Our pastor is retiring from our assembly in 2010. He will be remaining with our congregation as a member and will have no further duties or responsibilities with our church. He has been our shepherd for many years. If the church were to supplement his social security income with a monthly "benevolence" check would this qualify as non-taxable benevolence?
Rare exceptions to the taxability of gifts to employees (current or former) have been made by the IRS (Private Letter Rulings, I believe; but I am going on memory right now) in cases of former ministers with medical or other needs that typically merit benevolence. In the case here, it will likely appear to the IRS and other objective parties that the church is now aiding a former employee who received inadequate compensation during his tenure (at least inadequate in the sense that he did not accumulate funds for post-retirement living). This compensation, while appreciated by the minister, will be taxable.