Home / Resource Center / Resources / Top 5 Legal Issues for Churches & Nonprofits

Top 5 Legal Issues for Churches & Nonprofits

October 13, 2023


In today’s ever-evolving legal landscape, churches and nonprofits face a myriad of issues that demand careful consideration. Topics encompass legal compliance, property-related matters, operational shifts, leadership burnout, and the need for essential policies. Let’s delve further into the top 5 legal issues churches and nonprofits need to be aware of for their organizations.

1. Compliance Issues

Compliance issues cover a broad spectrum, from rulings by federal courts and the judiciary that impact churches to federal compliance matters with the Internal Revenue Service (IRS).

Churches and nonprofits are in a unique position regarding IRS compliance due to the specific requirements for tax-exempt organizations. Understanding and applying these regulations can be challenging. Examples of compliance tasks include applying for tax-exempt status, avoiding substantial lobbying or political campaign activity, and ensuring compensation does not violate private enrichment rules.

Special attention must also be paid to state-level compliance, which varies by location. Churches should keep their principal address current, maintain a resident agent, and fulfill regular filing requirements to remain in good standing.

2. Property Matters

With the advent of COVID-19, churches have seen a significant decline in attendance, leading many to reconsider their property needs. Many churches may find themselves with more property than necessary, while some might need additional space for growth or expanding services.

Some churches have begun to explore merging with others as a solution to this challenge. However, property management should also include planning for future repairs and costs. This helps to ensure financial stability and the sustainable operation of the church’s activities.

3. Operational Failures

Operational failures refer to issues regarding the day-to-day functioning of the church. With the post-COVID shift to hybrid or fully online models, new considerations such as copyright law for broadcasts and new job descriptions like “online pastor” have arisen.

The transition to virtual church services also raises questions about the definition of a church in a digital context. Additionally, understanding and adapting to new modes of operation can be complex, especially with emerging concepts like the metaverse.

4. Leadership and Burnout

Church leadership can face a high level of stress, potentially leading to burnout and other mental health issues. This issue has become increasingly prevalent and has, in some cases, led to moral failures within leadership.

Finding solutions to this problem involves a supportive system within the church and a keen awareness on the part of the leadership. There should also be clear internal operations for leadership support and a plan for a potential transition if a leader decides to step down.

5. Absence of Essential Policies

An absence of essential policies is another significant issue facing churches and nonprofits. Policies are intended to provide a clear path of action in specified scenarios. Essential policies include a child protection policy, financial policy, social media policy, and counseling policy.

For instance, a social media policy can guide how the church interacts with the public and how leaders with a strong social media presence can integrate with the church. Similarly, a counseling policy can protect the church if it performs marriage or other types of counseling.

In conclusion, these five issues are key considerations for any church or nonprofit. Addressing these challenges proactively can help organizations continue to fulfill their mission and serve their communities effectively. While the challenges are complex, the rewards of overcoming them can be significant. It is, therefore, crucial for these organizations to invest in understanding and addressing these legal issues.

Christian Community Credit Union (CCCU) is a faith-based financial institution whose mission is serve Christ followers to live and give more abundantly. For over 66 years, we’ve offered individuals and businesses financial products designed to help them thrive financially while they seek to serve God. Money entrusted to us is re-invested to help build churches, expand ministries, and support Christian charities. What other bank can guarantee your money goes directly to Kingdom purposes?

This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.

Apply for membership by opening a deposit account or applying for a loan!

Have a question? Call 800.347.CCCU (2228)