limited to the lesser of:

• the fair market rental value of the home (including furnishing, utilities, garage, etc.).  This requirement can be confusing.  We take extra time to explain this one to make sure it is understood.  Hint: it is not what you think;
• the amount officially designated (in advance of payment) as a rental or housing allowance, or;
• the actual amount used to provide a home, and cannot exceed what is reasonable pay for your services.

This tip also requires proper documentation.  You must make sure that every year you have adequate records to show the values of each of the above items.  Once that is substantiated with receipts and a housing allowance statement, one can rest assured it will pass IRS scrutiny.  I will explain in the next tip.
3.    Give it proper maintenance:  Like the preventative maintenance one gives to a car, the housing allowance requires that you do the same. Every year the church and the minister need to give the housing allowance proper maintenance and document it in its corporate records kit.  No document will do more than the housing allowance statement.  It is a form that we have created that lists all of the minister's actual qualifying home expenses.  It also contains a special formula that allows a minister to quickly calculate the "fair rental value" as required by the law.  Finally, the statement designates the next year's upcoming housing allowance and properly allows the church to renew it year after year.  This statement will be a lifesaver if you are ever audited.
4.    Make copies:  Always plan for the worst when it comes to taxes.  As a minister, I always kept a personal copy of my housing allowance records.  Though the church documented everything correctly, I always made the assumption that those records could be lost due to a fire, a flood, or just plain negligence.  If I ever got audited, I did not want to depend on old records kept by someone else.  This was even more important the three years following my resignation from the church we started in Florida.  The IRS can audit your tax return for up to three years after they have been submitted.
5.    Report it correctly:  Did you know that though the housing allowance is free from Federal Income Tax it is still subject to self-employment tax?  This is where many ministers miss it.  Not only do many churches improperly document it, most ministers do not report it on Schedule SE of their tax return.  The self-employment tax on the housing allowance as of 2011 is 15.3%.  Therefore, if a minister's housing allowance one year is $25,000.00, then the tax due is $3,825.00.  That brings us to another topic that I will cover in another article: applying for the exemption of self-employment tax.

How do I fix my messed up housing allowance?

Many pastors are not aware that the housing allowance cannot be set up retroactively.  What I mean is that if you have not properly documented a housing allowance for this year, you currently do not have one and you cannot go create one and make it retroactive to January 1^st of this year.  But there is good news!  You can set it up correctly beginning today.  (Treas. Reg. 1.107-1(b)) states that you simply need to designated it in advance.  This means that if your church officially designates it today, the rest of this year can be covered by a housing allowance.

Taking a Good Look at the Ugly Side of Your Ministry

By Raul Rivera

In 1995, my wife and I purchased 1 and 1/4 acres of vacant land in South Florida. Because the previous owner has used the property as "storage" for farm equipment, trash, and cars, it was quite an eyesore to the community in which it was located, and definitely not a very desirable piece of land.  In fact, at the time we purchased it, it was a really ugly piece of land containing holly bushes, saw-grass, and other types of unwanted trees. I knew that the land would require a lot of hard and backbreaking work if it were ever to become something beautiful.  The current condition of the land must have greatly discouraged others from valuing its potential, because NO ONE wanted that land, and that made the price very, very cheap!

It is too much work, so we will ignore it

Does that sound like your church's records?  A mess...all kinds of clutter...incomplete records, bad documentation and you are certain you have probably broken some laws but not sure which ones.  It is an uncomfortable feeling and the work to get in right looks insurmountable, so it seems better to just look the other way.
The same thing happened with the piece of land I purchased.  Because it looked like it needed so much work, the property just sat there; empty, with an old, worn out "For Sale" sign that had a phone number caked over in years of dust.  It was the amount of work required that scared everyone away.

Oh, by the way

Many churches today do services really well.  They plan every part of it from the greeting at the door, to children's services, worship, offerings, announcements, preaching and an altar call.  With so much excellence in ministry, why do the records and compliance with the law look like that piece of unwanted land?  It is because in many churches record keeping and compliance with the law is something that happens in an "oh by the way" focus of ministry.  Anything that you do as "oh, by the way" never gets the attention that it needs.                                          

Every problem has a solution

When I began to clean up the land, I found the chassis of a car, two transmissions, car doors, glass, chains, bicycles, tires and many more truckloads of trash. For everything that was steel or metal, I was able to get a steel recycler to come (at his cost) and haul it off.  Some of the trees went to a local sawmill, and the unwanted ones were cut down with the saw grass and burned.  After four months of hard work, a beautiful lot of land emerged with beautiful green grass, a couple of fruit trees, oaks and jacarandas.  What was such a sore in this rural community was now a delight.
Your church may need to go through the same cleanup process.  It may look intimidating because all you can see is an unbalanced check register, missing minutes, lost tithe records, undocumented reimbursements and poorly kept expenses.  You may even have received love offerings that were never reported, and feel uncertain about whether or not the housing allowance has been appropriately paid.  Those concerns are always in the back of your mind but they seem so big that it feels best to bury them and ignore them.

Put your hand to the plow

In Washington DC, there is a Hispanic church that had some issues with their church records.  In particular, they had been giving their pastor monthly freewill love offerings.  Moreover, the church paid all of the pastor's personal bills such as rent, water, light and natural gas.  The board of directors of the church approved the love offerings and payment of the pastor's home expenses, but their board meetings were all verbal.  No one kept minutes.  This went on for about ten months until one day the pastor and the church treasurer called me.  The administrator explained to me that he and the pastor were uncomfortable with the arrangements of the church and wanted to know if they were in error and how to fix them.
The U.S. Supreme Court has ruled that the "presence of a single nonexempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly exempt purposes," (Better Business Bureau of Washington vs. United states).  Their church, like most churches, had the three most common compliance issues.  Just one of these being wrong is enough to cause a church to lose its tax-exempt status.
1.    Love offerings
2.    Housing allowance
3.    Reimbursements

Digging through the past

One thing I admired about the Washington DC pastor and his treasurer was that they were not afraid to face their issues and fix them.  With my help, it took them almost nine months to get their records in order.   The most difficult part was digging through the past and fixing it.  Not too long ago, the church treasurer attended one of our conferences in Washington DC and testified about how their church finances and attendance had significantly improved since the time they gave equal priority to the business part of ministry.
It reminds me quite a bit of the land I purchased in Florida.  It just needed someone to apply the proper focus.  Because I took the time to correct the problems and to regularly maintain it, not too long after I moved in, many of my new neighbors asked how we were able to keep such a beautiful lawn.  My answer was always the same.  ¨You gotta stay on top of it. ¨

Surprise of the Year: 1000's of Ministries Lose Tax Exemption

By Raul Rivera

Many Americans that made tax deductible contributions after May 15th, 2010 will get a big surprise when they find out that those contributions were in fact not tax deductible.  This news comes to them because on June 8th, 2011, the IRS was forced by law to automatically revoke the tax exempt status of 275,000 organizations effective as of May 15th, 2010.
On June 8th, the IRS released a list of over 275,000 organizations that lost their tax exempt status.  The reason the IRS revoked their status was because these ministries failed to file 990 tax returns for three consecutive years beginning with tax year 2007.
In August of 2006, Congress passed a law that requires all non-profit organizations to file a 990 tax return every year regardless of how big or small the organization might be.      In the past, any organization whose gross income was less than $25,000 did not have to file a return.  Now regardless of income, every organization (except churches) have to file either a 990N, 990 EZ, 990 (long form) or a 990PF.  I will explain later which form you are supposed to file.

What happens if my organization is on the list?

The law clearly states that any organization that gets their tax exempt status revoked has to file federal income tax returns and pay taxes for the previous three years.  That may be a bad consequence, but it gets worse.  Not only will the organizations have to file tax returns, they also lose their ability to receive tax deductible contributions.  This can have serious consequences because many organizations that have had their exempt status revoked continue to receive contributions thinking they are tax deductible for their givers.

7 Consequences apply to an organization that has its tax exempt status revoked.

1.    It has to file federal income tax return form 1120 and pay taxes on its net income, with penalties and interest.
2.    It has to file state income tax returns and pay taxes on its net income, with penalties and interest.
3.    Because of the loss, many organizations that have sales tax exempt status will have to pay back to the state the sales taxes that it was exempt from paying, with penalties and interest.
4.    It can no longer accept tax deductible contributions.
5.    Donors may file civil lawsuits against the corporation, president, and board members personally, claiming negligence and failure to carry out their fiduciary duties.
6.    It will have to reapply to reinstate its status.
7.    It will have to explain to its donors why they lost their tax deductions.

Can the IRS reinstate tax exempt status?

In order for an organization to get back its tax exempt status, it will have to file a new form 1023.  This is still a better option than filing an 1120 tax return and having to explain to donors that the contributions they have made after may 15th, 2010 were not tax deductible and that they have to amend their tax returns and pay penalties and interest.  It is more than likely that many will hold pastors personally responsible for their tax reassessments and demand refunds with interest.  The IRS has issued guidelines that allow organizations to reapply to get back their tax exempt status; in some cases they will allow an organization to reapply and get a retroactive approval.

How do I know if my organization is on the list?

The IRS has published the list on its website and it can be searched by state at http://www.irs.gov/charities/article/0,,id=240099,00.html.  Please click the state where your ministry is located or was located at the time that you received your tax exempt approval. 

Two Clauses in Your Bylaws That Can Save You and Your Ministry

By Raul Rivera

When Pastor Dan started a church in Florida, his only dream and vision was winning the lost and preaching to the masses. He never imagined being falsely accused of embezzlement or accused of privately benefiting from the church's funds. But that is exactly what happened. A lady in the church was convinced that he was improperly using church funds and she raised up the accusation against him causing a big stink in the church.
What was Pastor Dan's response? How was he to handle such an accusation? Naturally, his first response was to look into Scripture to see what the Lord has to say. Instead of defending himself with confrontation and politicking, he chose to take the low road and turned the other cheek (Matt 5:39). Secondly, he looked to see what the church's bylaws had to say on the matter? Thankfully, Pastor Dan's bylaws contained two clauses that proved very helpful. I will share them later.

Tragedies of ministry bylaws

Tragically, there are untold numbers of churches in America whose bylaws do not give the pastor and founder real accountability. Scripture tells us that there is victory in a multitude of counsel. But counsel is fruitless unless we heed it. It has been God's plan since the beginning for us to need each other. On the contrary, an equally disturbing tragedy is the score of pastors who do not have any protection from membership accusations or runaway boards. They serve their churches wholeheartedly, unaware that their bylaws are either silent on these matters or that they dictate something that places their futures on the whims of their members or board. While voting memberships and boards may be a form of accountability under which many churches have existed for many years, after surveying many of these church types of governments, the list of injured and heartbroken pastors is endless. With that in mind, let me share with you the two clauses that saved Pastor Dan's ministry and maybe one day, yours.

1. The accountability board clause: The accountability board is a special board that is created by the pastor nominating three individuals who are neither members of the church nor of the board. The nominees are usually ministers of other churches/ministries, or individuals from which those ministries comprise their boards. The accountability board is not a board like the church board of directors (elders). They are not a part of the day-to-day activities of the church. They do not vote on church matters. Instead, they serve to give the pastor comfort, aide, counsel, correction, protection, and discipline. Their service to the pastor can come in the form of phone calls, visiting, vacations together, prayer times and more. But the most valuable service they can render to the pastor and church is their availability and involvement should the pastor ever be accused of wrong doing. You see, under the accountability clause neither the board nor the membership can discipline or remove the pastor. Instead, the board hears the accusations against the pastor and then votes on the merits of the accusations to decide if they will report it to the accountability board. If they are unanimous in their vote to report it to the accountability board, then the accountability board goes into session to weigh out all of the facts and circumstances and to decide if the accusations are true and what discipline is necessary. What makes the accountability board so powerful is that it strips the devil of his precise ability to divide and conquer. The accountability board has nothing to gain or lose except to know the truth. 
2. Request of church records clause: Every church's bylaws should contain a clause to properly handle when members request to see the church finances (which can reveal personal giving records or expose certain sensitive information). If you have yet to undergo accusations from someone in your congregation, you have probably not been a pastor or ministry leader for too long. It happens. The key is being ready. Having a clause that limits what a member can see or request is important.

Deficiencies in your bylaws

There is something that ought to be of great concern to every pastor and ministry leader in America. It is the fact that many church and ministry bylaws are deficient. What I mean by deficient is that when the bylaws are silent (lack) on certain matters, the states incorporation laws will take precedent on how the matter will be handled. The laws of many states automatically vest the membership to vote in and vote out the board and its president unless something is otherwise stated in the ministry's incorporation document and its bylaws.

When faced with an accuser, Pastor Dan took the complaint to his board who then took it to the accountability board. A full and thorough audit and investigation was conducted and the accountability board unanimously exonerated him. Had he not had any of these clauses, the laws of his state would have allowed the members to gather votes through a political process, and his whole ministry would have been on the line. Not to mention what it would have done to his heart.

Take the bylaws audit journey

Below are seven points worthy of great consideration. Are the provisions mentioned hereafter clearly and precisely stated in your ministry's constitution and bylaws? Has anyone looked at your bylaws to see if they are IRS compliant? Look at them carefully and be willing to face the hard truth. You never know what you might find or in many cases, not find.

1. Do you have a constitution AND bylaws? Some churches have only bylaws. This is very important because through the constitution you declare that the bylaws are subject to the Scripture references and doctrines of the church as interpreted by the board and pastor. 
2. Does your constitution contain a preamble that clearly declares your organization to be ecclesiastical and not just an ordinary nonprofit organization? 
3. Does your constitution contain a membership clause that clearly has a method for membership, how one becomes a member and how one is removed, as well as outlining membership voting rights? 
4. Do your bylaws have a member privacy clause? The privacy clause binds the church to keep all church member records private. 
5. Do your bylaws contain a standard of living clause? Huh? A what? A standard of living clause is one that requires all members, board and pastor to uphold a standard of living that is consistent with Scripture. This makes their status at the church dependent on how they live their day-to-day lives and not just how they behave in the church. 
6. Request of church records: As stated earlier, this clause should contain a provision that controls the method used by a member to review church records. This is different from the member privacy clause in that this clause allows the church the right to decide if the request is frivolous. It also requires the requester to list exactly what he/she wishes to look at and state a reason for the request as well as sign a statement that the information will be kept in the strictest confidence. 
7. Does your constitution contain a mutual interest clause? This clause protects the pastor or board from a defamation lawsuit in the event that there is an instance in which either an employee, member or board member faces church discipline or removal from the church. In many instances, it becomes necessary to share such information with the church from the pulpit. Many churches have been sued for defamation because the individual claims he/she was defamed when his/her information was shared with the church.

How did you do? While there are many other vitally important clauses that should be in your bylaws, this simple audit should give you an indication as to the conditions of your bylaws. As a matter of due diligence, every church should review its bylaws annually and make sure they contain the latest provisions. All it takes is one provision or sentence change and it may save your whole ministry. Our latest software product titled "Bylaws" takes an exhaustive approach that will ensure you have the latest and greatest set of bylaws.

Love Offerings--When They Are Taxable and When They Are Not

By Raul Rivera

The dialogue that surrounds the taxability of love offerings is similar to a pendulum swinging from one extreme to the other.  There are some that believe all love offerings are tax free, others that believe a love offering can never be tax free, and a whole group of folks that have no idea.  There really is a lot of confusion over this topic--to the degree that pastors from both large and small churches have been prosecuted and convicted of tax evasion over unreported love offerings.  It definitely matters that every church and pastor knows when a love offering is taxable and when it is not.  Let me detail for you some scenarios of when it is taxable and when it is not, and hopefully it will help bring some clarity to your ministry.

Why the confusion?

The confusion comes primarily because the term love offering implies a gift that is given because of love and respect for the recipient.  In the giver's mind it may be a gift, while in the IRS's mind it is compensation.  Herein lies the conflict.  Section 102(a) says, "Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance."   While the members of the church are truly giving a love offering as a gift, the IRS says it is taxable income because section 102(c)(1) says that "any amount transferred by or for an employer to, or for the benefit of, an employee" shall be treated as gross income.
So while the law clearly says that a gift is tax free, the very fact that the gift is given to the church and then in turn given to the pastor or leader makes it 100% taxable because of section 102(c)(1).  The law does make an exception for a gift given by the church to the pastor if it is under $25.00.

What if the church collects the offering but the members make the checks payable directly to the pastor?

There are many who have suggested a scenario in which the church takes up an offering for the pastor and they encourage the members to either give in cash or make the checks payable directly to the pastor so that it never goes though the church.  I spoke to a church administrator whose accountant suggested this idea as a way for the pastor to be fully blessed by the love offering. 
While this may sound like a good idea, the love offering is still subject to section 102(c).  The very fact that the love offering was organized and controlled by the church (employer) makes it taxable; it is no different to an IRS agent whether the checks were made payable to the church or directly to the pastor.  What is more, the possibility exists that the IRS could interpret the act as an attempt to defeat or evade a tax, if by having checks made directly to the pastor it appears the church is trying to keep the offering "off the books".  The United States Supreme Court ruled that section 7201 refers to the willful attempt to evade or defeat the assessment of a tax by preventing the government from knowing a person's true tax liability. Sansone v.  United States, 380 U.S. 343, 354 (1965).  Please see the court case below Charles E Banks and Rose M Banks v. Commissioner.

What if a member randomly gives the pastor a love offering after service?

The possibility of an individual approaching the pastor and handing him/her a check or cash as a gift is realistic.  In fact, it happens every Sunday to pastors all across America.  What pastors want to know is if the love offering is taxable or considered by the IRS to be a gift.   The waters may appear to be crystal clear that they are tax free gifts, but in fact they are murky.  Section 61(a) defines gross income as ". . . all income from whatever source derived . . ."  Section 61(a)(1) expounds by including "compensation for services."  Because of this definition of gross income, we have to look at the context surrounding the reason for which the church member personally gave the pastor the love offering.  In a situation such as one described here, a church member has just finished attending a service in which he/she received some intangible religious service administered by the pastor.  The typical pastor usually thanks the church member for the wonderful blessing and then pockets the gift without ever reporting it.  While there is no published guidance by the IRS, in the case, Commissioner v. Duberstein, (1960), the U.S. Supreme Court stated that "the mere absence of a legal or moral obligation to make such a payment does not establish that it is a gift . . . conversely, where the payment is in return for services rendered, it is irrelevant that the donor derives no economic benefit from it . . .what controls is the intention with which payment, however voluntary, has been made."
In this scenario it is easy to surmise that the motivation for the love offering was the services that the minister rendered in the worship service.

What if several church members get together on their own accord, decide to gather funds together, and present those funds to the pastor?

There are times when church members get together and collect money so that they may bless their pastor.  The strategy is that if it is not a church sanctioned activity and not mentioned from the pulpit, but done outside the church, then it constitutes a tax-free gift to the pastor.  In Charles E Banks and Rose M Banks v. Commissioner, T.C. Memo. 1991-641, the members of the church met amongst themselves to discuss the gifts to be given to the pastor. The court ruled that the church members' desire to reward their pastor for her past services constituted compensation and had to be included in gross income.

What about love offerings to a retired pastor, or one about to retire?

In the IRS' Minister Audit Technique Guide "there are numerous court cases that ruled the organized authorization of funds to be paid to a retired minister at or near the time of retirement were gifts and not compensation for past services." IRS Revenue Ruling 55-422 states that those types of payments are gifts and not compensation.  This is a unique tax benefit that ministers enjoy.  In essence, the requirements that keep this type of love offering tax free are as follows:

1. The payment was not made in accordance with any enforceable agreement, or past practice.
2. The pastor will no longer be rendering services to the church.
3. The recipient's relationship to the organization was greater than mere employment; senior pastors, founders, etc. have a deeper relationship with the church than regular staff or other hired pastors.
4. The recipient had been adequately compensated for his past service. These love offerings cannot be reminiscent of or connected to his early years of uncompensated, sacrificial labor.  It is very important that a church carefully calculate its words when presenting this from the pulpit.

The possibilities are endless

As you can see, love offerings come in many ways.  The bottom line in determining whether it is taxable or not is knowing the context in which the offering was given.  If you follow this guide, you will not go wrong.

How are love offerings reported?

There are several ways to report love offerings on a minister's personal tax return.  If the church gave the love offering to him/her, then it needs to be reported on a W-2.  If the offering was given to the minister by a church in which he was a guest speaker, then it should be reported on schedule C of the minister's tax return.  Additionally, he/she should receive a 1099-misc form if the love offering was $600.00 or more.  If a member or a group of members writes the pastor a check or hands him cash and the context under which the gift is given makes it taxable, the pastor should report it on schedule C of his/her tax return.

The golden rule

No one enjoys paying taxes, but the fact is they are here to stay.  We enjoy our roads, sidewalks and schools.  They are paid for by tax dollars.  Moreover, Scripture commands that we obey the laws of our land.  When it comes to those offerings that are given by church members after services, it is very easy to slip it on your pocket and forget about it.  While it may nearly impossible for the IRS to know, the Father above sees it all.  So here is the golden rule: if a church member ever loves you by giving you a love offering, share the love with the IRS and all will go well with you.

A Fresh Perspective On Starting a Church

By Raul Rivera

It was Sunday afternoon and the service had long since come to a close.  Sixty people came to the service that morning.  For pastor Tom, it should have been a moment to celebrate.  However, there he was sitting at the foot of the altar with tears streaming down his face.  He could not shake the feeling.  He felt lonely and afraid.  Somehow the burden of leadership was more than what he had dreamt.  He thought that being the pastor of a new and growing church would make him feel validated, loved, covered and celebrated.  However, the exact opposite was true.  What could he have done differently to help alleviate the pain?

Remember your first service?

There is nothing more exciting than the events leading up to your first service as a newly started church.  All the months of planning finally reach their climax in the days just before the big service.  I have spoken to hundreds of pastors in the days before their first service and the one thing they all say is that they are "nervously excited."  However, what few people ever mention is the day after . . . or better yet, the moment after.  When that first service has come to a close and all the months of meetings and planning have culminated into that first service...what then?  If you are like most pastors, you were probably disappointed, maybe depressed.  More was expected to come from that service but the numbers that attended took the wind right out of your sails and now you wonder if you did the right thing.  The truth is, most pastors are never truly ready for the emotions that follow their first service.   Remember, the first service is only one event in hundreds and hopefully thousands of others.  There will be many more Sunday services.

Now that you have been pastoring have the feelings changed?

Now that we talked about the first service, let's look a little deeper into the heart of a pastor who has been through the first service and has begun to settle into pastoring.  Let's take a look at the moments right after Sunday service.  The last person has left and it is just him and his wife.  Whether it is in their own home or in a rented facility, when the last member says goodbye, the pastoral couple is left to ponder unspoken thoughts of loneliness.  That is often the struggle of pastors leading younger and smaller churches.   Now that everyone is gone, who is going to clean?  Who is going to count?  And finally, the last thought . . . does anyone care?

What to do to alleviate the pain

Pastors from all walks of life have shared with me their moments before and after services.  What I have discovered is that most pastors, regardless of the size of their churches, have similar feelings and experiences.  I call it "the way of leadership."  Every leader has to learn how to walk alone with God and let his/her fellowship be enough.  Many who leave the ministry do so because they never learned that lesson.  So, if every pastor has though go through the way of leadership is there anything that can be done to prepare for it?  The answer is, "Yes".  However, it is only something that will help to alleviate the pain of learning the "way of leadership", and not a shortcut to success.

Three things to do before your first service

Start legal process:  A common mistake that many church planters make is holding their first service before they start the legal process of establishing the church. Once you are in the thick of pastoring, it becomes much harder mentally to give this area attention.  There are very important reasons why these minimum set of steps should be done before the first service.  First of all, there is something spiritual that takes place when you do so.  Because the church has to conduct business transactions, following the Romans 13 requirements make a declaration that you are in it for the long haul.  I hear many pastors say when they get their incorporations, "It's official now . . . we are at the point of no return."   Secondly, it protects the church.  I recently spoke to a house church leader who was overseeing a growing network of house churches.  Everything started great.  Growth was happening and it seemed that every week some were being added to their number.  However, they had not started any of the legal process other than securing their tax ID number.  Then it was discovered that one of the children was sexually molested by a church volunteer.  While the volunteer may be criminally prosecuted, who is responsible for the civil damages?  Because they were not incorporated, the responsible people will likely be the pastors and the people in whose house it happened.  Pastors, please do not ignore the legal process.  This is just one reason why you need to push through this process.  Below is a quick list of the first steps you should take to get off to a good start.

• Get the church Incorporated
• Get a Tax ID
• Create ecclesiastical constitution and bylaws
• Teach the board secretary how to properly take minutes at meetings
• Adopt the conflict of interest policy, reimbursement policy, compensation policy, and international activities and anti-terrorism policy
• Establish an IRS proof ordination program through your church
• Properly set up a tithe and offerings tracking system
• Obtain 501(c)(3) status
• Obtain sales tax exemption
• Properly designate a housing allowance
• Obtain the minister's self employment tax exemption

Start a counting team and a cleaning crew:  It is obvious that someone has to clean and someone has to count the money from the tithes and offerings, but the question is, "Who?"  It may sound silly, but many churches start without ever considering this significant part of the process. If you take the time to establish this before you ever hold your first service, it will ease effects of the post service emotional roller coaster.  It will also help alleviate the burden of pastoring in the long term if you make sure that the cleaning and counting crews make commitments for at least 6 months.  At our conferences, we teach a step-by-step method on how to establish a tithe and offering counting policy and rotation team.
Set up a follow up team: Getting people to make commitments before you hold your first service is much easier than after the first service.  The weeks leading up to the first service are the best moments to cast vision and share how important it will be to follow up on any new visitors.  Most of the people that plan to be a part of that first service have grand feelings about the start of a new church and as a leader you need to leverage that and give them a place to get plugged into serving.  Below are two tips that will help in building a follow up team.

• Make sure they are committed
• Make sure they have a follow up strategy that features a "Meet the Pastors" fellowship after every service

Malpractice Lawsuits Against Pastors

By Raul Rivera

Counseling has always been an important part of ministry

Counseling has always been an important part of Pastor Ned's ministry, so much so that he has made it a point to spend 10 to 12 hours per week practicing many forms of counseling. From premarital counseling and couple's counseling to just plain pastoral counseling, Pastor Ned has done it all, and fairly successfully he thought...until Edward came to his office that day in search of some answers to his trials and tribulations. Needing to offer some sort of solace and direction, Pastor Ned gleaned scriptural answers for Edward to the best of his ability, though he had to admit he felt a bit inadequate to advise in the financial capacity that Edward was seeking.

Edward in tough financial times

Edward was going through a very tough financial time now that his business had taken a downturn with the economy. The depletion of profits led to a painful and reluctant 65% staff reduction, the results of which could not seem to preserve his rapidly dwindling savings account. In an effort to recoup some of his losses, he began to contemplate an investment opportunity that could potentially double his investment in as little as four weeks. In search of an objective point of view, Edward sought out his pastor's advice. During their meeting he shared how his business had suffered the effects of the financial downturn in the economy and that sales were down over 60%. Pastor Ned, as usual, opened with prayer, listened very carefully and spoke very little. However, when Edward asked if Pastor Ned thought that the investment idea was solid, Pastor Ned's answer was that he did not see anything disturbing in the investment idea and that to the best of his knowledge many people had engaged in those types of investments. Edward took it as confirmation that he needed to go ahead and do it.

Six weeks later

To say Edward's investment went badly is an understatement. The entire investment was completely lost, and Edward's dwindling business nearly diminished right along with it. Having interpreted the time with his pastor as a word from the Lord, Edward now battled confusion about whether it had actually been God's will for him to engage in that particular investment in the attempt to save his company. As resentment over the failed investment set in, Edward began to feel anger towards God and his pastor and even considered a malpractice lawsuit against him, feeling he had rendered advice to Edward that was outside of his qualifications.

Malpractice lawsuit?

Does Edward have a case against his pastor? Can Pastor Ned be held liable for malpractice because he rendered advice outside of a religious nature? Historically, courts have rejected the notion that clergy can be held liable for advice or counseling they give that is religiously based. What that means is that a pastor should not fear being sued simply because his advice is unacceptable or displeasing. Moreover, there are times when in a counseling session certain behaviors or lifestyles are condemned as sinful and it causes the recipient of the counseling session to feel great discomfort. When done in his/her capacity as clergy and within a religious context, courts will not accept the validity of a claim for clergy malpractice.
In Bladen v. First Presbyterian Church, the Oklahoma Supreme Court dismissed a claim made against a pastor, stating, "Once a court enters the realm of trying to define the nature of advice a minister should give a parishioner, serious First Amendment issues are implicated,"
In a Utah case the State Supreme Court ruled that to " . . . embroil the courts in establishing the training, skill and standards applicable for members of the clergy . . . is as impossible as it is unconstitutional."

What if the person commits suicide?

How about a pastor of an independent church who's only training is his local ordination? What if he/she is counseling someone who is depressed and considering suicide? What if the minister feels that he/she can walk them through it and does not refer it out to a licensed professional and the person commits suicide? The California Supreme Court ruled on such a case when 24-year-old Kenneth Nally committed suicide. He was being counseled by four of the church's pastors. Nally's mother claimed that the pastors should have referred him to a licensed professional and that the pastors lacked sufficient training to counsel him. The court rejected her claim stating that it is " . . . inappropriate to impose a duty to refer-which may stifle all gratuitous or religious counseling." Please see "do's and don'ts of counseling" below for my opinion on referring out cases.

What about non-religious counseling/advice?

Do certain crossable lines exist in counseling that is outside of a religious context? Over the last decade an increasing number of pastors have engaged in business outside of the church and have used their positions to give financial or business advice. In many cases, pastors have allowed multi-level marketing companies or individuals involved in such businesses to recruit church members into the business. While the pastor's intentions are good, this can lead to trouble, not to mention the distraction it causes. The fact is, in today's litigious society an individual can claim breech of fiduciary duty because the pastor used his/her position of authority for personal gain. Another claim is that the pastor did not exercise his/her duty to protect by allowing individuals to prey upon the flock and thus bringing financial disaster to them. While these claims may be novel, what prevents an individual from bringing them? The courts have long held that religious counseling is outside the scope of malpractice suits, but these are claims that have yet to be tested. Who wants to be first?

Do's and don'ts of counseling

When engaging in counseling there are some definite do's and don'ts that need to be followed. They are listed below.
When counseling always do the following:
1. Counsel within a scriptural context: Always stay within a scriptural context when rendering advice or any type of counseling? When asked for financial advice, be sure that you base your advice on Scripture and that you make it clear that you do so as a minister.
2. Report child abuse: Many states require clergy to report to proper officials knowledge of child abuse, which includes a child reporting it to the minister.
3. Take notes: Keeping notes is the best way to ensure a record that protects you and the church. It also allows you to better remember counseling sessions that may have happened years ago.
When counseling never do the following:
1. Refer a case out to a specific individual: This may sound strange, but many pastors have referred extreme cases out to licensed professionals for fear that they may get sued for violating the "standards of care" that apply to licensed professionals. Keep in mind that courts have consistently ruled against those claims. On the contrary, it is possible that if a minister refers a case out to a specific licensed professional, and the counselee gets worse, that a case may be made to hold the minister liable for the referral made.
2. Counsel outside a religious context: Many pastors often feel that they need to be "answers people." Never engage in rendering advice that is outside of a religious context. Whether it is financial, business, retirement or other areas, make sure you base it on a scriptural standard.
3. Disclose any information: I have seen instances where a pastor shares personally with his pastoral staff some of the information he gleans from a member during a counseling session. While this may at times be appropriate to better help the church member, it should not be done without his/her permission. Moreover, what if the staff member shares it with someone else? This could bring an invasion of privacy, defamation and other claims.

Interesting world

It certainly is an interesting world. It was not until the 1980's that church lawsuits began. Now it is very popular. Many in America have lost the fear of God and have no problem suing their church or pastor if they feel it is in their own personal best interest. Do not let this discourage you from ministry. Whatever temporal suffering we go though in this lifetime could never compare with a life of eternal glory before The Great King.

Recording Your Own Crimes? Churches do it Every Week

By Raul Rivera

Many pastors spend hours and hours crafting everything that goes into their sermons. They think of their points, stories and verses. But one thing few pastors think about...is that they may be recording their crimes.
Have you ever thought about the actual content in your recorded worship services and sermons? What exactly is in your archive of recorded services? Technology has made it simple to record worship services, and to archive them; and with that ability comes potential liability.
On August 28, 2009, an IRS Grand Jury investigating a pastor for tax evasion subpoenaed all of the church's recordings of sermons and church services from 2007 through 2009. In particular, they sought to discover whether there were any love offerings taken up in his behalf that were not reported. Because the church studiously recorded each event, quite a library had to be turned over. In all, the IRS was able to produce thousands of pages of evidence against the pastor. The church recorded more than its sermons. It unfortunately recorded its crimes!

Why churches record services

There are several reasons why churches record their services. Often, it is to offer their congregation the ability to listen to the service again while at home. Other times, it is to allow members to have a copy of special words spoken from the Lord to a specific individual or to the church body, which might have come forth during a service.
Today, most churches record their services on computer hard drives and make them available instantly on their church websites or podcasts, giving the entire world instant access to the church's services. These wonderful technological advances make it possible for practically any church to record, archive and publish or broadcast their church services.
But many are not aware that the recorded content can archive information that could one day be used against the church or pastor. It is time for churches and ministries to consider what they are really recording.

Common crimes that get recorded

Many ministers have not used discretion when speaking from the pulpit and have suffered loss. Pastors need to be reminded that what they say from the pulpit carries weight. The weightiness of the pulpit requires that every word spoken from it be carefully considered in light of the Scriptures and the law.
The Government can take the church's recordings and use them against pastors and preachers when conducting investigations.
In our research in this area, we have found 3 common areas churches are in danger during their recordings:

1. Love offerings: Love offerings are legal. The problem lies with the method used to take up the love offering. Many churches encourage the congregants to give cash so that it does not have to be deposited or reported. Other churches have people put the money on the stage as the speaker is sharing. While these practices may be viewed as an attempt to bless somebody, the truth is these are usually cash gifts that never get reported. That is a crime. I have seen many recordings of these that get archived in church records. The result is evidence that can and will be used against you.
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2. Recorded worship: There is probably no greater area of danger for most recorded services than in the area of copyrighted material. Many churches record praise and worship and sell CD's of the service. Many of the songs are copyrighted intellectual property that belongs to the artists that wrote them. I believe that the Lord is the inventor of commerce and He promised us that He would give us the power to make wealth. One way He does it is by giving us ideas such as sermons, books and music that can be recorded and sold. He keeps His promise while honoring the laws of the land.
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3. Investment opportunities: There are times when a well-intentioned minister shares a business opportunity that is supposed to be a "blessing" to the church. Many multi-level marketing schemes, foreign currency revaluation scams and other such "business opportunities" have burned their flames through churches. Usually the pastor is recruited and he promotes it from the pulpit only to find out later it was a ponzi scheme from which he may innocently but illegally have profited. These have led to civil lawsuits and even prosecutions. Usually a recorded service provides all the evidence needed.

Public recording prohibited?

I think it is time for churches to protect themselves in this technological age. Technology has evolved to the degree that now every person in your church carries a video camera on his or her cell phone. As a matter of policy every church should display either on the big screen or somewhere conspicuous that recording devices of any kind are strictly prohibited. Before you get too uncomfortable, let me explain.
Many people feel very uncomfortable being videoed or recorded by any means other than a church sanctioned recording. Now imagine iPhones and other devices being used throughout the church to capture videos and then QUICKLY being posted on Facebook accounts and YouTube.
Imagine you as the preacher finding yourself on a poor quality video on YouTube. Imagine if someone videos the nursery where toddlers or infants are, and then it gets posted online. There will be many upset parents.

It's complicated! Everyone should know!

Recording services can be a great blessing to many people. But the church must protect itself and it's members in the process. When it comes to recording your services, there are matters of law that come into play of which you must be aware.
State and federal laws govern the use of electronic recording equipment in regards to recording conversations without consent of the parties.
Taking that into consideration, there are some questions that need to be asked when it comes to recording your services:

1. Is it legal to record a testimony given by a member or a non-member without their knowledge or consent?
2. Can you video the congregation in worship without their consent?
3. Can you distribute people's testimonies or publish them on your website without knowledge or consent?
4. Can you hire a professional photographer to take pictures for use on the church website without the consent of those being photographed?

The issue of recording services goes much deeper than what this article covers. If you decide to record your services, whether through audio or video, a notice should be conspicuously posted at the entrance of each door to the sanctuary, communicating that the service is being recorded for public broadcast or dissemination, and that by entering, an individual consents to being recorded.