Much like the United States government traces its authority back to the U.S. Constitution and subsequent statutes, each church traces its authority from its primary governing documents: Formation document (Articles or Certificate of Incorporation) and Bylaws.  The formation document acts like a church’s constitution, and the bylaws act like the church’s statutes.

These governing documents are the place to look anytime a question arises as to whether a church has authority to take an action, and if so, how do go about the action:

Can we purchase a piece of real estate? If so, who must sign the documents?

Can we protect our board from liability through insurance?

How do we hire (or terminate) the pastor?

Can we take out a loan? Can we make a loan?

These are all questions of authority which can be traced to powers given in the governing documents.

Keep in mind that the formation document is filed at the state or county level, depending on each state’s law. Because it is filed with a government entity, it is the highest document in authority. Its provisions will trump any provisions of the bylaws if they are in conflict with each other. Any amendments to the formation document must be done in accordance with the provisions of state law and must be filed with the appropriate agency to make the change effective.

Bylaws are lower in authority than the formation document. They are an “in-house” governing document that need not be filed with any government agency but should be formally approved by the church’s board. Any amendments should be approved exactly as provided in the bylaws and documented in writing.

The formation document should be general so that it does not need to be modified often. However, it must contain the minimum provisions required by state law and must contain appropriate language for any church wishing to have recognition of 501(c)(3) tax-exempt status from the federal government.

Bylaws should be specific and written in such a way as to leave no “dead ends” on any issues. Bylaws are easier to amend, and therefore should contain the kinds of provisions that may need to be updated from time to time.

Churches may want to include the following often-overlooked provisions in their bylaws:

  • Indemnification Clause (allowing the church to protect its directors and officers from liability),
  • Conflict of Interest Clause (addressing how conflicts will be addressed),
  • Clergy Ordination Clause (especially if the church is an independent congregation), and
  • Prohibited Activities Clause (prohibiting the church from conducting activities in its facilities that violate any officially adopted statement of doctrine).

Finally, churches should not be reluctant to modify their bylaws when they need to do so. Although the most altruistic approach may be to ensure that the church’s activities are always consistent with what is already written in its bylaws, the more practical approach may be to modify the bylaws to be more consistent with how things actually work in a particular church.





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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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