Clergy – Part 1


Church Law and Tax 1990-09-01 Recent Developments

Clergy – Taxes

Are clergy serving as professors at church-related colleges eligible for a housing allowance? The IRS national office addressed this issue in recent “technical advice memorandum.” The professor was a commissioned minister who taught at a church-related liberal arts college that offered both religious and non-religious training. A local IRS office audited the professor’s tax return, and concluded that commissioned ministers who taught at the college were not eligible for a housing allowance since they were not “ministers of the gospel” for tax purposes. The professor challenged this conclusion, and the local IRS office sought advice from the national office. The IRS national office began its opinion by noting that a housing allowance is available to “ministers of the gospel” with respect to services performed in the exercise of their ministry. Both elements are necessary. The IRS conceded that the professor was a minister of the gospel. It noted that as a commissioned minister the professor “was authorized to perform functions normally performed by ordained ministers,” including public administration of the sacraments, leading public worship, confirmation instruction, evangelistic activities, counseling, and visitation of the sick. Did the professor’s teaching at a church-related college satisfy the second requirement for a housing allowance—that the housing allowance be paid for services performed in the exercise of ministry? The IRS concluded that he did. It noted that previous IRS rulings had clarified that services performed for an “integral agency” of a church or denomination constitute services performed by a minister in the exercise of his or her ministry, and, that in deciding whether or not a church-related college constitutes an “integral agency” of a church, the following eight criteria must be considered: (1) whether the religious organization incorporated the institution; (2) whether the corporate name of the institution indicates a church relationship; (3) whether the religious organization continuously controls, manages and maintains the institution; (4) whether the trustees or directors of the institution are approved or must be approved by the religious organization or church; (5) whether trustees or directors may be removed by the religious organization or church; (6) whether annual reports of finances and general operations are required to be made to the religious organization or church; (7) whether the religious organization or church contributes to the support of the institution; (8) whether, in the event of the dissolution of the institution, its assets would be turned over to the religious organization or church. The IRS emphasized that “the absence of one or more of these characteristics will not necessarily be determinative in a particular case,” and that the opinion of church leaders will be considered carefully in close cases. The IRS concluded that the college in question met the definition of an integral agency of a church, and accordingly that the professor (who was a commissioned minister) qualified for a housing allowance. The IRS noted: “The college was incorporated by the church. The name [of the church] is closely associated with colleges operated by the church …. Under the church bylaws the colleges are directly and actively controlled by the church. The college is governed by a board [whose members] are appointed by the national governing body of the church [or by] a local convention of the church …. The president of the college is elected by the national governing body of the church. Faculty members cannot be granted tenure without the approval of the church. The church reviews and approves the operation of the college … and reviews and approves curricula, budgets and other aspects of the college’s operation. The church controls the finances of the college [and] the college sends financial statements to the church. The church either owns or has a right of reverter with respect to all the real property of the college.” These facts clearly demonstrated that the college was an integral agency of the church under the 8-part test used by the IRS. As a result, the professor was eligible for a housing allowance. Technical Advice Memorandum 9033002.

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