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Taxation of Ordained Deacons

Permanent Deacons

Depending upon the facts and circumstances of their Church employment, permanent deacons will be classified either as lay employees or “ministers of the gospel” for tax purposes. This is not an option to be made at the discretion of the deacon or the Church employer. In order to be classified as a minister of the gospel under the Internal Revenue Code, the deacon must be “ordained, commissioned, or licensed” as a minister and must be performing the duties that are normally those of a minister of the gospel. All ordained permanent deacons meet the first requirement. However, all permanent deacons do not necessarily meet the second requirement. The specific job performed by a particular deacon must be analyzed to determine whether that job involves the performance of duties that are normally those of a minister of the gospel. Under IRS regulations, these will include “the ministration of sacerdotal functions and the conduct of religious worship, and the control, conduct, and maintenance of religious organizations (including the religious boards, societies, and other integral agencies of such organizations), under the authority of a religious body constituting a church or church denomination.” Whether a particular activity constitutes a “sacerdotal function” depends on the tenets or practices of the particular church or denomination. Under canon law, deacons do not perform the same sacerdotal functions as priests, but may nonetheless perform services normally those of a minister of the gospel within the meaning of the IRS regulations. It is recommended that decisions about the proper classifications of deacons for tax purposes be made centrally by the diocese in order to ensure consistency of interpretation among deacons in similar job categories.

If a deacon qualifies as a minister of the gospel for tax purposes, he must be treated consistently as such for all tax purposes. Thus, such a deacon is eligible for the section 107 housing allowance exclusion (assuming all other applicable requirements are met), and must also be treated as self-employed for social security purposes, being liable for SECA taxes. If a deacon does not qualify as a minister of the gospel for tax purposes, i.e. he is not performing duties that are normally those of a minister of the gospel, he must be treated in the same manner as lay employees for tax purposes.

Transitional Deacons

When a seminarian is ordained to the deaconate, he should be treated in the same manner as an ordained permanent deacon for tax purposes. Thus, if he is assigned to a parish during the summer or for a year-long training assignment and is performing duties that are normally those of a minister of the gospel, he would be eligible for the section 107 housing allowance exclusion, and would be treated as self-employed for social security purposes and be liable for SECA taxes. If he is not performing duties that are normally those of a minister of the gospel, he would be treated in the same manner as lay employees for tax purposes.

Religious Orders

Some permanent and transitional deacons may also be members of religious orders. In this case, the norms in Chapter V, Compensation of Religious, are applicable. The norms given above apply only to permanent and transitional deacons of the diocesan clergy.