| May 24, 2017 | TaxTips
Issue
The IRS looks for “assignment letters” when non-churches engage in the MHA process.
Situation
Marathon Bible College (MBC) is a public charity and a school under I.R.C. sections 501(c)(3) and 170(b)(1)(A)(ii). MBC is not an integrated auxiliary nor an affiliate of a church (I.R.C. section 170(b)(1)(A)(i)). MBC has several employees who are ordained, licensed, or commissioned ministers of the Gospel and those employees receive a minister’s housing allowance from MBC.
MBC’s Controller asks us whether these housing allowances would “pass IRS muster.”
We answer that, because MBC is not a church or a “religious organization” in the eyes of the IRS, that their ministers should have “assignment letters” from a church or denomination/association of churches.
In addition, we tell the Controller that MBC should periodically perform a review of their procedures with regard to minister’s housing allowances to ensure consistency, fairness, and proper regulatory treatment.