5 Big Challenges That Every Church Faces

By Raul Rivera

The landscape for churches and ministries is one that is filled with many pitfalls. Over the last twenty years, Congress and the IRS have become very interested in the activities of churches, ministries, and nonprofits.

This has led to the enactment of section 4958, and the creation of the Exempt Organizations Executive Compensation Compliance Project, resulting in increased enforcement presence and millions of dollars in fines.

Those who do not perceive how the landscape has been changing may find themselves inundated with tax trouble. Moreover, they also miss out on the hundreds of truly great benefits and exemptions available.

With that said, let us take a look at the path that churches and ministries are facing. I am going to discuss five challenges that every church is facing today. We also take time to discuss these, as well as others, at our conferences. 

While I am always convinced that the Lord will lead His church in victory, one of the ways He does it is by sounding the alarm so that His church is not caught off guard.

5 challenges to be aware of

1. Watch your activities

The activities of churches and ministries on a day-to-day basis need to be balanced with the income tax regulation in 1.501. In essence, this regulation states that if an organization substantially participates in an activity that is not tax exempt, the organization jeopardizes its tax-exempt status.

Furthermore, the US Supreme Court ruled, "A single nonexempt purpose, if substantial in nature, would preclude an organization from qualifying under section 501(c)(3) of the Code."

This brings to question some of the activities that churches engage in, that if audited could preclude them from tax-exempt status. Such activities may include (but are not limited to):

• Renting out facilities to the local public
• Having too many bake sales
• Running a café or bookstore during non-church or non-ministry events

(Recommended reading: "Can Our Church Own a Business?")

It is not that a church cannot engage in any of these activities, but rather that these activities, if NOT done correctly, can be classified as activities unrelated to the church’s charitable purpose and possibly get ruled by the IRS to be substantial. If this happens, your ministry may lose its tax-exempt status.

2. The IRS is allowed to give you bad advice and not be responsible

In a 2011 case (David Michael Maser v. Commissioner), the court asserted that if an IRS employee gives you bad advice it is not binding on the Commissioner. In other words, this means that you can call the IRS, ask for advice, and if it is wrong advice then that’s on you and not the IRS. 

The IRS is allowed to give you bad advice and not be responsible.

Can you imagine what that may mean to your church?

The fact is that many IRS employees are not sufficiently trained to answer questions dealing with even simple matters, let alone complex questions pertaining to church and ministry.

So, if you have a question, do not call the IRS. Seek advise from a qualified tax attorney, CPA, or tax professional.

(Recommended reading: "IRS Taxes Pastor for Money He Never Received")

3. Lawsuits against churches

In 1992 the American Bar Association hosted a seminar and discussed how best to sue churches and win large settlements. A Christian attorney in attendance that day described it as “blood being poured into shark-infested waters.”

Since that time, we have seen an overwhelming increase in churches being sued. Some statistics indicate that in the United States over 1,000 churches are being sued per month.

For many pastors, the idea of their church getting sued and losing everything is a worst nightmare scenario. Although there is no sure fire way to prevent your church from ever being sued, there are strategies you can implement to help protect your church.

We teach these strategies at our conferences. One such strategy is for your church to establish a tax-exempt holdings corporation. For more information on the holdings corporation, you can click here to read more, or simply give our office a call at 877-494-4655.

There are strategies you can implement to help protect your church.

4. Cultural shifts

Since the Supreme Court’s decision last summer to legalize same-sex marriage, this has been a concern amongst many pastors and church leaders, and rightfully so. Earlier this year, North Carolina passed its infamous House Bill 2 (HB2), also known as the “Bathroom Bill”. (Both of these issues were addressed in an earlier post. Click here to read.)

Recently, the Iowa Civil Rights Commission was forced to amend its brochure on Sexual Orientation & Gender Identity after a complaint was filed by Fort Des Moines Church of Christ with help from Alliance Defending Freedom. The previous brochure indicated that churches would be required to accommodate bathrooms for individuals based on their sexual identity.

Although the Iowa Civil Rights Commission revised its brochure, this goes to show that religious freedom and expression is a continuous battle, and it is imperative that your church has proper wording in its bylaws.

In short, your best 1st Amendment protection is your church’s bylaws.

Because legislation in our country is ever changing, your church’s bylaws must be able to provide adequate protection. For some of you reading this, that means you will need to update your bylaws. It is good practice to regularly review your bylaws to ensure they are up-to-date with current legislation.

5. Unprepared CEO’s

It is intriguing to me that most ministry training programs teach ministers strategies that concentrate on the spiritual side of ministry (preaching, teaching, counseling, etc.), yet at the same time fail to adequately prepare ministers to lead as CEO of their church corporation.

It is not until ministers are actually leading a congregation that they realize the full weight of their responsibilities as CEO. And in most instances, ministers feel unprepared and inadequate to lead in such a capacity.

The fact of the matter is that most pastors do not have the time or resources to pursue higher education or additional training they feel is necessary to lead as CEO. That is one reason why we have put together a 1-day conference to give pastors and church leaders the necessary tools, resources, and knowledge to help lead their ministries as the CEO of their churches in the 21st century.

If you have not yet been to one of our conferences, we would love for you to join us. You can click here to find out when we will be in a city near you.

Sound the alarm

So, what do you do with information like this?

What I have discovered is that though I am announcing it at a level 10 volume, many leaders hear it at only a level 1 volume. Unfortunately, many churches have significant compliance issues, and with increased church scrutiny and IRS enforcement presence, the years ahead may become more challenging for churches to StartRIGHT™ and StayRIGHT™.

If you have any questions or concerns or would like to receive more information about how we can help you and your church, give us a call at 877-494-4655.

Handpicked articles for you:

• "Why Bylaws Are Important, And How to Make Yours Better"
• "Tither Denied Deduction Because Church was not 501(c)(3)"
• "How to Simplify All of Your Church's Filing Requirements"

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