We are about to hire an interim minister of missions and community ministry. The candidate is an ordained minister. As an interim employee that is hired by the church through the personnel committee, can she claim a portion of her salary as a housing allowance?
Yes, an interim minister can request that a portion of her compensation be designated as a housing allowance, provided the minister both qualifies as a minister and is performing ministerial duties. The Tax Court’s “five-factor test,” Knight v. Commissioner, 92 TC 199, for who is a minister for federal tax purposes is anyone who has the ability to:
- administer sacraments;
- conduct religious worship;
- have management responsibility in a local church or religious denomination (control, conduct, or maintenance of a religious organization);
- demonstrate he or she is ordained, commissioned, or licensed; and
- demonstrate he or she is considered to be a religious leader by his or her church or denomination.
To be considered a “minister,” only the fourth factor is required, though, with a balancing test applied to the remaining four factors by the IRS. Once classified as a minister, the minister also must be performing ministerial duties as his or her predominant duties. When a minister works for a church, these duties include (1) the performance of sacerdotal functions; (2) conducting religious worship services; or (3) being involved in the control, conduct, or maintenance of a religious organization.
