A minister didn’t receive a salary from his church, but the church paid his personal credit card charges, his home mortgage and home utility expenses. He claimed these payments should be excluded from his income because he made a vow of poverty. The Tax Court upheld the IRS in finding the payments were taxable income. The taxpayer failed to meet the requirements of the housing allowance exclusion. The requirements are (1) the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel; (2) before the payment of the rental allowance, the employing church or other qualified organization must designate the rental allowance pursuant to official action, which may be evidenced in an employment contract or by any other appropriate instrument; and (3) the designation must be sufficient in that it clearly identifies the portion of the minister’s salary that is the rental (housing) allowance. There was no evidence of an official action between the church and the taxpayer, so the requirements for exclusion weren’t met. In addition, the minister failed to file an election to be excluded from self-employment tax under a vow of poverty, so he was also subject to self-employment tax. (Rogers v. Commissioner, T.C. Memo. 2013-177, August 1, 2013.) Clergy Financial Resources
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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