• Are retired clergy eligible for a housing allowance? The IRS recently announced that this is a question “under extensive study” and that it will “not issue rulings or determination letters on the question … until [it] resolves the issue through publication of a revenue ruling, revenue procedure, regulation, or otherwise.” The IRS probably will be releasing guidance in the near future. In 1975, the IRS announced that retired clergy were eligible for a housing allowance exclusion if the following conditions were satisfied: (1) a portion of a retired minister’s pension income is designated as a housing allowance by the trustees of a denominational pension fund; (2) the retired minister “has severed his relationship with the local church and is reliant upon the fund for his pension”; (3) the pensions paid to retired ministers “compensate them for past services to the local churches of the denomination or to the denomination.” The availability of a housing allowance exclusion for denominationally-sponsored pension plans has been a very attractive benefit for many retired clergy. In many instances, retired clergy are able to exclude some or all of their pension income by having the pension plan designate a portion of their income as a housing allowance. The IRS has not indicated why it has subjected this issue to “extensive study”. There is little doubt, however, that it stems in part from IRS concern over the “housing allowances” paid to certain televangelists. The whole issue of clergy compensation will no doubt be coming under greater scrutiny by the IRS in the years ahead, and the recent IRS announcement regarding housing allowances of retired clergy should be viewed as evidence of this trend. Of course, any guidance issued by the IRS on this important subject will be covered fully in future issues of Church Law & Tax Report. Revenue Procedure 89-54.

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