travel paid for pastors family to attend annual conference

Church pays for pastor's family to attend annual churchwide conference. Is this a taxable fringe? The expenses are fully accounted for and supported with receipts.

Pastor's portion, sure, it's a valid expense and not not necessarily taxable to pastor. I cannot think of a reason, though, as to why the church paying for the remainder of the family to attend would NOT be deemed taxable compensation. Or are they also clergy/church staff, where attendance is essential or at least highly beneficial to the church?

I just located some guidance on this. Like non church operations, there must be a business purpose for nonemployee spouse & family to be there (ie registering attendees, speaking, handing out literature etc). The guidance then suggested spouse attending annual conference with pastor probably meets the"legitimate business purpose" test but "visiting Disney" while spouse attends meetings would not. While not being officially employed by the church, spouse and family do considerable amount of ministry.

My understanding is that the following tax requirements now exist.

1) 1099-Misc, Box 7 Non-Employee compensation (assumes wife provided no services for the church).

2) A church being 501-c-3 cannot allow inurement. In this case, inurement has occurred. See Regs. §1.501 (c) (3) – 1 (c) (2) Distribution of earnings and §1.501 (a)-1 (c) Private shareholder or individual defined.

Court has ruled that inurement occurs at even a very small dollar amount. See

222 F. Supp. 151 SPOKANE MOTORCYCLE CLUB v. UNITED STATES of America, United States District Court E. D. Washington, N. D. August 9, 1963.

3) Trumps new tax law at section 13703 now emphatically states such fringe benefits are to be treated as unrelated business income.
https://www.congress.gov/115/bills/hr1/ ... hr1enr.pdf

§274 (m) (3) disallows spouse / dependent travel expenses generally.

4) Assuming the travel expenses of the wife / dependents were over $1,000.00, §511 requires Form 990-T.


5) This transaction also brings §4958 excess benefit taxation onto the church and the pastor in that the wife / dependents have received economic benefit.

My 2 cents worth,,,,,,,,,,,,,

Thank you Oregon, for your insight. I will look into this much further.

3) Trumps new tax law at section 13703 now emphatically states such fringe benefits are to be treated as unrelated business income.. Isn't that new law quite limited? See bold below.

SEC. 13703. UNRELATED BUSINESS TAXABLE INCOME INCREASED BY AMOUNT OF CERTAIN FRINGE BENEFIT EXPENSES FOR WHICH DEDUCTION IS DISALLOWED.
(a) IN GENERAL.—Section 512(a), as amended by this Act, is further amended by adding at the end the following new paragraph: ‘‘(7) INCREASE IN UNRELATED BUSINESS TAXABLE INCOME BY DISALLOWED FRINGE.—Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organiza- tion for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises athletic facility (as defined in section 132(j)(4)(B)). The pre- ceding sentence shall not apply to the extent the amount paid or incurred is directly connected with an unrelated trade or business which is regularly carried on by the organization. The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations or other guidance pro- viding for the appropriate allocation of depreciation and other costs with respect to facilities used for parking or for on-
premises athletic facilities.’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to amounts paid or incurred after December 31, 2017.