A common misconception about minister tax status is that it is only available to ordained ministers. The IRS criteria for church staff members to qualify for minister tax status is a lot more inclusive than you might expect. The IRS actually views ordained, licensed, and commissioned ministers as all having equal minister tax status. Additionally, the IRS recognizes the authority of the church or the denomination to determine who qualifies as an ordained, licensed, or commissioned minister.
Is Your Church Denominational or Non-Denominational?
Denominations typically have their own pre-set standards to determine who will qualify for minister tax status and the IRS acknowledges those standards for that denomination. Most decide and apply these standards uniformly to all of their ministers although some denominations may allow individual churches to determine who might be qualified to be commissioned or licensed as a minister.
Non-denominational churches are allowed to determine who qualifies to be an ordained, licensed, or commissioned minister based on their church policy and their interpretation of the three IRS qualifications outlined below. This can vary greatly from church to church. For example, some churches will only confer ordination on ministers with seminary education and will commission or license other ministers, thereby making them eligible for a housing allowance.
When it comes to settling your income taxes in Singapore, one particularly important document that you’ll be required to follow is the Notice of Assessment. You can view this page – what is noa to learn more.
The IRS has three essential requirements for minister tax status. These requirements are subject to each individual church’s interpretation and philosophy.
- The authority to perform sacerdotal functions.
The IRS requires that a minister have the authority to perform sacerdotal functions, i.e. conducting weddings, funerals, baptisms, etc. The IRS does NOT require that a minister is regularly performing sacerdotal functions, only that the minister is eligible to do so if called upon. In its definition of sacerdotal functions, the IRS includes such duties as teaching, leading, praying for the sick, and more. The IRS interpretation of sacerdotal functions is more liberal than one might expect and sometime even less restrictive than some churches’ policies.
- Essential to worship
For a staff member to qualify for minister tax status, the person must be considered essential to the overall worship experience of the church. This does not mean the minister is required to be on stage every Sunday. This qualification is subject to each church’s philosophy about who is essential to the overall worship experience. For some churches this definition rightfully applies to the majority of the church staff and for others it is limited to a select few depending on how the church defines the term.
- Recognition by a board resolution and a certificate
The IRS wants a minister to be recognized officially. The most effective way to recognize a minister as ordained, licensed, or commissioned is through a board resolution and a certification of ordination, licensure, or commissioning. The church board should recognize the minister tax status in a board minutes resolution. And the church should provide a certificate of ordination, licensure, or commissioning that includes the date, the title, and the signatures of church officials.
Clergy Advantage can help you extend minister tax status to staff members who qualify according to your church’s overall philosophy, document this appropriately and educate your staff on their clergy tax benefits. Start with our free resources on our website and this 4-minute video “Who Qualifies for Minister Tax Status.”
