Pastors, Ministers, Clergy and the IRS

The church has every theological right to ordain whom they will, and has historically done so. But remember Paul, Barnabus and the multitudes following, did not have to contend with the IRS.

Ministries living and functioning in the US are subject to US tax laws. The question we will address in this article is what the IRS will look for, if the credentialed minister is receiving benefits which reduce his tax obligation. Such benefits include reimbursements for ministerial expenses, a housing allowance, which is free of state and federal income tax, and the privilege of exempting from social security, and paying taxes as a self employed person.

How the minister’s income is reported by the employing church is also a concern to the IRS. The IRS’s concern is in regards to the many “Scam” operations posing as a “Church,” that would issue credentials for the sole purpose of benefiting from the tax benefits granted to legitimate ministers by the Internal Revenue Code. There are three terms of credentialed ministry the IRS accepts: Ordained; Licensed; and Commissioned. The required prerequisite is that the credentialed minister, regardless of which term is used, be authorized to Marry and Bury,” in order to participate. Of course, they will also be interested in whether or not the credentialed minister is "In fact":

1. Administering the Sacraments [does he marry and bury];
2. Conduct "Religious worship." [entails the preparation, and the ministering of the word];
3. Does he/she have management responsibilities in the church or denomination";
4. Is he/she considered a religious leader by the church or the parent denomination?

Some of the key points that should be addressed by the “Ordaining Church.”

• Does the church require of the applicant to have completed a prescribed course of study, or has otherwise proven his qualification for ministry by virtue of having served in a position of “apprenticeship” under active and qualified ministry?
• Does the church have the necessary language in their By-Laws which clearly define how, or strongly alludes to, and under what conditions, the church will grant ministerial credentials?

Following are some basic suggestions to consider:

1. Qualifications of the candidate for ministerial credentials: *
• A period of time of having been with the church, that his character and family life is fully known;
• Preparation; By completion of prescribed course material; or his experiential requirements;
• Having a proven record of Ministry of the Word of God, and a good report from the community;
• Recommendations by additional seasoned “Senior” ministers, other than from the ordaining church;
• Upon application to the Board, the Minister would be evaluated to determine that he or she meets Biblical qualifications, with an assessment of his “Gifting, Anointing, Calling, and ability to minister.”
2. Does the church require an “Ongoing relationship of accountability” with the minister? Is their annually, a reaffirmation of identity on theological perspectives? Can this be proven by any documentation recorded in the church records? And then, based on that documented reaffirmation,
3. Will the ministerial relationship be reviewed and credentials be reissued every year?;
4. If there are different “Levels” of credentials, is it clearly defined what those differences are?;
5. For the “Ordained” minister, do the By-Laws [and his Ministerial Certificate**] clearly give him/her the authority to “Marry and Bury?”
* The Ministerial “Credential” – is a wallet sized card, issued annually, that says the Ministerial Certificate is current and valid for the year issued, because of his ongoing relationship of accountability with the church.
** The Ministerial “Certificate” – For the Ordained, Licensed, or Commissioned Minister, is that document issued by the church – and now hangs on the wall of his office;Credentials – as spoken of within this article – refers to both the Certificate, and the Credential Card.

Ordination - is for life (Unless the minister has been “Defrocked”), and may only need new credentials from another organization;

Oftentimes a church wishes to ordain it’s pastor, who had previously been credentialed with another organization or Denomination, but is now no longer relational. We suggest building a “Bridge” with appropriate documentation in the Minutes, using the previous documents (A copy of his previous Certificate of Ordination), as justification for the church issuing new credentials. This is proof that his ministry was recognized by others.

In all other cases, when a church decides to credential a minister, ordained or otherwise, documentation of as much of the above as possible would be wise.

CONCLUSION: The “Independent” * church, that chooses to ignore the above, may well be setting it’s newly credentialed minister up for some serious headaches down the road – and a disallowing of his previous tax breaks – possibly having to pay back taxes, penalties and interest.

* Oh how I dislike using that term, for we believe the Lord would have us all be relational, and accountable to one another.

[Ophelia Livingston]

Many Pastors Are Without Health Insurance

Many pastors in America are left to figure out their own health coverage with little or no help from their church or denomination, found a survey released this week.

“Thousands of pastors and churches are among the millions of Americans without health insurance,” said Leith Anderson, president of the National Association of Evangelicals, based on responses to the May Evangelical Leaders Survey.

The monthly survey asks the NAE board of directors questions based on relevant issues in society. The NAE board of directors includes the CEO’s of 60 church denominations, and representatives of a broad array of evangelical organizations including missions, universities, publishers and churches. In the latest survey, the majority of respondents expressed that they had little or no help from their national denominations when it comes to securing health insurance.

Many pastors replied that they either received health insurance benefits through their spouse’s employer, a second job, or go without insurance.

“Well over 80 percent of our pastors get health insurance outside the life of the church,” reported one unnamed denominational CEO, according to NAE.

He said that about 10 percent of the pastors in his denomination receive coverage from Medicare or Medicaid.

However, he noted that his denomination did previously offer a health insurance plan, but stopped because younger and healthier ministers could obtain cheaper individual coverage than the national denominational plan that included coverage for older and more difficult to insure pastors.

"We have tried two or three times to provide health insurance, but we have not been able to make it work,” admitted the head of a Pentecostal denomination, in the NAE survey.

Alternative health plan options listed by respondents included high deductible catastrophic coverage, self-insurance, health savings accounts, or coverage through non-insurance Christian organizations that receive monthly contributions that are available to those with large hospital and doctor’s bills.

“This is a large and growing problem for American pastors and churches,” explained Anderson. “So many churches are small and too many pastors are uninsured. There is no room in limited budgets for premiums or no way to get adequate insurance at any price. As clergy age with the rest of America’s population we may see a growing list of pastors entering retirement with bankrupting medical bills.”

The NAE said statistical analysis of responses to the open-ended question was difficult because of the many options pastors and churches are pursuing to get health insurance.

[By Jennifer Riley, Christian Post Reporter]