Clergy housing allowance
The Clergy housing allowance is an allowance paid to ordained ministers in Canada and the United States.
United States
In the United States, the rental value of a home furnished to, or the rental allowance paid to, a minister of the gospel is not included in the minister's taxable income if certain conditions are met.[1][2][3]
In order to qualify, the minister must be duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination, and the minister must be given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization.[1][2][3]
The allowance must be for the minister's services performed:
- as sacerdotal functions;
- conducting religious worship;
- controlling, conducting, and maintaining religious organizations under the authority of a religious body that is a church or denomination;
- in the exercise of the ministry;
- in the exercise of duties as required by the religious order;
- writing religious books or articles
- in the exercise of the minister's profession as a Christian Science practitioner or reader;
- teaching and administrative duties at theological seminaries; or
- duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia.[1][2][3]
The following services do not qualify:
- Services performed as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions, even if performing sacerdotal functions or conducting religious worship.
- Services performed as an employee of a public hospital.[1][2][3]
The home must actually be used as a home by the minister. The allowance cannot exceed the fair rental value of the home, furnishings, appurtenances, and utilities.[1][2][3] The minister's total compensation, including salary, fringe benefits, and clergy housing allowing, cannot exceed reasonable compensation for the services performed.[4]p. 22
Clergy housing allowance is generally subject to self-employment tax[3] except for retired ministers.[4]p. 23
In November 2013, the clergy housing allowance faced judicial opposition. In Freedom From Religion Foundation, Inc. v. Lew, the Federal District Court of the Western District of Wisconsin issued a decision holding that the allowance violated the Establishment Clause of the First Amendment. However, the Justice Department appealed to the Seventh Circuit Court of Appeals and the Court reversed the decision, thereby protecting the housing allowance for clergy who serve churches, synagogues, mosques, and other worshiping groups.[5]
References
- 1 2 3 4 5 "U.S. Code § 107 - Rental value of parsonages". Internal Revenue Service. Legal Information Institute. Cornell University Law School. August 16, 1954. Amended on May 20, 2002. Accessed on March 29, 2016.
- 1 2 3 4 5 "Publication 15-A: Employer's Supplemental Tax Guide". Internal Revenue Service. 2016.
- 1 2 3 4 5 6 "Publication 517: Social Security and Other Information for Members of the Clergy and Religious Workers". Internal Revenue Service. 2015.
- 1 2 "Publication 1828: Tax Guide for Churches & Religious Organizations". Internal Revenue Service. 2015.
- ↑ "Freedom from Religion Foundation, Inc. v. Lew". United States Court of Appeals, Seventh Circuit. No. 14–1152. November 13, 2014.