Most religious organizations start out focused on local work, perhaps with an eye toward developing a network with like-minded groups located elsewhere. But the contemporary landscape of religious practice is changing toward an ever-broader scope, with churches increasingly seeking to reach audiences beyond the confines of their local communities or even their home states.
When do out-of-state activities raise concerns?
Many types of out-of-state activity do not raise particular legal concerns. Sending a minister to a conference across the country or making content available through a website that’s accessible everywhere might not create any special concerns, though a church should always make sure that its insurance policies cover those sorts of activities.
A church can begin to accrue specific legal concerns when its activities in a particular state trigger that state’s foreign entity registration requirements. “Foreign” in this context refers to organizations that are not created under a particular state’s laws. For example, a California religious corporation that routinely conducts activities in Arizona may trigger Arizona’s foreign corporation registration requirement.
Every state’s foreign entity registration rules are a bit different. In general, attending a meeting or incidentally selling a product (like a book) to someone in a state does not create a registration obligation. But opening a branch or buying property for use as a regular event location may create a registration obligation. Registration is often a simple process involving a short form. It’s important to bear in mind that the church must comply with the state’s rules governing tax-exempt organizations.
There are two important ideas worth consideration. The first is fundraising. Churches should be especially careful about state registration requirements if they intend to direct fundraising efforts into other states. Although efforts have been made to standardize regulations around fundraising activities, states may have specific rules governing fundraising activities directed at their residents. Be sure to understand what those rules are before beginning an active campaign to raise funds from out-of-state donors.
The other consideration for churches with a broad reach is that doing a lot of activity in other states can increase the risk of being sued there. Again, a good insurance policy can cover legal fees even if they are to cover an out-of-state lawsuit. It’s important to verify that the full scope of the church’s activities are covered, especially if its activities are sufficient to trigger a state’s registration requirements.
The Church Law Center of California can answer your questions
The Church Law Center of California supports the work of religious and secular nonprofits as they grow and evolve. We can help your church look at its current and planned activities to verify that it is complying with applicable rules and adequately managing its risk. Call us today at (949) 689-0437 or reach out to us through our contact page.