Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 68-67

1968-1 C.B. 38

Sec. 61

Sec. 102

IRS Headnote

Voluntary contributions made directly to and for the support of employee-missionaries performing services to further the purposes and objectives of a mission exempt from Federal income tax as an organization described in section 501(c)(3) of the Internal Revenue Code of 1954, are deemed paid on behalf of the mission and in consideration for services rendered by the missionaries and, as such, are includible in the gross income of the missionaries for Federal income tax purposes.

Contributions made to lay missionaries and other lay employees during a period for which a certificate waiving exemption from the taxes under the Federal Insurance Contributions Act is in effect are `wages' for purposes of the taxes imposed under that Act.

Full Text

Rev. Rul. 68-67

Advice has been requested regarding the Federal tax consequences of certain contributions designated as `gifts' and received by employee-missionaries performing services for a mission.

In the instant case, the mission is exempt from Federal income tax under section 501(a) of the Internal Revenue Code of 1954, as a religious organization described in section 501(c)(3) of the Code. The employee-missionaries, ordained ministers and lay individuals, must have certain prescribed educational and religious training before they are selected for missionary duty. The mission selects the missionaries, prescribes their respective posts of duty, and requires them to operate through its main office.

The missionaries do not receive stated salaries as such. However, every month each missionary is assured of a minimum sum of money, which includes amounts for each dependent. These missionaries are sustained in their work by contributions of individuals interested in furthering the aims of the mission. Contributions designated for specific missionaries are usually received by the main office of the mission and are then distributed to the missionaries in the field. Undesignated contributions are placed in a general fund from which general expenses of the field and the main office are paid. In some few instances contributions are tendered directly to the missionaries by individuals or groups and in these instances the missionaries report periodically to the main office the amounts so received.

One issue for consideration is whether contributions tendered directly to the missionaries by individuals or groups are subject to Federal income tax.

Section 61 of the Code provides, in part, that unless otherwise provided by law gross income includes income from whatever source derived including compensation for personal services. Thus, amounts paid to a religious field worker pursuant to a contract, agreement, or understanding and in consideration for his services, are includible in gross income.

Section 102 of the Code excludes from gross income the value of property acquired by gift, bequest, devise, or inheritance. In determining whether a gift has been made, the mere absence of legal or moral obligation to make the contribution in question does not establish that it is a gift, and where the contribution is for services it is irrelevant that the payor derives no economic benefit therefrom. Commissioner v. Duberstein , 363 U.S. 278 (1960), Ct. D. 1850, C.B. 1960-2, 428.

In the instant case, the missionaries are performing services consistent with the objectives of their mission. Whether they receive their support payments from the mission or direct from third parties, the dominant reason for such payments is that the missionaries perform such services.

Accordingly, voluntary contributions, irrespective of their designation as `gifts,' made directly to missionaries under the above circumstances, are includible in the recipients' gross income.

Furthermore, voluntary contributions, which are designated for a specific missionary, made by individuals or groups and transmitted directly to the mission should also be included in the recipients' gross income when distributed by the mission or its representatives.

Services performed in the employ of the mission are excepted from `employment' under section 3121(b)(8)(B) of the Federal Insurance Contributions Act (Chapter 21, Subtitle C, of the Code). However, such exception is not applicable to services performed by lay missionaries and other lay employees during the period for which a certificate, filed pursuant to section 3121(k) of the Act, is in effect, if the services are performed by an employee (i) whose signature appears on the list of employees who have concurred in the filing of the waiver of exemption certificate, or (ii) who became an employee of the organization after the calendar quarter in which the certificate was filed.

In view of the foregoing, amounts paid by the mission to lay missionaries and other lay employees, during a period for which a certificate under section 3121(k) of the Federal Insurance Contributions Act is in effect, are `wages' for purposes of the Act. Similarly, amounts tendered to these employees by individuals or groups during a period for which such certificate is in effect and in consideration of the services of such employees in furthering the mission's objectives, also are `wages' under the Act.