A Guide for Church Trustees

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I. General Corporate Information

Most religious congregations in New York are individually incorporated as religious corporations pursuant to the Religious Corporations Law ("RCL") of the State of New York. Within the Religious Corporations Law are general provisions and separate sections which apply to the congregations of many of most specific Christian denominations and to independent and other churches. The denomination-specific portions of the RCL essentially acknowledges the pre-eminence of the particular polity of the various religious groups with respect to the corporate acts including the purchase, sale, mortgage, lease or any renovation of real property.

The Board of Trustees

The governing board of trustees ("Trustees") of every religious corporation ("Congregation") is defined in the RCL. In different denominations and polities, this board may have different names (e.g., Vestry, Session, Consistory, Elders, Deacons, etc.) We are referring here specifically to the body of the Congregation which is charged with the overall corporate oversight of the Congregation's real and personal property. Individual Trustees are elected annually as provided in the RCL and the Not-For-Profit Corporation Law ("NPL").

Duties and Responsibilities of Trustees

By definition, a trustee acts for the benefit of another. Therefore, the trustees of a Congregation are to exercise their authority and responsibilities for the benefit of the Congregation in accordance with its governing documents (Canon Law, Constitution, By-Laws, etc.). The Trustees are to act in the best interest of the Congregation, not necessarily in the best interests of the individual parishioners. The duties and powers of a trustee are considered by the RCL.
The Trustees of a Congregation have custody and control of all the temporalities and property, both real and personal, belonging to the Congregation. The Trustees also have custody and control of the revenue produced by the Congregation's holdings and/or property. The Trustees are to administer the property and revenue for the support and maintenance of the Congregation, or for other religious, charitable, benevolent or educational purposes. The administration of the property shall be in accordance with the governing documents of the Congregation and its teachings.

Trustees may transfer Congregation property to a custodian (bank, trust company or holding company) to be held in trust with the income paid to the Congregation. Trustees may also delegate any of their powers, responsibilities, and/or discretionary authority to the custodian with respect to the investment or reinvestment of Congregation property. The Trustees are free to modify the power or authority delegated, or designate another, or successor, custodian. However, Trustees do not have any authority over the removal or dismissal of the pastor, or the fixing of his salary. The Trustees do not have any authority to regulate or modify the nature or order of worship of the Church.

Notwithstanding the above powers, any action taken by the Trustees of a Roman Catholic Church must be sanctioned or authorized by the Bishop, or in case of his inability to act, the Vicar General of the Diocese. Any delegations, investments, all require the approval of the Bishop. This is a mandatory requirement, particular to Roman Catholic Churches, found in the RCL. Requirements applicable to Congregations of other denominations may be similarly subject to oversight by the Bishop or some other body representing the diocese, synod, conference or district of the Church.

Liability of a Trustee

The Not-For-Profit Corporation Law is applicable to any organization incorporated under RCL. The NPL considers the liability of directors, officers, and trustees of a religious, not-for-profit corporation. Regarding liability of the aforementioned fiduciaries, there is no conflict between the statutes. Under the NPL the liability of a Trustee of a religious, not-for-profit corporation is limited. A Trustee of such a corporation or Congregation will not be liable except for grossly negligent conduct, intentional torts, or acts specifically delineated by statute.

Any questions concerning specific actions contemplated by the Trustees, or citations to the applicable law described herein, should be directed to your Congregation's Attorney or legal advisors.

Sale/Lease of Property

In the event the Congregation wishes to sell any of its property or lease a portion of its property for a period of more than five years, then the Religious Corporation Law requires the approval of the State of New York. In order to submit a petition for such approval it is necessary to obtain the permission of the Bishop or other appropriate official or denominational body, conduct a meeting of the Board of Trustees and the signing of a petition to the Court (prepared by Legal Counsel) and obtain an appraisal of the property being considered for sale.

Religious Corporation Tax Status

Congregations are religious corporations, which are exempt from Federal Income Tax as "501(c)(3)" corporations. This number refers to the section of the Internal Revenue Code, which grants the exemptions. The exemption is evidenced by a letter of determination, or a "group ruling" which is issued annually, by the Internal Revenue Service. These documents are very often requested from entities who wish to be assured of tax exemption for purposes of making donations or other tax related reasons. Congregations are also exempt from New York State and New York City Income Tax by reason of the 501(c)(3) exemption.

Sales Tax Exemption

Congregations may obtain from the New York State Department of Finance and Taxation an exemption from New York City and State Sales Tax, which is evidenced by a "Sales Tax Exemption Certificate." The State of New York permits exemption from its Sales Tax only for items purchased for the use of the Congregation. Items purchased for personal use, whether by laypersons or clergy, are not entitled lawfully to the tax exemption.
It should be noted that only entities with the exact title as that which exists on the Certificate may claim exemption pursuant to the Certificate. In the event the organization seeking to make use of the exemption is connected with the Congregation all purchases should be made in the name of the congregation with a sub-heading that contains the specific name of the organization. Failure to consider this might result in the denial of the exemption and levy of sales tax upon the vendor who sold the goods as well as the purchaser of the goods


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Queens Federation of Churches http://www.QueensChurches.org/ Last Updated February 2, 2005