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Nonprofit Law/Church board redesignation of restricted funds


QUESTION: Dear Harvey,

Thank you for your time.  We have a small, but what could become a contentious issue crop up in our church and was hoping we could get some guidance on it. About five or six years ago, our church sold our parsonage and the church membership, in a called membership meeting, voted to restrict a portion of the profit (about $40,000) from the sale of the parsonage as a seed for the purchase of a future parsonage. At that time, our finances were tracking the rest of the economy and we needed a portion of the funds just pay our expenses.  However, a member made the motion to restrict a portion of the funds as above so as not to completely lose the value of the asset we had. The motion passed.

We now have a new pastor, a new treasuer, and, mostly, new Board at the church.  Currently, we are discussing calling an associate pastor but would potentially need to use some of the "parsonage funds" to assist at least for the first year.  Our current pastor says the new Board has the ability to redirect the use of these funds since we are the elected representatives of the congregation. A few of us on the Board disagree since we do not feel even as elected representatives we can legally override the "will" of the members since it was the church body/membership that voted to restrict the fund (since, under our bylaws and church structure, we derive our authority and "power" from the members).

Is this correct?  I know there is somewhat of a moral issue here as well, but just speaking in terms of legality, can an elected Board of a nonprofit overturn a specific financial restriction of funds approved by the membership?

Thanks again for your assistance in this matter.

Sincerely, Richard

ANSWER: The Alaska Religious Corporation Law as of 2011 is available at: Let me know if your church has been incorporated under that Act. If not, let me know what type of entity it is and, after you give me that information I will reply further.  

In any case, confirm that the bylaws give certain authority over finances to the voting members who I assume you mean by "members".

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    

---------- FOLLOW-UP ----------

QUESTION: Thank you, Harvey.

Our church is incorporated under AS 10.20 as a "Religious Organization" which appears to apply AS 10.40 for all religious entities.

Our bylaws are not excruciatingly detailed in this matter, but merely states that the Board is responsible for the handling of the finances of the church; however, it does stipulate that any purchase or sale of real estate/property must be approved by the voting members, hence the need for calling a meeting of the membership/congregation.

I guess, then, to clarify in this context, can the Board override the restriction of funds approved by the voting membership within their approval of the sale (the restriction was a "friendly amendment" attached to the original motion to approve the sale of the property)? Or are the voting members only restricted to either approving or rejecting the sale, with the restriction of funds being more of a non-binding referendum for the board to consider rather than a binding vote?

Understand it doesn't legally matter, but the vote to sell the property probably would not have succeeded without the friendly amendment as a large block of individuals was not in favor of selling the property to begin with unless it allowed the seed for the potential of a future purchase.

Thanks again, and sincerely,

It is standard in many states that a congregation would need to approve the sale, mortgage or lease of the real property of a religious organization.  However, that does not mean that the voting members have authority to decide how funds, obtained from the sale, would be used.

Section 10.20.081 provides, "The affairs of a corporation shall be managed by a board of directors."  Therefore, the Board has authority over the funds, even though formerly they passed a resolution as to the use of the funds.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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