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We cannot stress enough the importance of making sure that no church worker is ever alone with a child.  No policy is more important or more effective in preventing tragedy than this, and church leaders must be certain workers comply with the requirement. Every child deserves to be safe in his own church building. In addition, non-compliance leaves both church and workers open to false accusations that could bankrupt the church.

Based on our decades of legal experience, the importance of both having and following the two-adult rule without exception cannot be overemphasized.

We often receive questions about the best way to form churches—whether or not to incorporate, whether or not to be a non-profit, etc. Regardless of what a church decides in those areas, one point that isn’t up for debate is the EIN. Every church needs an Employer Identification Number (EIN) from the Internal Revenue Service.

  In order to open a bank account in a church’s name, an EIN is needed. Of course, church funds and personal funds should never be comingled in one bank account. The EIN is also needed to file tax documents and to conduct financial dealings with businesses. You will even need an EIN if you wish to send bulk mailings through the 

post office.

  To obtain your EIN, file IRS Form SS-4 Application for Employer Identification Number. You should retain a copy of this form for your records. Once you receive your EIN, keep that number easily accessible because your ministry will use it frequently.

Running a Christian school involves navigating various financial and legal responsibilities,including tax-related matters. Here are the top 10 tax tips for Christian schools to help ensure compliance and maximize benefits:

1. Ensure 501(c)(3) tax exempt status

• Christian schools not acting as integrated auxiliaries of a church need to apply for and be recognized as a 501(c)(3) nonprofit organization. This status exempts the school from paying federal income taxes and allows donors to make tax-deductible contributions. 

• Comply with ongoing requirements to retain this status, such as filing the Form 990 (or 990-EZ) annually and avoiding political activity.

2. Understand State and Local Tax Exemptions

• In addition to federal tax exemptions, many states offer property, sales, and income tax exemptions for schools. Be sure to apply for these exemptions where applicable.

• State laws vary, so it’s important to consult with a tax advisor familiar with your state’s tax code.

3. Track Employee Benefits and Salaries Carefully

• Teachers and staff members in a Christian school may be eligible for certain tax benefits, such as salary deferrals or retirement contributions. Classify employees correctly (full-time vs. part-time) and comply with payroll tax laws.

• Schools may offer tax-advantage benefits like 403(b) retirement plans, flexible spending accounts (FSAs), and health savings accounts (HSAs), which can benefit all parties.

4. Ensure Proper Classification of Employees vs. Independent Contractors

• If someone is a full-time or part-time employee, they are subject to payroll taxes. Independent contractors (e.g., guest lecturers, after-school program leaders) should not be treated as employees.

•   Misclassification leads to fines and penalties, so follow IRS guidelines carefully.

5. Charitable Contributions and Donations

• Christian schools often receive donations from families, alumni, and other supporters. Appropriate donation receipts must be supplied to donors (IRS Form 170), especially for gifts over $250.

• Keep detailed records of all gifts, including the amount and date of the donation, for accurate financial reporting.

6. Sales Tax Exemptions

• Many states offer sales tax exemptions for educational institutions. Determine whether this exemption applies for supplies, equipment, and other necessary items.

• Be cautious about sales to the public, as some states require sales tax to be collected on certain goods or services offered by schools, such as gift shop items or fundraising event sales.

7. Claim Available Tax Credits

• Some states offer tax credits for donations made to educational institutions, scholarship programs, or educational improvement programs. Investigate opportunities for such tax credits, which can help the school and supporters.

• If your school offers a scholarship fund, you may qualify for tax credits depending on the jurisdiction.

8. Utilize Depreciation Deductions

• For-profit Christian schools may own buildings and equipment eligible for depreciation. Depreciation allows the school to deduct a portion of the cost of these assets over time, reducing taxable income.

• Be sure to track depreciation for all qualifying assets, including buildings, computers, and vehicles, as this can provide significant tax savings.

9. Offer Tax-Exempt Fundraising Options

• Fundraising is often essential for Christian schools. When conducting fundraising activities, be mindful of the tax implications.

• Schools should explore ways to organize tax-exempt events like auctions, donations, and silent fundraising drives. Consult with a tax advisor to ensure that the fundraising activities meet IRS guidelines for nonprofit organizations.

10. File Timely Tax Forms and Reports

• Stay on top of tax filing deadlines to avoid penalties. For example, Christian schools that are not run by a church must file IRS Form 990 annually if they are a tax-exempt organization. This form reports the school’s income, expenses, and compliance with tax laws.

• If your school has employees, ensure that quarterly payroll tax returns (such as Form 941) are filed on time. Additionally, year-end W-2 and 1099 forms should be provided to employees and contractors as required.

Tax laws are complex, especially for nonprofits like Christian schools.  These steps will assist you in navigating taxation more effectively and ensure legal compliance. If you have questions, please reach out to us at the CLA office.

While religious freedom is protected nationwide, states like Texas, Florida, Tennessee, and Mississippi tend to offer more robust protections for Christian values, especially in the public sphere and in religious practices. On the other hand, states like California, New York, Oregon, and Vermont may present more challenges for Christians when it comes to aligning faith with certain state laws and societal norms.

However, it’s important to note that religious freedom is a constitutional right in the United States, and individuals and organizations can still legally fight for their rights, regardless of the state they are in. The specific challenges Christians face may vary, but their fundamental freedoms are protected by the First Amendment.

Not only do fire alarms help keep people safe in the event of a fire emergency, working fire alarms are often required by insurance companies. If you experience a fire and it can be demonstrated that your fire alarms were not working, you could stand to lose coverage from your insurance company.

Recently, a church and Christian school complex with extensive facilities discovered that no one had checked to make sure their fire alarms were still working properly. When a new maintenance worker discovered a problem, the church was shocked to learn that the fire alarms were not functioning in a large percentage of their property.

If the leadership of the church is not completely certain that all the alarms are in good working order, it would be wise to check on this matter immediately.

The IRS has revealed that many of the mistakes made in filing tax returns are actually easy to correct. But if you get them wrong, it can lead to delays and headaches. Be sure to avoid these errors!

• Be sure your Social Security Number is entered accurately.

• Confirm that the spelling of your name matches your Social Security card.

• If you are not sure of your filing status, use the Interactive Tax Assistant, available at IRS.gov.

• Check your calculations to avoid simple addition and subtraction errors.

• Taxpayers commonly miscalculate the Earned Income Tax Credit and the Dependent Care Credit. Again, the Interactive Tax Assistant at IRS.gov is helpful.

• For refunds, be sure bank account and routing numbers are listed correctly.

• If you use an ITIN, be sure it hasn’t expired.

Don’t let these little items cause big problems for you!

This Easter season, let us remember that true, lasting joy is not based on circumstances but is deeply rooted in a personal relationship with Christ and the assurance of His sovereignty. 

1. Joy Comes from Christ, Not Circumstances—Joy is not a fleeting emotion tied to our earthly circumstances. Rather, it is a fruit of the Spirit (Galatians 5:22) and comes from a deep relationship with Jesus Christ. No matter what challenges or hardships Christians face, true joy can still be experienced because it is grounded in the unchanging nature of God.

2. Joy in Trials—Joy doesn’t disappear in the midst of trials or suffering. In James 1:2-4, believers are encouraged to “count it all joy” when they face various trials. God uses these trials to refine our faith and deepen our reliance on Him, and through them, Christians can experience joy that surpasses understanding.

3. Joy Is a Choice—Joy is ultimately a choice that believers can make. Even when life is difficult, Christians can choose to rejoice in the Lord, trusting in His plan for their lives. This choice to embrace joy is an act of faith and obedience to God, who commands His followers to rejoice in Him regardless of their circumstances (Philippians 4:4).

4. Joy Comes from Obedience to God—Obedience to God’s commands leads to lasting joy. Jesus Himself said, “If you keep my commandments, you will abide in my love; just as I have kept my Father’s commandments and abide in His love. These things I have spoken to you, that My joy may be in you, and that your joy may be full” (John 15:10-11). Following God’s Word and living in alignment with His will brings joy that is not fleeting or circumstantial.

5. Joy Is Rooted in the Hope of Salvation—Remember the joy Christians have because of the eternal hope they possess through Jesus Christ. He encourages believers to focus on the eternal promises of God rather than the temporary struggles of life. The joy that comes from knowing Christ is secure and eternal, grounded in the salvation that cannot be taken away (1 Peter 1:3-9).

6. Joy in Serving Others—Another aspect of joy is that it is found in serving others. Christians find true joy not by focusing on their own needs or desires, but by fulfilling God’s call to love and serve others selflessly (Acts 20:35).

7. Joy in the Present and Future—Christians are to experience joy not just by looking ahead to heaven, but also by recognizing the present blessings God has given them. Joy is not only about looking forward to the future but also about living in the fullness of God’s blessings in the here and now.

8. Joy Is Linked to Gratitude—Joy is tied to a heart of gratitude. A thankful heart is essential for cultivating joy. When believers take time to reflect on God’s goodness, 

mercy, and blessings, they are naturally filled with joy. Gratitude for salvation, for provision, and for God’s continual care fuels a deep and abiding joy.

9. Joy in God’s Sovereignty—Joy is the importance of recognizing God’s sovereignty. Understanding that God is in control of all things—whether good or bad—brings a sense of peace and joy, knowing that He works all things together for the good of those who love Him (Romans 8:28).

10. Joy Is Not a Temporary Emotion—Joy is not happiness, which is temporary and based on circumstances. True joy is deeper and rooted in God’s love and promises. While happiness can come and go, joy remains steadfast because it is anchored in our relationship with Christ.

In Conclusion—Joy is not something dependent upon external circumstances, but a supernatural gift from God that comes through trusting in Christ, obeying His Word, serving others, and keeping an eternal perspective. No matter the struggles or challenges, Christians are called to rejoice in the Lord, knowing that their joy is found in Him alone.

Churches are busy places! Because the main business of the church is spreading the message of the Gospel and helping people, it is sometimes easy to let certain matters slide. Please remember that—regardless of how the church actually operates day by day—if you are ever in a lawsuit, you are held accountable for the way the church should be run according to its constitution and bylaws!

In some cases, churches do not even know where their organizational documents are. While most churches have their documents extremely well organized, you are not in a good position if you “think that one of the deacon’s wives has all that stuff.”

If you haven’t seen your organizational documents for a while, find them! Then browse through them to see if they need to be updated. If you need any assistance, our dedicated legal missionaries will be more than happy to help.

It is certainly the case that what the Internal Revenue Service considers incomeis often different from what ordinary people consider income. The situation of a discounted sale is an excellent example.

A well-established church in Northern Virginia had accrued a number of houses during its long and storied history. In addition to its facilities at the main church campus, the church owned several houses in neighborhoods 

around town.

The church wanted to be a blessing to its pastor, so they explored the idea of selling the pastor one of the church-owned houses. Because of booming real estate prices in Northern Virginia, a house that the church purchased for about $200,000 was currently valued at about $650,000. The church floated the idea of selling this house to their pastor for the price they paid.

To be clear, the church has every right to sell this house to their pastor, and he has every right to buy it. But because the sale would be $450,000 below fair market value, the church would have to include $450,000 on the pastor’s W-2 Form for the year, and he would be responsible to pay taxes on that money as though it were income. Keep in mind that the church did not give the pastor a check for $450,000, but the IRS certainly counts the discounted price as part of the pastor’s annual income.

In many cases, sales like these would create such a heavy tax burden for the pastor that the discounted rate would bankrupt him. Unless the church also had the ability to greatly increase his annual salary to cover these taxes, their generous gesture would actually turn out to be harmful.

If you have questions about how taxes work when church property is bought and sold, please contact the legal team at the Christian Law Association.

As Christians, we are called upon to be faithful stewards. In churches, we should certainly use the talents of our staff members prayerfully, take care of the physical church plant, and faithfully preach the Word. But we must be careful not to overlook solid financial stewardship. In most churches, receiving the offering is the starting point of the church’s finances, and proper procedures should be in place from the very beginning.

The handling of offerings may be likened to links in a chain. Each link is important to the trustworthiness of the chain. The basic “links” of the offering chain are the contributors, the collectors, the counters, the recorder, the depositors, and the recordkeeper. This “chain of custody” of money given to God as an act of worship must be regained in churches. Increasingly, churches are being held to the same standards of financial accountability as businesses. The pastor should not handle the finances of the church personally (1 Corinthians 16:3). Instead, the pastor should ensure that procedures for handling the church finances are adopted and followed.

1. Those involved in handling the church finances should be approved as persons of integrity by the church body and then by the leaders.

2. The handling of the church finances should never be left to one person. Always have two or more involved in the “chain of custody.” This provides a twofold protection: shared strength against the temptation to dishonesty, and a witness in case of unfounded accusation.

3. The pastor should not treat the communication of the financial activities and status of the church as unimportant.

4. He should communicate with the people on the matter of church finances.

5. He should use both verbal and written means to keep the congregation informed.

If you ever face legal action related to your church’s finances, it will be very helpful to have a list of the people who collected the offering each Sunday, as well as a list of the people who counted the offering each Sunday. Keep in mind that you cannot verify who actually did the work by looking at something like the schedule for ushers because the day-to-day reality of church work often involves people swapping dates, not showing up at the last minute, etc. It is also important to bear in mind that the people who collect the offering should not be the same as the people who count it.

The people who count the offering should be carefully screened. The strongest links in the offering chain must be the counters. CLA strongly recommends that the following policies be adopted:

1. Always have at least two people involved in the counting of the offering. 

2. Basic written counting guidelines should be made known by the pastor or the deacon board.

3. The counting room should be secured from the inside during the count. 

4. There should not be any traffic in or out of the room during the count. 

5. For security reasons and for best practices, have all the materials needed (such as bank bags and adding machines) for accurate counts.

Following procedures like these offers many benefits to you ministry. First, when these procedures are followed, the church is less likely to have some of its funds surreptitiously stolen. Second, and perhaps more importantly, if these procedures are not followed, it makes it easier for people to sue the church and perhaps impeach the character of church leadership, even if they have been completely honest and upright.

At the Christian Law Association, we have dealt with the issues that arise from financial situations for decades. We have several other steps and procedural recommendations in our resource, From Offering Plate to Disbursement. Please contact us today to get your copy so that you can be certain your ministry is taking the proper precautions with the finances. If you need any assistance, our dedicated legal missionaries will be more than happy to help you.