There were several important tax developments in 2019 that affect tax reporting by ministers, church staff, and churches for the upcoming tax-filing season as well as reporting and records-keeping requirements in 2020 and beyond.
The top ten developments are explained in this article as well as the 2020 Church & Clergy Tax Guide, which also further covers 65 other key developments.
1. Status of the housing allowance
For years, the Freedom From Religion Foundation (FFRF), a not-for-profit atheist organization, has attempted to invalidate Section 107(2) of the tax code, the provision permitting clergy to receive an annual housing allowance designated by their employing house of worship—and not pay federal income taxes on the designated amounts. The FFRF argues the tax law is a constitutionally impermissible preference for religion, since leaders of secular nonprofit organizations are not eligible to receive the same benefit.