PARISH INCORPORATION QUESTIONS & ANSWERS



Questions asked at the Parish Incorporation Information Meetings held in the 11 Vicariates in the Diocese of Tucson during October of 2005 have been compiled and organized by the categories below. Each category is linked to its questions and answers.

You are welcome to communicate any additional questions to Kathy Rhinehart, Executive Assistant for Corporate Matters, at the Diocese of Tucson. Your question will be answered individually and included in the questions addressed here.




Articles of Incorporation

Who wrote the Articles of Incorporation and Bylaws and can the individual parishes change them?
The proposed Articles and Bylaws were drafted by a subcommittee of the Diocesan Incorporation Committee. The actual drafting was done by the Diocesan Attorney with the help and input of the canon lawyer for the Diocese. These documents may both be amended from time to time as circumstances require. These documents also underwent independent review by canonical lawyers and civil lawyers from outside of the Diocese.

Are we certain that with the commonality in the Articles of Incorporation, Bylaws and Board of Directors, that we adequately have separated parishes from the Diocese? Can the corporate veil be broken or pierced?
Yes, we are satisfied that the current plans adequately have separated the parishes from each other and from the Diocese. The corporate veil can be pierced, however, if corporate formalities (keeping minutes and keeping accounts separate from other parishes and the Diocese) are not scrupulously followed.

Asset Vulnerability

Can restricted funds or donations be taken if a parish is sued?
Generally no. This answer will be definitely no if the parish observes the corporate formalities of doing annual reports and preparing corporate minutes, and keeps its book of accounts in good order (including proper documentation of the restrictions imposed by the donors of the funds).

If a parish is sued and in the middle of a capital campaign such as building a new facility are those funds vulnerable in the suit?
Restricted funds will escape execution for the payment of parish debts, but in order for the funds raised for building or other restricted purposes, the collection of the funds will need to be well-documented to show that the funds are restricted. Once the funds' restrictions are well-documented, they will not be in jeopardy of being lost for general liability executions against other parish properties.

If a parish is sued is there a homestead law that would protect it from losing the church?
No. The homestead law in Arizona pertains only to single family residences.

Board Accountability

In the earlier slides it states that board members cannot be paid. How is that possible if the Pastor is being paid?
The Pastor is paid to be the Pastor. He is not paid for being a Board member. He gets no extra pay for being a Board member. Non-profit corporations may pay for services received, and that is why the parishes will be able to pay their Pastors for the services the Pastors will render to the corporation by serving the parishioners.

With reference to the question of member and non-member corporations, there is a concern that there is no direct parishioner input into the Board. What is the accountability of the Board to the parishioners?
Parishioners have the same input to the Pastor and the Board of Directors after incorporation as they have before incorporation. The accountability of the Pastor and the Board of Directors to the parishioners will not change just because the parish is incorporated. The moral obligations of the Pastor as imposed by Canon Law remain the same, and since the Board is to help the Pastor deal with the assets of the parish in the civil arena, those moral obligations spill over to the Board as well. The primary avenues for parishioner input continue to be the Pastoral Council and the Finance Council. However, parishioners may also direct their questions and concerns to the Board.

When making decisions how will parishioners be informed of what is going on?
We expect that the Board meetings will be open to all the parishioners; likewise, we expect that minutes of Board meetings will be made available to all parishioners once they have been prepared and signed. It is highly recommended that Parish Boards be open and transparent and communicate with parishioners.

How often are reports to the parishioners to be made?
We expect that reports to the parishioners will be made as soon as Board decisions are made on anything. If the minutes of the Board meetings are made available to the parishioners, they will be informed of decisions that have been made. Likewise, if the parishioners attend the Board meetings, they will have instantaneous information of the decisions of the Board. Currently Diocesan policy requires an annual financial report to parishioners. Parish Boards should communicate frequently by way of Board minutes and other methods of communications.

Will the subject of the meeting be published and open to the parishioners?
We expect that the agendas for the Board meetings will be made public in each parish (bulletins or bulletin Boards), and that all Board meetings will be open to all parishioners. This is highly recommended for each Board.

Board Authority

How can a Pastor move forward on a capital project if the two lay members are against it and either the Bishop or Moderator of the Curia does not attend the meeting?
The Pastor will probably have the proxy votes of the Bishop and the Moderator of the Curia. The Bishop and the Moderator may attend the meetings by phone. However, it will be important to listen carefully to the lay members' objections.Though not required on such isues, unanimous approval of the Board should be the desired goal.

In the example of a financial problem at the parish level who has the final say?
Under Canon Law, at the parish level, the Pastor has the final say in dealing with a financial problem. Under civil law, the majority of the Board would have the final say. Since the parish Articles of Incorporation defer to Canon Law, the Pastor would ultimately be the final arbiter for such a decision.

Under Civil Law the Board of Directors has full responsibility for the corporation yet under Canon Law the Pastor is responsible. How is that sorted out?
The "sorting out" of the potential conflict between civil and Canon Law is one of practicality. The Pastor is the person who in the first instance is responsible under Canon Law to run the parish. If the Pastor determines that a given path is the most desirable, he presumably will make his wishes known to the other Board members, who in turn will discuss the proposed action and help the Pastor see the pros and cons of the action in question. Seldom is anything done in small corporations where there is anything but a unanimous determination to go forward in a particular manner. The leader of the small corporation makes his wishes known to the other Board members, who in turn decide if they wish to make an issue of their positions. Compromise is usually attained, and the corporation moves forward to perform the tasks they have decided upon.

Who has control over the funds of the parish? Who decides what and how much is spent?
In the last analysis, the Pastor has control of the funds in the parish. Pastors have shared some of that control with their finance councils, and soon with their Boards of Directors. Ultimately, depending on the magnitude of the proposed expense, the Bishop might have the final say. Canon Law gives the Bishop the ultimate say on the expenditure of funds, and our Diocese has policies in place regarding the spending of monies and making sure that the financial decisions are sound.

What would be the process under incorporation if a parish wishes to buy or sell land?
Parish corporations will have to execute purchase or sale documents by and through those people who are authorized by the Board of Directors to execute such documents. The execution of the documents will no longer be done by the Diocese. Nonetheless, the parish is still subject to the restrictions imposed by Canon Law, which require the Bishop's consent to acquire real property or to sell the same.

Once incorporated will the Directors have absolute authority to sell any property including schools?
The Directors will have authority as a Board under civil law to sell church property, including schools; but they cannot sell any property without complying with Canon Law which requires approval of the Bishop.

Board Composition

What is the process for election of lay members to the Board? Who can vote in the election?
Those who are registered in the parish and who have attained the age of 18 years, and who are in full communion with the Roman Catholic Church may vote in the election of lay members of the Board of Directors. The elections must be announced in the parishes before they are to be held, with the notice of the elections being given for at least 4 weeks prior to them being held. It is expected that the Board of Directors will appoint an election committee of parishioners to oversee and implement the elections to make sure that they are fair and properly done.

Can a deacon be a Board member?
No. A deacon is part of the clergy. The only clerical members of the Board are the Bishop, the Pastor and the Moderator of the Curia. This leaves no room for another cleric to be on the Board.

Can a layperson be re-elected after appointed to the Board?
Yes. There are no term limits in the drafted Articles or Bylaws at this time.

Can a Pastor appoint the Board?
The Pastor will be able to appoint only the lay members of the Board at the inception of the corporation. After the corporation has been formed, the lay members will be elected by the parishioners. The Pastor still has the right (and duty) to nominate people to serve on the Board after the corporation has been formed. These nominees will be voted upon by the parishioners, who in their own right may nominate people to fill vacancies on the Board.

The Bylaws mandate a Board, Pastoral Council and Finance Council. Will they be elected or appointed by the Pastor?
The Board of Directors will have three members who have their positions by ex officio status - the Bishop, the Pastor and the Moderator of the Curia. The lay people will in the first instance be appointed and ultimately elected. The members of the councils will be appointed, discerned or elected as the Pastor determines best for the parish.

Which term is recommended for the secretary, the 2 or 3 years for the treasurer?
We express no opinion on which office has the first three-year term. It will be up to each Pastor to decide who is appointed to fill each slot, and it will then be up to the individual Boards (once their members are in place) to decide who will be secretary and who will be treasurer.

Why are there only two lay people (and three clerics) on the Board?
To conform with Canon Law - the Pastor and the Moderator of the Curia have moral obligations imposed by Canon Law to the Bishop, while the lay people do not have those same obligations. The Bishop has certain authority under Canon Law to replace the Pastor and the Moderator of the Curia, but he does not have that same authority to replace the lay people - only if the Bishop determines that the lay people are not registered members of the parish and in full communion with the Roman Catholic Church. Thus to insure that the Bishop retains the authority he is to exercise under Canon Law, it was determined that the make up of the Board needed to be such as to allow the Bishop to step in and make the moves necessary to guarantee the orthodoxy of the Church.

In the age of the laity, it seems confusing that out of the five members of the board of directors for a newly incorporated parish only two are lay persons. Why is this, and is this not a diminishing of the role of the laity?
(Question addressed by Bishop Kicanas in his Monday Memo of Oct. 31, 2005.)
The laity absolutely do have a major role in the life of our parishes, and the make up of the board of directors is not a true measure of how laity can and should be involved in the life of the Church. While the board has an importance in dealing specifically with matters that pertain to the parish's civil identity and corporate responsibilities, the real influence on the parish's mission remains with bodies like the parish council and the parish finance council and the many other organizations and programs that are overwhelmingly comprised of laity, including those areas of parish life like the liturgy (Extraordinary Ministers of the Eucharist, lectors), catechesis (directors of religious education and catechists), Catholic Schools (administration, faculty and staff), parish administration (business and office managers, secretaries) parish social mission (the corps of volunteers who always can be called upon to get things done). Reflecting further on the question, I think that one way to see the role of the board of directors is to think of a symphony orchestra. The board of directors is like a section of the orchestra -- maybe the woodwinds, responsible for the special tone and feeling that they add, but always playing together with the many other sections. While two of the five members of the board of directors' "section" are laity, laity predominate in the other sections. All together, the goal is to produce the beautiful music of a parish symphony that is in perfect harmony with the mission that Christ has given us. It is important to remember that the same articles of incorporation that call for the establishment of the board of directors also mandate a parish council and a parish finance council, consultative bodies on which lay members predominate.

Can a layperson be re-elected to the Board? Can the Bylaws be changed to include term limits?
Yes, laity may re-elected to the Board. As currently drafted, neither the proposed Articles nor the proposed Bylaws provide for term limits for lay members of the Board. Yes, Bylaws may be amended by the parishes to mandate term limits for lay members.

According to the bylaws and Articles a nun cannot be a member of the Board even though she administratively manages the parish. Will the Board have an option to include administrators into a voting role?
As currently proposed, no. We expect that parish administrators will be given a consulting role on the Boards of those parishes where they serve.

Are there other possible "make ups" of the Board? More numbers? For example: pastors plus four members and Bishop? Because of the size of some Parishes with missions can the Board increase the number of Directors?
Yes, it is possible to increase the size of the Boards, so long as Canon Law is observed (i.e., the clerical members of the Board must be greater in number than the non-clerical members). It is not anticipated that any parish, regardless of size, will increase the number of people to sit on its Board.

In absence of a Pastor who takes the place of the Pastor as President on the Board if a parish is in the transitional process of getting a new priest?
Section 5 of Article V of the Bylaws provides that the priest appointed by the Bishop as successor Pastor or administrator, or the priest charged with the responsibility of the spiritual care of the parish under Canon 517, Section 2, of the Code of Canon Law will automatically on the day of his appointment be the Pastor of a parish, even if he is not physically present at the parish for some reason.

Are international priests allowed to be incorporators as non-citizens?
Yes.

What or who is the Moderator of the Curia?
The Moderator of the Curia is Father Al Schifano. His job is like that of a chief operations officer of a civil corporation.

Board -- Finance and Parish Councils

A question of the treasurer and secretary as they relate to a Finance Council - do they run parallel or independent of the Finance Council?
The secretary and treasurer Board members are separate from the Finance Council. They are independent of the Finance Council. The Finance Council is an advisory body to the Board. To the extent that the secretary and treasurer are Board members, the secretary and treasurer are members of a body which oversees the Finance Council.

Explain the relationship between and among the Board, the Parish Council and the Finance Council. Can the Board override the decisions and actions of the Pastoral and Finance Councils? Is that likely to occur?
Yes, the Board of Directors may override recommendations of the Parish Pastoral and Finance Councils. It is not likely to occur, however, since the Pastor will have participated and probably guided the Pastoral or Finance Council in the determination of various issues. We anticipate that the Board will in most instances go along with the Pastor's desires, but help the Pastor in making an informed decision on whatever issues are addressed from time to time.

Can the Board override the decisions and actions of the Pastoral and Finance Councils? Is that likely to occur?
Yes, the Board can override recommendations of the Pastoral and Finance Councils. As a practical matter, since the Pastor is on both councils, we do not see it happening very often where the councils' recommendations will be overridden.

Can the members of the Board be ex-officio members of the Parish Council or Finance Council?
It will be up to the Pastor and the councils themselves to decide if Board members will be ex officio members of one or both councils just by virtue of membership on the Board of Directors.

Can the Parish Council treasurer and secretary serve on the Board?
Yes, the Parishl Council treasures and secretary may serve on the Board of Directors. There is no proscription in the Bylaws to prevent such service.

Explain the role of the Board treasurer with respect to the Finance Council.
The Board Treasurer, along with the rest of the Board, will receive the financial report and the recommendations from the Finance Council. The Board Treasurer will be well-versed on the finance manual of the Diocese and will be equally able to advise the Pastor and the rest of the Board of shortcomings or laudatory positions of the Finance Council's actions and recommendations.

How can the parishioners get assistance to enforce the requirement for Parish and Finance Councils by the Pastor?
Parishioners should direct their pleas in this regard to the Parish's Board of Directors directly or to the Bishop.

Presume that the Pastoral Council and Financial Council and the Board of Directors have conflicts - what happens?
The Board of Directors civilly are the controllers of the parish, and thus their decisions on matters of conflicting views will prevail. We expect collaboration among these bodies to pursue what is deemed to be in the best interests of the parish from time to time.

Board Liability

Is there some sort of insurance coverage for the Board members?
Yes. The Diocese has blanket Directors and officers coverage for Board members. When the parishes are incorporated, they will be named insureds under the blanket policies.

What happens if the Board is sued?
The Board will contact the insurance company for representation in the suit.

What is the indemnification for Board members if the veil is pierced?
The Directors should turn the matter over to the insurance carrier immediately. They should also immediately confer with diocesan counsel regarding the suit.

Will lay members of the Board be liable and can they be individually sued?
Lay Board members can be sued, but they are covered by blanket insurance coverage for Directors and officers currently carried by the Diocese for all the parishes. They will be responsible for their own actions to the parish (e.g., they cannot steal from the parish).

Will the Board Treasurer be required to be bonded?
No. It is up to each parish to decide if the Board treasurer is to be bonded. As a practical matter, it is not likely that a Board treasures will have access to any of the accounts of the parish. He or she will simply oversee the reporting to make sure that the Diocesan guidelines are being adhered to.

Can the Bishop as a member of a parish's Board be named as a defendant in the lawsuit against that parish?
Yes, but it is not likely that he will stay in the suit as an individual defendant, just as it is not likely that other Board members will remain as defendants if they are named personally. As long as the corporate formalities are observed, the prospect of piercing the corporate veil under Arizona case law is not likely to occur.

What liability do Parish Board members assume?
Civilly, they assume a fiduciary obligation to the parish corporation. This means that they must act toward the corporation with utmost honesty, loyalty, good faith and fair dealing. Any conflicts of interest must be resolved in favor of the corporation. They must discharge their duties in good faith with the care of an ordinarily prudent person in similar circumstances and in a manner which they reasonably believe to be in the best interest of the corporation.

How is Board of Director coverage obtained?
The Diocese currently has such coverage in place. It will remain in place with the parish as a named insured under the policy as a separate entity once it is incorporated. Once the Board has adopted the draft resolutions, coverage will remain in place.

Board Process

Can consent minutes be substituted for the minutes of the Board?
Yes, but we discourage the use of such things. We feel that the parishioners will be best served if the Directors had regular meetings at which Pastoral and Finance Council reports are received and discussed openly.

How will the Open Meeting Law of the State of Arizona apply with respect to parishes who receive federal funds? Will the meetings be open to the parish?
The open meeting law applies to the government and its political subdivisions. Parishes are neither the government nor political subdivisions thereof. Thus the open meeting law does not apply to parishes. Parishes do not receive federal funds except for grants pertaining to preservation of historic places (Mission San Xavier). Those grants do not require open meetings.

Is there a reason why the annual meeting has to be in Tucson? Can that be changed? Why do the Bylaws require that the Board meetings take place in Tucson?
The annual meeting is in Tucson for the convenience of the Bishop. The place of the annual meeting may be changed from time to time by the Board of Directors, of which the Bishop is a member.

Since the Board is made up of five members including the Bishop, how will he attend and how often will the meetings be?
The Bishop may attend in person, by telephone, or by proxy. The meetings will be at least once a year. It is suggested that they be held at least quarterly, or as often as the individual Boards desire.

What takes place at the annual Board meeting -- special meetings?
The annual meeting usually will entail the approval of all actions taken in the prior year by the Officers and Directors. It may include the appointment of someone to fill a vacancy on the Board. It may include the receipt and review of reports from the Pastoral and Finance Councils. Other corporate business may also be discussed - fund raising, expenditure of funds, hiring of new personnel to serve the parish, firing of personnel, accounting for restricted funds, review of the parish finances for future expansion or building, etc. All these things may also be discussed or reviewed at the special Board meetings throughout the year.

Who gets to participate in the organizational meeting?
The Pastor, the Bishop, the Moderator of the Curia, and the two lay members of the Board. Interested parishioners may attend as observers.

Will the detailed financial information of the parish be handled by the various Boards?
Financial information of the parish will be handled ultimately by the Pastor, for he is primarily responsible under Canon Law. The parish finance council will handle parish financial information as in the past, and the Board of Directors will also handle such information at least in receiving the report of the parish finance council.

Can the bishop delegate proxy vote to laymembers?
Yes, but it is not likely to be done in that fashion simply to be sure that Canon Law is observed, which requires a clerical majority on the Board.

Will the Board have to require outside audits financially each year?
No. It will be up to each Board to decide if such an expense is warranted or desired.

Will parishioners receive notices of the Board of Director meetings and will they be allowed to attend?
It is up to each Board to decide how to publish notice of its meetings.We expect that the Board meetings will be open to all the parishioners; likewise, we expect that minutes of Board meetings will be made available to all parishioners once they have been prepared and signed. It is highly recommended that Parish Boards be open and transparent and communicate with parishioners.

Board Role

What is the role of the Board?
The Board is an extension of the Pastor. The Pastor is the CEO. The Board of Directors helps the Pastor make policy for the operation of the parish as it pertains to its properties, programs and personnel. The Board then determines how to put its policies into effect and takes action to do so.

In committees it is difficult to get consensus. What does one do to come to a decision?
In the parish corporations, once a quorum is present, decisions are made by majority vote, except for amendments of the Bylaws which requires a unanimous vote and approval by the Bishop.

The example of "How to build a Church" was given -- explain the roles of the different councils?
The various councils will have the same roles and obligations after incorporation as they had before incorporation. They will report to the Board instead of just to the Pastor who himself is a member of the councils.

Would it be useful to have a list of what decisions must be brought to the Board or can be brought to the Board?
Any decisions imaginable could be addressed to and by the Board. There is no value in trying to conjure up a list of decisions a Board might make. To put down some things the Board might do would possibly exclude others.

Bylaws

If we allow each Parish to change its own Bylaws we won't be on the same page after many years. Won't that be a problem?
No. It is additional evidence of the separate status of each parish.

Canon Law

How does Civil Law feel about Canon Law?
Civil law must defer to Canon Law in certain instances. In others, civil law will ignore Canon Law. For example, a civil court may not engage in the determination of a Canon Law question; but once a decision is rendered under Canon Law (e.g., the determination to close a parish, or to laicize a priest), civil law will enforce the Canon Law decision.

What is the involvement of the Board with regard to Pastor assignment?
None. Pastor assignment is totally within the determination and control of the Bishop.

Lay persons who are elected to serve on the Board of Directors must be in "Full Communion" with the Catholic Church. What does that mean?
"Full communion" is defined in Canon Law as follows: "Those baptized are fully in the communion of the Catholic Church on this earth who are joined with Christ in its [the Church's] visible structure by the bonds of the profession of faith, the sacraments, and ecclesiastical governance." (Canon 205)

Why does the Bishop get 2nd veto after a decision has already been made by the Board?
The Bishop has the ultimate say under Canon Law. To provide otherwise would violate Canon Law.

Employee

Can the laity on the Board be a paid employee, such as the Finance manager or bookkeeper?
Yes. For a check and balance system, however, it is not recommended.

Currently all employees are employed by the Diocese. Will priests who are paid through PAA or whose salary is paid with a subsidy from the Diocese be considered employees of the parish or of the diocese? Who is considered the employer since the application reads Diocese of Tucson application?
Priests will be employed by the parishes. For priests, the pay scales will be set by the Diocese. For others, the parishes will be guided by the Diocese, but ultimate decisions in this regard will be made by the parishes.

Will the existing retirement plan continue - will there have to be a separate 501 c 3 incorporation for schools for the tax exemption?
The existing retirement plan will continue. There will be no need to seek a separate tax exemption after incorporation. The Diocese will continue to list the parishes and their schools in the Official Catholic Directory, thereby insuring tax exempt status with the IRS.

Finances

At the moment of the incorporation of parish will all debts / liabilities be wiped clean?
No.

Can a parish set its own fiscal year?
The Diocese will require that the fiscal year be the same as the Diocese's for tax purposes and for the proper administration of insurance programs, accounting programs, and retirement programs.

How can a parish become viable prior to incorporation?
Parishes will need to become better managed and more fiscally responsible. There may be a need to tighten up on expenditures if the income is not there to handle the debt. They may also need to seek external sources of financial assistance, such as grants.

How will the new incorporation as separate entities with new names affect our creditors/contracts?
A parish cannot escape debt by incorporating. It will still owe on its debts and still be obligated on its contracts.

Salaries - Will the parishes set their own pay scales for priests and employees?
For priests, the pay scales will be set bythe Diocese. For others, the parishes will be guided by the Diocese, but ultimate decisions in this regard will be made by the parishes.

What will happen if a parish is not financially stable or viable to pay its debts/bills?
Such a parish will need to borrow money from somewhere, probably from a parish which has a surplus. Then it will have to repay its loans. It might also seek donations from philanthropic groups and Catholic groups.

Will the accounting requirements change such as from cash to accrual basis?
No.

How much do the parishes pay for assessment fee to the Diocese?
The Chancery tax is 7% of parish annual collections. If the parish's annual collections are less thatn $30,000, the Chancery tax is 3.5%.

Are there any new audit requirements with the incorporation?
No.

What provisions have been made for the Dioceses to help Parishes that are in financial trouble?
The Diocese sponsors a Priest Salary Subsidy Program for poorer parishes. In this program parishes which are financially healthy contribute to this subsidy, also external sources of grant money are also used for the subsidy.

Can the Diocese send money to a Parish?
Yes.

What happens if a Parish cannot afford to pay its insurance premiums?
Such a parish will need to borrow money from somewhere, probably from a parish which has a surplus. Then it will have to repay its loans. It might also seek donations from philanthropic groups and Catholic groups. The parish must find the means to pay its bills if it is to remain viable.

In reference to the money that was on deposit at the Diocese - when will the parishes receive an accounting of those moneys and how they will be repaid? What is the parishes contribution to the settlement pool?
Pastors have received this information and are sharing it with parishioners. Also there is a special report on this subject in the November issue of the "New Vision/Nueva Vision."

Could it be summarized why we are incorporating if the Diocese is in control of the Finances and nothing really has changed?
The Diocese is not in control of the finances. The control is with each parish through its Pastor. Canon Law requires that the Bishop also be responsible for the finances of all parishes in the Diocese, and that is why a finance manual is published by the Diocese to guide Pastors in the proper investment of monies and the prudent care of personal and real properties of the parishes. Incorporation is being pursued for several reason: to reflect the reality of separateness as decreed by Canon Law; to abide by the order of the U.S. Bankruptcy Court which approved the Chapter 11 of the Diocese; and to make sure that never again will the parish properties be considered by litigants to be entirely the properties of the Diocese and therefore subject to execution for the payment of Diocesan debt.

Will we be able to open our own bank accounts or do we have to use the Diocese Accounts?
Under the Diocesan Norms, parishes are allowed to have an operational checking account and are able to keep up to three months operating funds in the account. All funds above this amount are to be transferred into the Parish Pooled Investment Program (PPIP) until needed by the parish. Withdrawals from the PPIP can be initiated by contacting the Fiscal Department at the Diocese.

What involvement, if any, do the parishes have in the investment pool?
Investment policy is set by the Oversight Committee of the Parish Pooled Investment Program, and is intended to generate good investment returns with low risk. Parishes will be able to choose from three investment options: short term, medium term, and long term. The longer the term, the greater the expected rate of return. Other than selecting the investment term, parishes will have no direct input into the type of investment, but rather will participate in a pool of investments offered under the program.

Incorporation Process

Is there a gap between 501 c 3 and incorporation?
No.

Since we have to incorporate, do you want us to start now (on our own)?
No.

What additional reporting will be added with the incorporation - will the reporting formats be the same, different or in addition to what we already report annually?
The reporting for the Diocese will remain the same. For the Arizona Corporation Commission, a report will need to be filled out and filed annually. The report is quite short and not at all onerous.

What are the documents pastors will receive on incorporation?
They will receive a copy of the Articles of incorporation, the Bylaws, and a parish service agreement to cover the services to be performed for the parishes by the Diocese.

What is the deadline for the incorporation?
The bankruptcy court deadline is April 15, 2006.

When the incorporation papers are signed does it have to be witnessed by the statutory agent?
No.

Will each Parish get its own 501c exemption?
No. Each parish will be included in the exemption granted to all the Dioceses in the USA by the IRS Ruling which comes out every July. The parishes will be recognized as tax exempt by the inclusion by the Diocese of the parishes in the Official Catholic Directory.

Will there be uniformity in record keeping and standard compatibility between parish and Diocese?
Hopefully, yes.

What is the timetable for incorporation?
The Articles will be filed in November. A fee will be paid to expedite handling of them. We expect to have the Articles approved and returned to us by December or early Janaury. We will then publish (three consecutive publications) the Articles in a newspaper of general circulation in the county in which the parish church is physically located in order to complete the incorporation process under Arizona law. The effective date of incorporation is the date the articles are actually delivered to the Arizona Corporation Commission, even though the Corporation Commission will not file or approve the Articles until a later date. Once the publication is complete, we will file an affidavit of publication (with an actual cut-out copy of the Articles as printed in the newspaper) with the Arizona Corporation Commission to complete the incorporation process. Property currently held in trust bythe Diocese will be deed over to each parish following incorporation and before April 15, 2006.

Lawsuits

How will litigation be handled?
All tort litigation will be sent to the insurance company for handling. For contract litigation, the Diocese will aid the parish in obtaining counsel.

Who will represent the parish if a lawsuit comes against the parish?
For tort cases, the parishes will be represented by attorneys hired and paid for by the insurance company. For contract cases, the parish will be represented by counsel of the parish's own choosing.

What resources do the parishes have for legal advice or help?
In the first instance, the parishes may seek legal advice from the Diocesan attorney. If he cannot provide the legal help necessary to address the issue, he will aid the parish in obtaining counsel to advise and help the parish.

The parishes pay insurance premiums to protect themselves from liability but in case of a lawsuit who will pay the legal fees and if the parish has no money what happens if they loose, who will pay?
In those cases where the defense of a suit is handled by an insurance company, the insurance company will pay for the parish's defense. The insurance company will pay up to its limits to indemnify the parish from loss. If the parish is not insured for a given loss, it will have to pay for its own defense, and for whatever loss it sustains as a result of the lawsuit.

Does each parish have its own lawyer?
Each parish may consult with the Diocesan attorney. Each parish may also hire its own attorney as it sees fit.

If a lawsuit is brought against a parish, what are we to do? Will a parish have to stand alone against the suit?
First, the parish should advise the Diocese of the suit. The Diocese, through the Diocesan attorney, will notify the insurance company of the suit to obtain representation for the parish. Each parish, being a separate entity, will stand on its own in the suit.

Liability - Diocese

How are parish assets protected from Episcopal error?
By being separately incorporated and by being kept financially separate, the parishes will have the protection afforded all corporations by Arizona law. This means that the parishes will not be looked upon as the alter ego of the Diocese. Thus, the parishes will not pay for the debts or shortcomings of the Diocese or its Bishop.

What is the Diocese (Bishop's) responsibility and legal liability for financial decisions and their performance in giving advice/help to a parish?
The Bishop is the member of the Board, not the Diocese. As such, he has the same obligations toward the parishes individually as does any other Board member. He has a fiduciary duty to the parish as a separate entity. If he gives poor advice, the statutes in Arizona do not make him liable. If he does something to harm the corporation (fraud, embezzlement, etc.), then he will be personally liable to the parish corporation for any damages he might cause.

Is there really "firewall protection" provided by incorporation between the Diocese and the Parish?
No. But the protection will be best obtained if corporate formalities are followed and accounts are kept strictly separate from each other.

Liability - Parish

If a parish is sued, can the corporate veil be pierced through to the Diocese and in reverse?
The Diocese is not a member of the parish corporation; it is not a member of the Board. The Bishop is personally. The only way to pierce the corporate veil is for a court to find that the corporation is the alter ego of someone else. So long as the corporate formalities are kept, and so long as the financial accounts of the parishes are kept separate from those of the Diocese and other parishes, there will be no factual basis for the piercing of the corporate veil.The corporate veil should not be pierced because of the actions of the Diocese. The Diocese as a corporation itself is not a member of the parish corporations. The Bishop as a person, not as the embodiment of the corporation sole which is the Diocese, will be a member of the parish Board of Directors. That by itself will not allow for the piercing of the corporate veil, especially as long as the individual parishes observe corporate formalities (have meetings and record minutes faithfully), and maintain their books of accounts separately from those of the members of the Board and other related entities (the Diocese). This means that the parishes should not commingle their funds with Diocesan funds; that is, they may be invested in the same investment vehicles or banks, but the account holders should maintain separate ledgers for each account-much like your own personal bank accounts which are commingled with the funds of many other people who deposit money in the same bank, but whose individual accounts are kept separate and accounted for separately by the bank. The same admonitions hold true for the Diocese; that is, as long as the Diocese observes corporate formalities and keeps its funds separate from the parishes, the Diocese will not be responsible for the actions of the individual parishes.

What is the parish liability for actions taken by their member groups such as the St. Vincent de Paul Society (SVdP) if they break the law with regard to undocumented residents? Can the Diocese push for a change in the law?
The parish is separate from the SVdP. The SVdP is a separate corporation. As long as the parish does not conspire with the SVdP, or any other organization, to violate the law, then it will not have to answer for the violations of any other related group. The parish can push for humanitarian changes in the law, but it should not engage in lobbying.

Non-profit Status

Is there a ceiling limit on net gain for non-profit organizations? Will making a profit nullify the non-profit status?
No. The only thing that non-profit entities need to watch out for is the earning of taxable business income (rents and advertising profits, for example). The earning of such income will not of itself destroy the tax exemption status of a parish, but it will require the filing of a tax return - the form 990-T.

What does it mean "not affiliated with any political agenda?"
To retain tax exempt status, IRS regulations state that the parish may not engage in any political campaign on behalf of or in opposition to any candidate for public office.

Ownership

How can the Diocese continue insurance for all the parishes if the Diocese does not own the parishes?
The Diocese has bargained for a blanket policy for all the parishes, and the insurance company has agreed to afford such coverage, with each parish becoming a named insured under the policy.

Parish - Liability

What are the risks, exposure and cons of parish incorporation?
There are no risks undertaken in incorporating the parishes. The only risk following incorporation is that the parish can be sued individually because its separate existence will finally be civilly recognized under Arizona law. The protection afforded each parish from the Diocese and other parishes comes with the price of having to observe corporate formalities and file the annual reports to comply with Arizona law. These are acts which up to now each parish has not had to concern itself about.

Will insurance continue for health coverage and property liability?
Yes.

What do the Diocesan umbrella insurance policies cover?
The Diocesan Insurance Program offers a comprehensive insurance package that covers a variety of insurance issues including, but not limited to the following: property, boiler & machinery, forgery & fiduciary liability, workmen's compensation, auto, uninsured motorists coverage, business interruption, builder's risk, Directors & officers, computer theft, bodily injury and property damage, employment related practices, and sexual misconduct liability. Coverage is provided by six different insurance companies.

Parish Authority

With separate 501 c 3 incorporation, can the parishes apply separately for grants?
Yes, but parishes are cautioned in this regard because of the stringent accounting which many such grants require. Counsel with the Diocese is recommended before any grants are sought.

Since the parishes will now own the deeds to the property are the parishes exempt from the old process of going to the Diocese/Bishop to obtain permission to spend over $7,500 or sell property?
No. The parishes must still follow Canon Law in dealing with their property.

What is the current process for assigning Pastors to a church?
The Bishop has that authority under Canon Law.

Will the process for borrowing/credit from Banks or other parishes change?
The process will be the same for borrowing; the parties executing the documents will change.

With the incorporation of the Parishes, can they now apply for Federal Funds such as Faith Based initiatives?
Yes, but again caution is suggested along with counsel with the Diocese.

Do parishes have veto power over assignments to the parish?
No.

Parish Incorporation - General

Explain the difference between a member and non-member corporation and how the Diocese decided on the non-member format.
Member corporations have people who are like shareholders of a for-profit corporation (Ford Motor Company, for example); non-member corporation do not have rosters of such people. It was decided to use a non-member format to keep the business side of the corporations which are ultimately governed by Canon Law easier to work. With non-member status, parishes do not have to be concerned with actual notice to an entire community of corporate meetings or elections. It is not critical to have absolute and timely information on all the residence addresses of the parishioners in non-member corporations.

How was the Arichdiocese of Milwaukee experience with parish incporation?
Good. The Arch Diocese of Milwaukee has had incorporated parishes for many years.

What does the parish gain from incorporation?
Protection from liability for the acts of the Diocese or for the acts of the other parishes. Pre care and post care.

How will this incorporation and change affect churches with missions?Are missions going to be incorporated too? How will they be protected and covered?
Mission real property will be deeded to the parish responsible for it, and will be deemed to be part of the incorporated parish. As such, they will be insured to the same extent as any other parish. Missions themselves will not be incorporated.

With the indemnification of the civil law in the Articles hypothetically what would happen if a state law was passed that was in conflict with the religious statues of the Catholic Church? (such as same sex marriage and abortion)
If a statute were passed that were in conflict with Canon Law, the parishes would follow the law of the Roman Catholic Church. The hypothetical question posed is not likely to occur; to put it differently, the hypothetical facts posed in the question would not impact the parish corporations. In Arizona, we have statutes called "Free Exercise of Religion," found in ARS 41-1493, et seq. These statutes would protect parishes from having to abide by the hypothetical recognition of same sex marriages. In other words, even though the state might recognize such marriages, the church (and thus the parishes) would not have to render recognition to such unions. There is also federal protection under the U.S. Constitution to keep states from unduly restriction the free exercise of religion in this country.

What happens when the next Bishop takes the place of Bishop Kicanas?
The Articles as drafted indicate that the next Bishop of the Diocese of Tucson will ipso facto be deemed to be a member of the Boards of Directors of all the parishes in the Diocese.

How does the incorporation affect current and future contract limits?
Diocesan Norms require that contracts in excess of $7,500 be reviewed and approved by the Bishop. The Bishop uses Diocesan staff or committees to study and review the contracts; final approval comes from the Bishop. Incorporation will not affect this requirement.

Parishioners

What part will the parishioners play in this non-profit organization?
They will eventually be voting on the election of a lay person to the Board of Directors yearly. They will also continue in dialogue with their Pastor directly or through the Parish Council and/or Finance Council.

What is the definition of registered parishioners? Many smaller parishes do not require formal registration.
A registered parishioner is someone who is recognized as being a member of a given parish. For those parishes which have a formal registration process, those people who are formally registered are by definition registered parishioners. For those parishes which do not have formal registration processes, then those people who are recognized as regular attendees will be deemed registered parishioners.

Pastor Authority

What is the decision making process or connection? How does that work and affect the normal operations of the parish? Please give clarification.
The Pastor is the CEO, and the Board is there to help the Pastor make decisions. The councils also exist to help the Pastor make appropriate decisions.

What is the decision making process as it relates to the authority of the Pastor? How does that work and affect the normal operations of the Parish?
The Pastors do not abdicate their authority to control their parishes. Under Canon Law, the Pastors are the ones in charge of the parishes. The Board of Directors will help the Pastor (the president of the Board) make decisions pertaining to the temporal assets (the property) owned by the parish and will be responsible for taking action as directed by the Pastor and the Board as a whole to deal with the property of the parish (sign deeds, mortgages, contracts). The day-to-day operations of the parish will continue as in the past because the Pastor is the one responsible for responding to the Pastoral and religious needs of the parishioners.

Property

Why is the Diocese to be listed on all insurance policies when it doesn't own the property?
The Diocese is simply an additional insured. It costs neither the Diocese nor the parishes anything extra for the naming of the Diocese as an additional insured.

Many places that are served by the parish may not be owned by the parish. When occupying a particular place what is the obligation and liability? Is there a difference if the place is leased or loaned?
If a parish leases or "borrows" a property for any purpose, it should treat the property as though it were subject to a written lease. As long as the parish is in control of the property (whether it owns it or not), it should be sure that the property is insured as required by any written lease governing the parish's use thereof; and if there is no lease, the parish should be sure to have the property insured as to the parish's use thereof because the parish will have primary responsibility for injuries occurring there while the parish is in control of the same.

Where will the property deeds be kept? Who keeps the original?
The Corporate Matters office will keep parish deeds in the official corporate book. If an original deed is lost, a certified copy of the same may be easily obtained from the recorder's office of the county in which the property is located.

Schools

For schools licensed and certified under the Diocese - what happens during the gap in the certification and licensing?
The Diocese will continue to be the operating party, the licensed party. The parishes will apply for licenses and will take over as the operating parties as soon as their licenses are issued. If need be, there may be a contract between the Diocese and the parishes in question to have the Diocese contractually agree to continue the operations under the Diocese's license.

Is the parish with a school at a disadvantage because of their chances of being sued?
They are not at a disadvantage; they simply have more risk. Parish with schools have more risk of suit than parishes without schools because of the duty imposed on schools by common law, state law and federal law. In terms of common law liability, the parish with a school must see to the safety of the people working at the school and the students attending it. In terms of state and federal law, the parishes with schools must abide by statutes which govern the operation of the schools and the maintenance of the academic records of the students there. These duties are not imposed on parishes without schools, and in this sense, parishes with schools have a greater risk of suit simply because they have taken on greater and more responsibility under our laws.

What affect does the incorporation have on the day to day operations of the parish, school, Pastoral mission etc?
The Pastors do not abdicate their authority to control their parishes. Under Canon Law, the Pastors are the ones in charge of the parishes. The Board of Directors will help the Pastor (the CEO) make decisions pertaining to the temporal assets (the property) owned by the parish, and will be responsible for taking action as directed by the Pastor and the Board as a whole to deal with the property of the parish (sign deeds, mortgages, contracts). The day-to-day operations of the parish will continue as in the past because the Pastor is the one responsible for the Pastoral and religious needs of the parishioners.

What does it mean that schools will need new licenses and re-certifications as stated in the diocesan newspaper? For schools licensed and certified under the Diocese -- what happens during the gap between incorporation and re-licensing?
The Diocese will continue to be the operating party, the licensed party. The parishes will apply for licenses and will take over as the operating parties as soon as their licenses are issued. If need be, there may be a contract between the Diocese and the parishes in question to have the Diocese contractually agree to continue the operations under the Diocese's license. When the parishes take over the ownership of the schools, they should also take over the running of the licensed programs which have up to now been licensed to the Diocese.

Who is the point of contact at the Diocese for the school incorporation process/questions?
Sister Rosa Maria Ruiz, Superintendent of Catholic Schools.

With regard to schools - explain the importance of the process of architectural plans, steps to take before incorporation.
The architectural plans are important for the licensing of the parishes in the running of their before and after school programs which are licensed by the State. The State requires the plans as part of the licensing process. The obtaining of the plan drawings takes time, and thus schools with these programs are urged to get started as soon as possible to get the drawings started.

For schools licensed and certified under the Diocese, what happens during the gap between incorporation and re-licensing?
For pre-schools and after-schools licensed and certified the Diocese will continue to be the operating party -- the licensed party. The parishes will apply for licenses and will take over as the operating parties as soon as their licenses are issued. If need be, there may be a contract between the Diocese and the parishes in question to have the Diocese contractually agree to continue the operations under the Diocese's license.

Are schools considered separate from parishes?
No.

Separate Entities

How are endowment funds impacted by suits?
Since they are restricted, they are protected in the law- meaning that they cannot be used for general liability or debt service by the donee recipient.

How is the Catholic Tuition Support Organization impacted by the parish incorporation?
There is no impact. The CTSO is already incorporated.

Is the Diocese going to be separately incorporated?
The Diocese is already a corporation under Arizona law - a corporation sole.

Will the cost of insurance coverage increase because the parishes are now separate entities?
No.

Services Agreement and Resolutions

Does the parish has the option to obtain its own insurances and to set its own limits?
Yes.

Why is the Service Agreement at Diocesan level and not at parish level?
It is an agreement between the Diocese and the parish.

Insurance rates are $35,000,000 why so high?
That is the amount of coverage -- not what parishes and the Diocese pay. This is the amount of the blanket coverage (all added up) which the Diocese carries at this time for all the parish properties. It will be broken down to the individual parishes by the time the organization meetings take place in January, 2006.

To what extent can the parishes modify their personnel policy as written by the Diocese?
The parishes may modify the personnel policies as they deem appropriate as long as they otherwise abide by any applicable state and federal laws.

As a parish, can the Pastor and representatives study the Bylaws, Articles, Service Agreements and make changes?
Yes.

To what extent can a parish modify personnel policies?
The parishes may modify the personnel policies as they deem appropriate as long as they otherwise abide by any applicable state and federal laws.

Within the service agreement, legalise specifies that the Parish will indemnify the Diocese for their actions, why does it now work both ways? The Diocese should indemnify the Parishes.
It will be so modified before execution.

Can a parish go outside of the Service Agreement for other things like an audit?
Yes.

If we don't accept the Service Agreement will there be an assessment?
Parishes must accept some part of the service agreement because they are still under the guidance and authority of the Bishop. They will still pay a chancery tax, and for this the parishes would be foolish to ignore the services for which they are paying.

Could parishes "opt out" of Diocesan services? Is a parish free to use or not to use items under the service agreement?
Yes. The Board of Directors have that power.

Will the cost associated with the Service Agreements be the same as we are now paying?
Yes, no change in the Chancery Tax is anticipated.

Will the current diocesan assessment be increased because of the additional services of the incorporation?
No increase is anticipated.

With regard to the Corporate Resolutions optional contractual relationships that can be taken - How does that differ from what we are doing now?
The corporate resolution tracks what is currently being done.

Tax Exemption

Is each parish released from having to go through the tax exemption status process?
For now, yes, as this pertains to real property tax exemption. In 2007, the parishes will need to apply for the real property tax exemptions themselves. As to the income tax exemption, the parishes will enjoy such exemption because of their inclusion in the Official Catholic Directory by the Diocese. Kathy Rhinehart will assist parishes with this each year.

Will the parishes be required to obtain a new employer's identification number (EIN)?
No.

Is there sales tax exemption associated with the 501 c 3 tax exemption?
Yes. But the exemption applies only to religious items.

What is the process for property tax exemptions and how they are filed?
Real property tax exemptions are applied for every January. A form is sent out by the County Assessor to apply for the exemption. It must be filed in January along with other documents (e.g., copy of the Articles of incorporation, Bylaws and the Diocesan certification of inclusion of the parish in the Official Catholic Directory). Kathy Rhinehart will assist parishes with this each year.

Will there be any income tax filing at the parish level after incorporation?
No.

Will the parishes execute the 1023 tax exemption?
Form 1023 refers to the IRS recognition of the religious non-profit tax exemption status of the Catholic Church and its related entities. The IRS recognizes any Catholic entity that is published in the Official Catholic Directory (also known as the Kennedy Directory) as being tax exempt. The Diocese will be responsible for ensuring that all Diocese of Tucson parishes, schools, and other entities will be included annually in the Directory.

Has our tax exemption changed? What about the property taxes?
No. Parishes will have to apply for real property tax exemption in January of each year, starting in January, 2007. Parishes do not file income tax returns unless they have unrelated business income in excess of $1,000.00. This is covered by IRS form 990-T, and expert advice should be obtained before such a return is filed. It is suggested that each parish contact the Diocesan CFO (Tom Arnold) to determine if such a return needs to be filed.

Training

In establishing Pastoral and Finance Councils in individual parishes, will there be additional training for smaller rural areas? Will there be training on how to form Pastoral and Finance councils?
Yes.

Will the Diocese provide legal counsel, incorporation assistance and training for each parish?
Yes.

Will this presentation be available electronically?
Yes.

Will training and legal assistance take place right away?
At present, no. Perhaps in the future.