Section 107(2) of the Tax Code allows ministers who rent or own their own homes to receive an annual housing allowance from their employing church—and not pay federal income taxes on the designated amounts. The provision was adopted by Congress in 1954 after clergy from a variety of faith traditions indicated there was unequal tax treatment for those who were not provided a parsonage from their employing house of worship. In 2017, a federal district judge in Wisconsin ruled in favor of the leaders of the Freedom From Religion Foundation (FFRF) who argued the housing allowance exclusively benefits ministers, violating the Establishment Clause of the First Amendment. On Friday afternoon, the US Court of Appeals for the Seventh Circuit in Chicago reversed this decision.
Must employers reimburse their employees for work-related expenses, like cell phones and laptops used for work calls and projects? Illinois recently joined the growing state trend, requiring employers to reimburse expenses incurred by employees within the scope of their employment. As a result, many nonprofits need to revisit and update current reimbursement policies and communicate these changes to employees to mitigate against unexpected liability in this area. Additional employment law aspects make legal compliance even more compelling.
Does your house of worship financially help those in need? Commonly known as “benevolence,” this charitable assistance arises from age-old religious concepts and carries significant modern-day tax compliance implications. Not only should such religious organizations maintain benevolence policies, but they also need to follow through with related communications, financial controls, and other safeguards.