Tax Court Rejects Pastor's Attempt to Avoid Taxes Through Vow of Poverty, Salary Renunciation

Key point. Ministers cannot avoid taxes by making a vow of poverty, renouncing a salary, and having their church pay for all of their expenses, if they maintain effective control over the payment of expenses.

The United States Tax Court rejected an attempt by a pastor to avoid income taxes by making a "vow of poverty," renouncing a salary, having his church pay all of his expenses, but retaining effective control over the funds. In 2001 a pastor recommended to his church's board of advisers that the church be restructured to include a "corporation sole" as an office of the church. The board of advisers unanimously agreed with this recommendation, and a nonprofit corporation sole was created in the name of "the Office of Presiding Head Apostle" currently held by the pastor. The church was located in Florida, which does not recognize corporations sole, so the corporation sole was established ...