Skip to main content

Federal Court Rules Against Minister's Housing Allowance (Under Appeal)

By
An important news update that may affect ministries and tax-exempt organizations across the country:

 On Friday, November 22, 2013 Federal Judge Barbara Crabb of the Western District of Wisconsin ruled in favor of the Freedom from Religion Foundation (FFRF), declaring the minister's housing allowance unconstitutional. It is important to note, first of all, that this will have no immediate effects. Additionally, only this specific district is affected by the ruling unless it is upheld by a higher court. Presumably, this case will be appealed to the Seventh Circuit Court of Appeals in Chicago, which will rule for Wisconsin, Indiana, and Illinois. Until the Seventh Circuit rules on the appeal, the unconstitutionality ruling will not be enforced.

 The specifics of the ruling:

 Judge Crabb held that the housing allowance provides benefit to religious organizations and ministers that has no corresponding secular benefit. The provision of a church-owned parsonage as a tax-free benefit to a minister was not ruled unconstitutional. Based on this ruling, only minister-owned housing for which a housing allowance is provided will be affected. As noted earlier, no ministers or organizations will be immediately affected. However, those who may be affected should continue to watch for updates on the final ruling.

 For more, follow the links below.

 NCLL on Housing Allowance Ruling

ECFA on HA Ruling

FFRF v Geithner: Parsonage Exemption

CapinCrouse Update
Labels:

Comments

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

Form 944 or 941 Filing for Churches

By Anonymous
Question:   A new church filed for an employer identification number (EIN) recently. It received notification from the IRS about the EIN, stating that the church must file Form 944 by the following January deadline. The church has no non-ministerial staff members. Since income tax withholding is elective by ministers and none of the pastors has elected to request non-mandatory withholding is the church required to file Form 944 annually? Also, a quarterly Form 941 (rather than an annual Form 944) is required of some employers. Which IRS form, if any, should be filed? Answer: According to IRS Section 1402(c) and 3121(c), ministers are not subject to mandatory income tax withholding. Unless one or more ministerial employees request non-mandatory withholding, church employers with only ministerial employees do not need to file Form 941 or Form 944.  The IRS  Ministers Audit Technique Guide  explains in further detail a minister's treatments for social security, Medicare tax, Fed
Post a Comment
Read more