An itinerant minister serves as a workplace chaplain (as the sole proprietor for a religious organization he has established), compensated by the businesses he serves. Instead of compensating him directly, some businesses contribute to an established tax-exempt ministry which, in turn, compensates him. He also speaks at civic and Christian organization gatherings and is provided a stipend. He's trying to follow the example of "circuit riding preachers."
Without obtaining Internal Revenue Code 501(c)(3) status from the IRS for his sole proprietor religious organization can he claim ministerial tax benefits for earnings received from his business clients?
The only organizations that qualify as IRC 501(c)(3) organizations without formally filing for exempt status are churches and associations of churches (IRS Form 1023 instructions).
When the chaplain cited above receives compensation from a church for his ministerial services as a licensed or ordained minister, his income is considered as ministerial. Typically, I recommend that itinerants request housing allowance designations for an appropriate portion of their compensation at the time of receipt. Further, the ministry should first reimburse the minister fully for his specifically identified and documented travel and other expenses that he incurred to provide the services.
However, his payments received from for-profit business do not mirror the circuit riding preacher analogy cited above. The circuit riding preacher typically received compensation only from churches.
In order to qualify his religious organization as a IRC 501(c)(3) organization which, in turn, could compensate him as a minister, he will need to gain a corporate charter from his local state government, then file Form 1023 to gain recognition as a religious tax-exempt. Christian camps, schools, and other parachurch organizations typical follow this procedure.
Alternatively, he could bring his ministry (and all receipts) under the oversight of a church which was willing to partner with him in his unique ministry.