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Clergy Compensation

Tax court decides compensation was reasonable

Truth Tabernacle, Inc. v. Commissioner of Internal Revenue, T.C. Memo. 1989-451

The United States Tax Court addressed the issue of "unreasonable compensation" paid to clergy.

This issue is important for two reasons. First, section 501(c)(3) of the Internal Revenue Code specifies that churches are not eligible for tax-exempt status if they pay unreasonable compensation to any worker. Second, the law does not define "unreasonable compensation," and this makes court rulings interpreting the phrase very significant.

Let's look at the facts of the case. Truth Tabernacle was incorporated as an independent church in 1978. The church was a fundamentalist Christian congregation, and its doctrine included a belief in "the death, burial, and resurrection of the Lord Jesus Christ … the sovereignty of the Church of God … Jesus Christ as the head of the church … ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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Posted:
  • March 1, 1990

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