CMTC - Blog

5/21/2018

When Money Becomes a Problem

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I am sure there are some, but I do not know of any Pastor that is in ministry for any reason, other than he or she was called by God. Most of us do what we do to further the Kingdom of God on this earth. We preach to see people accept Christ and see lives changed. But, most never stop and consider the financial responsibilities that are connected to ministry.

A Pastor in a recent Church Management Tax Conference spoke to me of the financial problems his Church was facing. His largest donors left his ministry because they felt as if he was focusing too much on the gifts of the Spirit, rather than following a pre-set time schedule for praise and worship, a 20 minute sermon, a brief altar call, and service dismissal.

This Pastor began several outreach ministries solely on the additional income these families had afforded the Church. Now, not only are the new ministries in jeopardy, but the Pastor is faced with this dilemma: Close the Church, or become bi-vocational and keep pastoring without a salary, and ceasing all outreach ministry.

The Fallacy of Church Growth Seminars

Many Pastors attend, at least one, if not several, Church Growth Seminars in the course of their ministry. Most of them leave excited, only to face frustration in the following days or weeks.

Every Church will not be a mega Church. The average Church in the USA is 70 people or less. With a few exceptions, most Pastors will never get more than 70 – 100 people in their congregations. Yet, they mistakenly operate out of emotion that is generated at the Church Growth Conference they attend.

(Most of those teaching these conferences cannot remember the last time their Church was less than 100. They should have been teaching during their growing process–not after they became a mega Church.)

The excited Pastor leaves the conference with hopes of implementing everything he or she has heard. When they discover the amount of money needed to do what the mega Church Pastor has done, they get frustrated with their Church, their members, their cities, etc. When the money does not materialize, their frustration turns to anger and then desperation. In their desperation they mistakenly think if they do the program on borrowed money it will increase attendance which will in turn generate income. That is flawed thinking. They usually do not get more members–they get more debt.

If it is God, he will provide the money before we start it. If the money doesn’t proceed it, don’t do it. If the money doesn’t come for what we feel God has told us to do, the onus is on God, not us.

No Money, No Ministry

Contrary to the belief of some, ministry does not happen without money. The wisest man, other than Christ, to walk this earth stated that money answers all things (Ecc. 10:19). God will show us where it is and how to get it, but He is not going to drop money from the sky to support what Pastors feel He has told them to do. Even Jesus had to send Peter fishing to get money to pay their taxes.

Many mistakenly think when they hear from God that it means they are to quickly act–money or no money. That is not how God expects us to operate. Jesus instructed that we are to count the cost before engaging in the project (Lk. 14:28).

Neither Jesus, nor the disciples took out loans to fund ministry. Why do we think we should? Just because we think God told us to do it, does not mean that it is to be done now, or that we alone are to do it. Noah worked on the Ark for about 120 years. Joseph suffered tremendous persecution for more than 13 years, before what God told him actually manifested.

Don’t do it without the money in hand (pledges and vows do not count as cash in hand).

Unfortunately, many will do it anyway. Then, they begin to let their books get out of order or adhere to bookkeeping practices that are not pleasing to God and not legal with the Government.

Why You Need Us

Chitwood & Chitwood has been guiding Pastors and Churches for more than 78 years. Not only does our experienced staff keep Churches compliant with the IRS, we also know how to bring in finances to do ministry. But, God does not bless a mess. Before He will send finances your way, you must first be a good steward of what you already have.

At our Church Management and Tax Conferences we instruct the attendees as to how to get their books in order, and we provide some practical education on where to get the money for ministry. You owe it to yourself to avoid the frustration, anger, and depression that accompany insufficient Church finances. Visit us at www.cmtc.org or call 800-344-0076 to register for a conference nearest you.

For us this is “A Ministry – Not A Job!”

By Dr. Michael Chitwood

5/17/2018

Designated Donation Creates Havoc for the Church

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Pastor Johnson was elated when those counting the tithes and offerings brought him the news that someone had donated $50,000 to the Church that Sunday. An attendee wrote a check to the Church, but specifically instructed that the donation was to be used to establish a Senior Citizens’ ministry in the Church. With the money in hand the Pastor thought it may be a great idea to pursue it even though there were no senior citizens who regularly attended.

Generous Gift Causes Trouble for the Church

One problem that would later surface was the fact the gift to the Church had strings attached and therefore was not considered by the IRS as an acceptable tax deductible contribution. Another problem was the designation.

Pastor Johnson’s Church in Illinois did not have a Senior citizen ministry because he had no Seniors. The money sat in the bank waiting for the Church to find the right person to spearhead that to which the money had been designated. In the meantime the Church suffered a setback that needed to be addressed immediately.

This Church was about to have their church condemned because the parking lot was not up to local building codes. In order to keep the church from being closed they would need to immediately resurface the parking lot, but had no money to do so. During the Board Meeting one of the Deacons suggested that they use the $50,000 that had been designated for Seniors’ ministry and pay it back over a six month period. Everyone agreed this was the quickest and best solution to their dilemma.

Family Files Suit Against the Church

Pastor Johnson’s Church did not have a disclaimer on the giving envelopes that would make any donors aware that the Church, with an approval by the Board, could redirect all funds to the area of ministry most needed. When the family of the donor (now deceased) discovered what the Church had done, they sued the Church. The Church lost the lawsuit and had to obtain a high interest loan to reimburse the family for misusing the donor’s designated gift.

When the information hit the news networks it triggered an IRS investigation of the woman’s donation. She had given it with strings attached but the Church had provided her paperwork to deduct the gift as a tax deduction. The Church not only had to repay the woman’s family, but had to pay penalties to the IRS for providing tax-deduction credit for a non-allowable donation.

Donations May Be Designated when Proper Protocol is Followed

Many Churches list different departments on a giving envelope so the donors can see the areas in need of funding, in hopes the donors will give to support the different ministries offered by the Church. There is nothing wrong with those donations when they are given to an area in which the Church is seeking contributions.

However, Church accounting departments and donors should be aware of certain pitfalls that may be encountered because of these types of donations.

When donating to an area where the Church is seeking donations, those donations would be tax deductible. But, when donations are designated for other areas, the donation then has strings attached and is not deductible.

If donations are designated they must meet four requirements to be tax deductible.

- The Gift must be at arm’s length distance
- The Gift must not have strings attached
- The Gift must be corporate in nature
- There must be a lack of influence connected to it

Designated gifts must also be used in the area for which it was designated unless there is a disclaimer on the envelope. If there is a disclaimer the Church may redirect the funds to the area of ministry most needed, with the exception of money designated to Building Fund. Monies designated to purchase or construct a building must be used for that purpose.

Why You Need to Attend the Next Conference

This is why you and your Church need us NOW!!! Church Management and Tax Conferences are conducted monthly across this nation by Chitwood & Chitwood. With 80 years of experience we are the ultimate Church Management Group in the USA.

At our conferences we go into great detail concerning the situations mentioned above in addition to many other requirements necessary for a Church or non profit to be in legal compliance.

It would behoove every Pastor, Pastor’s spouse, and every Church Leader to attend the next Conference. To register, please call 800-344-0076 or visit us online at www.cmtc.org. This will probably be the best investment you and your Church make this year.

By Dr. Michael Chitwood

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5/3/2018

Church Members Sue Their Pastor and Church

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Disgruntled members of the Southern Acres Christian Church in Lexington, KY sued their Pastor and First Lady because they felt that he was concentrating too much financial power to himself, his wife, and one other Board Member. The situation became so divisive that the Police Department had to be called to the Church during a Sunday morning service.

In Georgia a Church Member has sued because she believes the way the Pastor prayed for her resulted in a brain injury. She stated that when the Pastor was invoking blessings on people at the altar, he forcibly placed his hand on her head, causing her to fall, hit her head and lose consciousness.

In New Jersey the Pastor removed three members from the choir because they were caught smoking (which is contrary to the beliefs of the Church). The three choir members sued the Church and Pastor to be reinstated. Fortunately, in this incident the Church was victorious.

In Gibson County TN a Church Member sued his Church because they voted to change their name. The Church Member, an attorney, in his suit declared the vote to be illegal and void, and filed a lawsuit demanding a new vote.

In Pontiac MI a former Board Member and his wife sued the Church demanding they return his and his wife’s contribution. The Board Member and his spouse made the contribution as a designated offering. According to the Church bylaws all designated offerings must be used for that which they were designated.

More On the Horizon

These are just a small amount of lawsuits targeting Churches. According to one report the American Bar Association conducted a symposium in 1992 with its lead agenda as “How to Sue Churches.”
As of this date about 1000 Churches per month are targeted in tortious acts—most of these are from Church members or former members. Based upon these numbers it is no longer a question of, “Will my Church be sued. . .but when?”

How to Minimize Your Church’s Exposure to Lawsuits

There are several policies a Church can implement to limit its exposure to tortious acts. Time and space will not permit me to cover all of them, but here are a few:

- Adopt extensive legal and spiritual bylaws and clear operating procedures

These bylaws and policies should dictate everything the Church believes and how its day-to-day operations are carried out. In the event of a lawsuit the courts will likely refer to the Church’s bylaws for guidelines as to how the suit should be settled.

- Obey Copyright Laws

Unfortunately, Churches and Church members are infamous for illegally using copyrighted material.

- Obtain Background Reports on those in Leadership positions

This is especially true for anyone who works with the youth in a Church environment.

These are just a few. There are several more that Churches and Church Leaders should immediately install and apply to their Church community.

Why You Need Us

Chitwood & Chitwood has 80 years of experience in protecting Churches in matters of Church Management and Oversight. Churches that follow our guidance, even if they were included in a lawsuit, have been victorious in the outcome.

This and other vital topics are covered in our one-day seminars across the nation. We not only teach a great deal of what a Church should do to protect its assets and its membership, but we also make available information that will empower the Church to continue with its due diligence.

An ounce of prevention is worth a pound of cure. It is much better for the Church and its Leadership to be proactive in any matters that could create legal hurdles. This is why every Pastor, Pastor’s Spouse, and Church Board Member should attend the next Church Management Conference. To register visit our website at www.cmtc.org or call 800-344-0076.

Do not wait until a Process Server has served you with a notice of a lawsuit against you.

ACT NOW!

By Dr. Michael Chitwood

5/1/2018

Just Because It Feels Right Doesn’t Mean It’s Legal

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In the complex world of Church ministry, many Pastors think they are doing a noble deed, when in reality they may be breaking the law. Since the Church is a non-profit entity and therefore exempt from taxes on its Tithes and Offerings, the IRS has page after page of regulations and directives that explicitly instruct how those non-taxable monies may be used and/or distributed.

Paying Money from the Offering

The Pastor wanted to show the stand-in musician his appreciation, so before the musician left the Church that morning, the Pastor reached into the Tithes and Offerings, removed $100.00 and gave it to the musician.

The Church van driver explained to the Pastor at the conclusion of the service that he had several people he needed to take home in the Church van, but the van did not have enough gas to make the trip. The Pastor reached into the Tithes and Offerings, handed the driver $20.00 and told him to bring the receipt back for audit trail purposes.

In both instances, the act may have been noble, but it was not legal. Cash cannot be paid from any offering.

Another Dilemma

The Head Trustee had notice that the Pastor had experienced more than his share of setbacks in the past few weeks. The family had an excessive amount of doctor visits, and the car broke down.

The Trustee approached the Church Treasurer and told him the Board wanted to help the Pastor and the Treasurer was to write a check to pay the Pastor’s mortgage payment for that month and make it payable to the Mortgage Company.

What a noble, expression of love to their Pastor. Unfortunately, it was illegal.

Just because an act is decent, kind, noble, or countless other adjectives we choose to use, does not make the transaction legal.

The Proper Way

In the first scenario, the musician should have been asked to complete some IRS documentation and a check should have been written to him as taxable income. With the van, a check should have been written to the gas station where the gas would be purchased, the Church credit card should have been used, or the driver could have purchased the gas with his own money and with a proper receipt he could have been reimbursed with a Church check.

For the Trustee and Pastor dilemma, a love offering could have been received and included in the Pastor’s W-2 at the end of the year.

For those dealing with love offerings for the Pastor, please make sure that those offerings are reported and do not push the total Church payroll beyond 32.6% of the total Church income for any given year.

What Difference Does It Make?

In all of the above mentioned scenarios, the Board was in agreement with the action taken. However, just because it feels right—just because the Board voted for it, doesn’t mean it is legal.

All Church officials should understand that people are watching their actions. The Church Treasurer or anyone who may have witnessed the above actions could have easily turned the Pastor, Trustee, and Church into the IRS and would probably have received a reward for their actions.

Many Church members do not really love the Pastor or the Trustees – they tolerate them. If they see something which seems inappropriate or they know violates laws, they will report it. Thousands have been reported by Church members throughout the years.

I was teaching a Church and Clergy Tax Conference in Texas and a lady at the front table laughed the whole morning. At break I asked her what it was in my presentation that she thought was funny? Her reply was that she was laughing because she had just reported her Pastor and Board Members to the IRS for the very things of which I was warning the class.

The days of Church members blindly following or trusting a Pastor or Board are gone. We should go to great lengths to ensure proper accountability when dealing with God’s money.

In Conclusion

For 80 years, Chitwood & Chitwood has been helping Pastors, Churches, and Church Boards maintain integrity in their bookkeeping practices. At 150 Church and Clergy Tax Conferences across the USA each year, we go in depth to warn those in attendance of the IRS compliance issues which Churches face daily.

It would benefit every Pastor and Church Leader to attend the conference nearest you. Do not attend alone – bring the whole Board including the Pastor. Contact us at 800-344-0076, or www.cmtc.org to register.

Do not allow what you consider noble to be your ticket to prison. Learn the law and obey it. We are here to help.

For us this “Is a Ministry – Not A Job!”

By Dr. Michael Chitwood