Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 66-90

1966-1 C.B. 27

Sec. 107

IRS Headnote

Individuals holding executive positions in a religious denomination which has no formal ordination, commissioning, or licensing procedure, do not qualify as ministers of the gospel for purposes of section 107 of the Internal Revenue Code of 1954 even though they are employed to carry out functions normally performed by ministers of the gospel in other denominations. However, those individuals who have been recorded and invested with authority as ministers by their employing meeting do qualify for this exclusion.

Full Text

Rev. Rul. 66-90

Advice has been requested whether certain individuals holding executive positions in the religious denomination described below qualify as ministers of the gospel for purposes of section 107 of the Internal Revenue Code of 1954.

The religious denomination under consideration is organized on a congregational basis with authority for the most part residing in the local unit designated as the `monthly meeting.' Several of these units are linked together to form a `quarterly meeting,' and the quarterly meetings in a region are organized into `yearly meetings.' This denomination has no rituals, rubrics or programed religious service, its central act of worship consisting chiefly in communal prayer and meditation with any member being free to speak to those assembled if he is moved to do so. The customary role of the minister, therefore, does not exist insofar as the worship service is concerned. Some of the larger monthly meetings, however, do employ a full time `secretary' who is an executive performing functions similar to those performed by the minister in other denominations. For example, he assists in the operation of the Sunday School, visits the sick, advises the meeting's various committees, represents the meeting on the local council of churches, prepares a newsletter for the members of the meeting and speaks at interchurch gatherings explaining the beliefs of his particular denomination. The employment of the secretary is approved at a business session of the meeting and is recorded in its minutes. There is no ordination or other formal ceremony in connection with his employment and the secretary's tenure of office is on a year-to-year basis terminable at the will of either party.

At the level of the yearly meeting, there are offices providing a variety of services to the local monthly meetings. These offices publish educational materials, coordinate the operations of church schools and promote a variety of programs in the advancement of world peace, social service, and race relations. Administrators are employed at this level to perform functions similar to those carried out by administrators of other religious organizations and their integral agencies.

The denomination historically does not employ ordained ministers to perform these duties. However, certain local meetings do employ professional ministers for this purpose.  These individuals, who have fulfilled all scholastic prerequisites for becoming professional ministers, are not officially ordained by any superior but are recorded as ministers in the minutes of the competent meeting. This recording is regarded by the denomination as being the equivalent of the ordination of a minister by other denominations and confers upon the individuals so recorded the right to exercise ministerial duties, such as performing marriages, if required to do so.

Section 107 of the Code provides that, in the case of a minister of the gospel, gross income does not include the rental value of a home furnished to him as part of his compensation, or the rental allowance paid to him as part of his compensation to the extent used by him to rent or provide a home.

Section 1.107-1(a) of the Income Tax Regulations provides, in part, that in order to qualify for the exclusion, the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel and that, in general, the rules provided in section 1.1402(c)-5 of the regulations will be applicable to such determination.

Section 1.1402(c)-5(b)(2)(i) of the regulations states that whether services performed by a minister constitute the conduct of religious worship or the ministration of sacerdotal functions depends on the tenets and practices of the particular religious body constituting his church or church denomination.

The term `minister of the gospel' as used in section 107 of the Code means an individual who is duly ordained, commissioned, or licensed to the pastoral ministry by action of a religious body constituting a church or church denomination and invested with the authority to conduct religious worship, to perform sacerdotal functions, and to administer ordinances or sacraments in accordance with the prescribed tenets and practices of such church or church denomination. In cases where a church or church denomination ordains some ministers of the gospel and licenses or commissions other ministers, in every respect the licensing or commissioning of an individual as a minister of the gospel must establish a status that is equivalent of ordination and is so recognized by the church. That is, the individual, upon being licensed or commissioned, must be invested with the status and authority of an ordained minister, fully qualified to exercise all of the ecclesiastical duties of such a minister in his denomination. See Rev. Rul. 65-124, C.B. 1965-1, 60. See also Revenue Ruling 59-270, C.B. 1959-2, 44, which holds that neither a `minister of music' nor a `minister of education' is entitled to the exclusion provided in section 107 of the Code. In each case, neither was an ordained minister of the gospel, although both performed services relating to the office and function of a minister of the gospel.

That holding may be contrasted with the position taken in Revenue Ruling 58-221, C.B. 1958-1, 53, where an exclusion under section 107 of the Code was permitted to an individual who was employed at a Jewish Community Center and Temple and whose duties constituted the conduct of religious worship or the ministration of sacerdotal functions according to the tenets and practices of the Jewish faith. The individual concerned, however, had been ordained by a theological seminary.

Many of the individuals holding executive positions in this denomination have been recorded as secretaries by the various meetings of that denomination for the period of their employment only, to serve primarily in a secular capacity. On the other hand, some of the individuals have been recorded as ministers by a meeting and invested with the authority to exercise ministerial duties. This latter recording is regarded by the denomination as the equivalent of ordination by other Protestant denominations.

Accordingly, individuals holding executive positions in a religious denomination which has no formal ordination, commissioning, or licensing procedure, do not qualify as ministers of the gospel for purposes of section 107 of the Code even though they are employed to carry out functions normally performed by ministers of the gospel in other denominations. However, those individuals who have been recorded and invested with authority as ministers by their employing meeting do qualify for this exclusion.