Transparency In Ministry

Intellectual property is created by individuals using the mind or intellect. These creations include songs, books, sermons, dramas, bible study materials, inventions, websites, etc. Employees may produce or create these items as part of their employment.

Who owns the rights to this property is becoming a significant issue with churches and ministries.

If the Church oversees or controls the work performed, provides a place, equipment or support for creation - the Church owns the property. If the Church or employer pays the employee to create the product, defines the product - Church/Employer owns the property.

Intellectual property is protected by the U.S. Copyright Act and under this act the Work for Hire Doctrine applies. This doctrine applies to entities who request and pay for the created property. If a minister or employees wishes to own the property, a written contract must be negotiated between the organization, defining who owns the property. This contract should be in place prior to creating the property. Any Church resources utilized by the employee to create the property should be reimbursed or is included in the taxable compensation of the employee. The amount taxable to the minister is based on the fair value of the resources used - whether it is a computer, office space, secretarial support.

This is a complex area for churches. We suggest you consult an attorney to provide guidance in these areas.

A senior pastor of a church wishes to purchase a church vehicle for his personal use. How is the sale recorded by the church? What are the tax implications to the pastor?

Fair value of the vehicle (adjusted for wear/tear) at the time of the sale will be used as the selling price. If the sale is consummated by an actual check written by the pastor, then the vehicle sold for $8,000 (with a net book value of $0 (cost less accumulated depreciation) is recorded in the general ledger using under the following scenario:
DR CASH $8,000 (as an example)
DR Accumulated depreciation $6,000
CR Vehicle $6,000
CR Gain on sale $8,000

If the pastor does not purchase the vehicle with a check but would like the sale to be included on part of his compensation, then his W-2 would include the sales price of the vehicle. This transaction would affect his annual compensation and should be approved by the board of compensation committee.