Clergy – Part 1


Church Law and Tax 1990-01-01 Recent Developments

Clergy – Taxes

Do counseling services performed by a minister for a “Christian counseling practice” qualify for a housing allowance exclusion? No, ruled the IRS in a recent private letter ruling. The minister established a family counseling practice to “meet human needs based on the principles of his faith.” A local church (with which the practice originally had been associated) “endorsed” the practice and referred persons to it. The minister claimed that he was eligible for a housing allowance since his church in effect had “assigned” him to the counseling practice. The IRS acknowledged that clergy may qualify for a housing allowance exclusion with respect to services they perform for organizations to which they have been assigned by their church or denomination. However, it stressed that such an assignment “must be significant, in that the minister must have been assigned to the church for reasons directly related to the accomplishment of purposes of the church. More is required than mere ordained status and the perfunctory ratification by religious authority of secular employment obtained by the minister for non-church-related reasons.” The IRS concluded that counseling services performed by the minister were not pursuant to a valid assignment by his church. It observed: “Although the church states that if commissions and endorses the minister in his counseling practice, this does not constitute an assignment or designation by the church. The church is supportive of the minister’s counseling practice, but we find no evidence to suggest that the church specifically assigned the minister to perform any counseling services on its behalf. Also, it does not appear that the counseling services the minister performs directly further the purposes of the church. The minister performs his services free from the church’s control …. The intent of the counseling services is not to further any of the church’s purposes (although the church may benefit from the minister’s counseling). While the minister may provide his counseling services based on his church’s religious beliefs, this does not meet the requirement that the minister be assigned to perform his services in order for them to qualify as services performed in the exercise of his ministry.” The IRS also pointed out that the minister had conceded that his church “does not assign … its ministers to any particular work.” This ruling will be of interest to those clergy who are working for schools, parachurch organizations, and secular organizations, and who are basing their eligibility for a housing allowance exclusion on an “assignment” by their church or denomination. The ruling suggests that the IRS will interpret “assignments” very strictly, and that effective assignments must have the following characteristics: (1) the practice or organizing documents of the church or denomination authorize assignments; (2) the church or denomination specifically assigned the minister to perform services on its behalf; and (3) the assignment furthers the purposes of the church or denomination. Private Letter Rulings 8826043 and 8930038.

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