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64 Tax Developments for Churches and Clergy
What to know before filing your 2010 returns.

Church Law & Tax Report is published six times a year by Christianity Today International, 465 Gundersen Dr. Carol Stream, IL 60188. (800) 222-1840. © 2011 Christianity Today International. CLTReditor@ChristianityToday. com All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Annual subscription: $69. Subscription correspondence: Church Law & Tax Report, PO Box 37012, Boone, IA 50037-0012.

Congress enacted new tax laws in 2010 that include provisions of direct relevance to churches and church employees. Tax laws enacted in prior years also contain provisions that took effect in 2010 or 2011. In addition, a number of court decisions and IRS rulings provided clarification on a number of important tax issues. Several of the most important changes and clarifications are summarized in this feature article.

Part 1: Clergy and Lay Church Employees

A. Miscellaneous Tax Law Changes

1. Housing allowance challenged in federal court

Section 107 of the federal tax code exempts from federal income tax (1) the fair rental value of a church-owned parsonage provided to a minister as compensation for ministerial services, and (2) the amount of a minister's compensation that is designated in advance as a housing allowance to the extent that the allowance represents compensation for ministerial services, is used to pay housing expenses, and does not exceed the fair rental value of the home (furnished, plus utilities).

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