A church recently began a summer internship program. What guidelines does it need to be aware of when implementing this program?
First, the church should consider fair compensation for any interns. Although many internships are unpaid, the Wall Street Journal in April 2014 covered increased scrutiny of unpaid interns. According to the Fair Labor Standards Act, unpaid internships should not be for the direct advantage of the employer, should benefit the intern and be educational, and must not displace regular employees. Churches should carefully apply these standards when considering intern compensation.
Second, an intern is not typically an ordained or licensed minister, and should not be treated as a dual-status minister. Generally, interns will be subject to the same federal and state income tax withholding and FICA withholding and matching rules as normal employees. For more on the dual status of ministers, read this previous blog post.
If the church provides housing along with the internship, as many organizations do, the value of the housing is not exempt from taxation unless it is provided for the convenience of the employer and as a condition of employment, per IRS Publication 525. Non-exempt housing is subject to withholding and matching of FICA tax, as well.
Most organizations do not extend fringe benefits to seasonal workers, but each church should make its own decision regarding benefits such as health insurance and vacation time.