Can a Pastor be Guilty of Fraud for Selling His Own Sermons to a Publisher?

Written by Founder Raul Rivera on Aug 05, 2010 in IRS Compliance

A conflict may exist between you and your church

Many pastors are not aware that because of the United States Copyright Act, when a minister preaches a sermon, the sermon belongs to the church.  There are two reasons why, as listed below. 

  1. The United States Copyright Act vests ownership of a sermon with the church because it was created and recorded using church time and assets.
  2. The minister assumes and rightly believes that it is part of his job as a minister to prepare and preach sermons for the church.

There is usually no problem with this until the minister decides to take the messages and create a sermon series that he/she sells on a personal ministry website or while speaking at other churches.   Another potential problem occurs if the minister decides to have the sermons transcribed into a written format that eventually ends up as a book.  This creates several problems for the minister and the church; they are listed below.

  1. Who keeps the royalties?
  2. If the intellectual property belongs to the church, then the pastor may be guilty of fraud if he/she hires a publisher and contends that he/she owns the intellectual property.
  3. The profits that the minister makes will be considered an excess benefit transaction, which may result in IRS excise taxes against the minister, to the tune of 200% or more.
  4. The church may lose its tax-exempt status because its assets were not used exclusively for exempt purposes.
  5. Board members can each be fined up to $10,000.00 for allowing the minister to receive an excess benefit transaction.

How to solve the minister' sermon problem

In order to solve this issue, a policy and a special license agreement needs to be created that clearly prevents the church from becoming the owner of the pastor's intellectual property.  These two items need to be saved in the church's minutes.  Below is the suggested policy that needs to be added to the church's corporate records and the agreement that it signs with the minister.

  1. The policy:  the church needs to adopt a policy stating that the sermons prepared on church time, with church resources, and preached in this church shall not be retained by the church.  It must also declare that working conditions benefits of $X.00 shall be added to the minister's compensation agreement, to be recorded in the minister's W-2 as a taxable benefit.
  2. The agreement:  the church must sign a compensation agreement between the minister and the church which states that the minister shall be entitled to keep the intellectual property that comes as a result of the pastor's time spent studying and preparing sermons to be delivered at the church.  This can be done one of two ways.
  • The church agrees that in order to induce the minister to accept the church's offer of employment he/she is allowed to retain the rights to all the intellectual property he/she creates as a result of his/her employment.
  • The church agrees that the minister shall not use church assets to create his/her sermons or be compensated for the time spent to create the sermons.

Get the exact language by attending one of our conferences

We have added this topic to our conference and will show you how to put the proper language, policies and agreements into place for the church to avoid problems down the road.   Today is the best time to get this right.  Every week that passes by without correcting this issue, the more difficult it becomes to correct.  Moreover, the sermons of the past will have to be dealt with differently.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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