• Skip to content
  • Skip to primary sidebar
Lifeway Research

Lifeway Research

Enlightening today’s church with relevant research and insights

  • Research
  • Insights
  • Resource Library
  • Fast Facts
  • Search

Tax Court Gives Love Gifts a Bad Name

Uncategorized | Nov 16, 2018

Judge Rules IRS Can Tax Gifts Made Directly to Pastors

tax check IRS church love offering gift pastor
rawpixel photo | Unsplash

By Aaron Earls

While church members may want to give their pastor a financial gift to show appreciation, a recent court ruling says the IRS can still get their cut.

A Minnesota tax court ruled that contributions made by congregants as “gifts” to their pastor are still taxable income, according to the Evangelical Council for Financial Accountability.

As pastor of Holy Christian Church, a non-denominational congregation in Saint Paul, Minnesota, Wayne Felton received what he believed to be nontaxable gifts from members.

In both 2008 and 2009, congregants gave Felton more than $200,000 as direct gifts.

Members could use special color-coded envelopes to indicate if they wanted the money to be counted as a tax-deductible contribution to the church or if the money was to go directly to the pastor as a gift without the same tax benefits for the donation.

Wayne Felton only filed tax returns for those two years after the IRS contacted him.

In his ruling, Judge Mark Holmes “rendered a decision that may be the most thorough judicial analysis of the law surrounding ‘love gifts’ for pastors that has ever been published,” according to Mike Batts of Batts, Morrison, Wales & Lee, a certified public accountant firm.

Holmes wrote that the dispute between the tax laws and Felton “has deep roots in Christian history and both parties can see their positions staked out as far back as St. Paul.”

Batts said Holmes seemed sympathetic to Felton and recognized “the law in the area of gifts for ministers is not abundantly clear,” but he agreed with the IRS’ position.

See also  7 Aspects of Healthy Church Leadership

Noting “our tax system is somewhat more complicated than the ancients’,” Holmes outlined numerous court cases dealing with conflicts over the taxable nature of certain financial gifts, including many made to pastors and religious figures.

Holmes concluded, “When comparatively so much money flows to a person from people from whom he provides services (even intangible ones), and to whom he expects to provide services in the future, we find it to be income and not gifts.”

The judge didn’t make any rulings on a housing allowance the church provides Felton and his wife, only to note the allowance has only recently been found unconstitutional by one court and is currently on appeal to the U.S. Seventh Circuit Court.

AARON EARLS (@WardrobeDoor) is online editor of Facts & Trends.

Dig Deeper at Lifeway.com

Zondervan 2019 Church and Nonprofit Tax and Financial Guide

FIND OUT MORE

Related posts:

Young Adults, Including Christians, Have Complicated Relationship with Money Few Pastors Left the Pulpit Despite Increased Pressure Are More Pastors Quitting Today? Churchgoers Proud of Church’s COVID-19 Response

Primary Sidebar

Follow Us On…

  • Facebook
  • Instagram
  • Twitter
  • YouTube

Popular

  • 7 in 10 Women Who Have Had an Abortion Identify as a Christian
  • Most Popular Sermon Passages, Topics in 2021
  • 7 Reasons to Praise the Lord
    praise
  • Gen Z Mental Health Crisis: How Pastors Can Make a Difference

Join the Lifeway Research Newsletter

Lifeway Research: Enlightening Today’s Church with Relevant Insights.

Signup for email updates on our church and culture research.

Sign Up

Leader Resources

Bible
Clip Art
Classics
Clip Art
Current Events
Clip Art
Discipleship
Clip Art
Pastoral Ministy
Clip Art
Theology
Clip Art
VIEW ALL RESOURCES
  • About Us
  • Contact Us
  • Custom Research
  • Resource Library
  • Search

Copyright © 2022 · Lifeway Research, a ministry of Lifeway Christian Resources