This financial news comes from the Alfred Johnson blog.
I suspect that most readers of this blog already know that tax-free income is rare. And, a tax court in Minnesota has ruled that love offerings to pastors must be treated as taxable income.
Here is the story from ECFA:
A tax court in Minnesota has ruled that contributions made directly as “gifts” by congregants to their pastor are taxable income. The case centered on Pastor Wayne Felton of Holy Christian Church in St. Paul, Minnesota, and monetary gifts of over $200,000 that Pastor Felton received from parishioners during 2008 and 2009. Judge Mark Holmes, in his decision that the love gifts to the pastor were indeed taxable, quoted Scripture as well as legal precedent.
“In addressing the core issue, Judge Holmes cited numerous Bible references and provided a very thorough analysis of applicable law, relevant cases, and other authority,” according to Michael Batts, Managing Partner of Batts Morrison Wales & Lee. “Judge Holmes noted that the law in the area of gifts for ministers is not abundantly clear. In the end, however, he agreed with the IRS’s position.”
The court also agreed with the IRS’s assessment of a 20% penalty for “substantial understatement” of income.
Read more in the full article from Batts Morrison Wales & Lee.
Read the full court opinion in Felton v. Commissioner of Internal Revenue.