Skip to main content

Commissioned Missionary and Housing Allowance

By
Question:

I am a commissioned missionary of a local church. Do I qualify for a housing allowance tax exclusion?

Answer:

In order for any missionary or minister to qualify for a housing allowance, the individual must fit the IRS’s definition of a minister. Let’s review the qualifications of ministerial treatment as noted in the IRS’s Minister Audit Technique Guide.
Treas. Reg. § 1.1402(c)-5(b)(2) provides that service performed by a minister in the exercise of the ministry includes:

1. Ministration of sacerdotal functions;

2. Conduct of religious worship;

3. Control, conduct, and maintenance of religious organizations (including the religious boards, societies, and other integral agencies of such organizations), under the authority of a religious body constituting a church or denomination.

Treas. Reg. § 1.1402(c)-5(b)(2) also provides that whether service performed by a minister constitutes conduct of religious worship or ministration of sacerdotal functions depends on the tenets and practices of the particular religious body constituting the church or denomination.

Treas. Reg. § 1.107-1(a) also provides examples of specific services considered duties of a minister, including:

1. Performance of sacerdotal functions;

2. Conduct of religious worship;

3. Administration and maintenance of religious organizations and their integral agencies;

4. Performance of teaching and administrative duties at theological seminaries.

The duties performed by the individual are also important to the initial determination whether he or she is a duly ordained, commissioned, or licensed minister. Because religious disciplines vary in their formal procedures for these designations, whether an individual is “duly ordained, commissioned, or licensed” depends on these facts and circumstances.
Conclusion: A commissioned missionary qualifies for a minister’s housing allowance if he meets the IRS’s definition of a minister and performs services in the exercise of his ministry as noted above in Treasury Regulations Sections 1.107-1(a) and 1.1402(c)-5.
Labels:

Comments

  1. Mark MorgensternDecember 11, 2015 at 3:29 PM

    For further clarification, what would constitute "duly commissioned" in the case of a church commissioning a missionary for ministerial service outside of the immediate context of the sending church. How would a church substantiate that commissioning to the Federal Government?

    ReplyDelete
    Replies
    1. AnonymousDecember 15, 2015 at 2:53 PM

      Thank you, Mark, for your questions. We posted a follow-up blog post in response. Please use the below link to access.

      Church Commissioning a Missionary: http://ministrycpa.blogspot.com/2015/12/church-commissioning-missionary.html

      Delete

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...
Post a Comment
Read more

Review: Form 1099 Payments to 501(c)(3) Organizations

By Anonymous
Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries
2 comments
Read more

Housing Allowance and Form 1099-MISC Reporting

By
Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa...
Read more