I know of a church in Florida who has been declared tax-exempt and has received their 501(c)(3) status. Their Pastor, who is carried as an independent contractor, essentially runs the church making most/all of the decisions with a Board of Directors which essentially green lights everything he wants to do. He says 'jump' they ask 'how high'?
The church hands over their weekly collection to him, minus bills. I want to know how legal this is.
Is your question whether or not the pastor is actually an independent contractor and if that piece is legal? According to the IRS, the pastor does not fit the criteria for contractor status and the church should be paying federal and state unemployment, social security, etc. on his wages. Because the board directs the pastor's work, he does not fit the definition. Tax-exempt organizations are NOT exempt from following regulations regarding contractor vs. employee status. This link to irs.gov explains it: http://www.irs.gov/charities/article/0,,id=131136,00.html
In some respects this isn't so different to a board of directors that blindly agrees whatever is proposed by the chairman/president. I don't think tere's anything inherently illegal about that, it just may be bad governance.
With that said, it really only matters if the pastor is making bad decisions and uses the funds inappropriately. There will be guidelines in place for the use of funds and these will be open to scrutiny. If the pastor is simply keeping the money handed over to him and claiming it as an honorarium or other fee, then he'd be subject to the same taxes as any other contractor wouldn't he?
The by-laws of the church and its articles of incorporation filed with your state should detail how finances are to be handled. As a non-profit corporation, those records may be open to the public, though you may need to contact an attorney for help. If the pastor is not complying with the terms of the operating documents, then he could be in trouble with the IRS and your state tax department. Have you raised your concerns with members of the board? Surely not all of them concur with everything the pastor recommends.
Not sure about the criminal or civil side of this - but thge church should have filed operating documents that spell out how the company is supposed to work - if the pastor is in violation of the company operating rules - then you might be able to get the members and board to make changes.
jc1221 | Window Shopper | 8/26/2010 - 7:47 am
mrhelpful | Contributor | 6/29/2010 - 3:38 pm
BizResearcher | Window Shopper | 6/11/2010 - 12:07 pm
bizjunkie | Creator | 6/3/2010 - 9:59 am
jbeidle | Contributor | 6/2/2010 - 7:09 pm
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