In the church law area of our complex business law practice, we have the privilege of representing churches in virtually all states. It is exciting to see the tremendous influence that churches are having in America! The profile of many churches has dramatically changed over the years. Instead of a small congregation confined to the church building for Sunday and mid-week services, the church today has a much larger footprint in the community than ever before.
Today’s pastors also have redefined roles. Many pastors have additional exposure outside of the pulpit on Sundays. Some are being requested to speak outside of their local churches at regional and national conferences. And some speak nationwide at leadership conferences, even those beyond their own denomination.
When a pastor speaks outside of the home church and brings “resources” with him/her to sell, the question arises: “Who Owns the Sermon”? The answer is a typical lawyer’s answer: “It depends”!
To stay in compliance with the IRS rules regarding avoiding “Excess Compensation”, or “Private Inurement”, it is very important to identify the intellectual property rights to the sermon material that a pastor might produce for distribution outside of his/her local church. Several scenarios can be anticipated. Each one demands very intentional contractual drafting to ensure compliance with IRS rules and regulations, as well as protecting the rights of the church and of the pastor.
Scenario 1: The pastor creates the sermon on church time, with church resources
Owner of the Sermon: The Church!
When a pastor is using church time, equipment and resources to create a sermon, under common law intellectual property principles, he/she is working for the church. Therefore, the church owns the sermon. If the pastor then reproduces the sermon to distribute outside the church, the church should receive the income from the sale of the sermon. If the pastor wants to use the sermon for his own benefit, he/she can “license” the material from the church, pay a fair market value for the use of the material, and then keep the profits from the distribution. However, the “license agreement” needs to be expertly drafted to ensure compliance and protection from “Private Inurement” as defined by the IRS.
Scenario 2: The pastor develops a sermon/series on his own time, preaches it outside the church, and then brings it back into the church for distribution
Owner of the Sermon? The Pastor!
Again, the most important fact element here is proof that the pastor did, indeed, create this material on his own time and used his own resources.
Obviously there are many variations and “hybrid” applications of this principle. The point is to identify that intellectual property rights are flowing in these situations and to ensure that the church and the pastor are in compliance with IRS rules regarding “Private Inurement”. Our recommendation is that proper licenses be drafted and that the employment agreement between the pastor and the church be well written to allow the pastor to be able to preach outside of the church and to create his/her own material for distribution.
Firms like Goodman Allen Donnelly PLLC have experience both with identifying and protecting intellectual property rights, and with the application of this area of the law to the modern church world! It would be our privilege to assist churches in these emerging areas.
This blog is made available by Goodman Allen Donnelly for general information, and does not constitute legal advice. By reading this blog, you understand that there is no attorney-client relationship between you and the firm. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.