I took a call lately that went something like this: “Money is tight at our church, but our pastor is doing such a super job. What tangible ways we can support and affirm him without actually increasing his salary?”
We then thought about several ideas, such as:
– Vacation days
– Paying for continuing education
– Sending staff to visit with other churches they want to go see
– Bringing in a financial planner to work with all staff
– Creating a common book library that lets staff purchase materials from a common fund that are used in the staff's “library”
– A refrigerator with free soft drinks
– Free meals at the church’s cafe
– Staff pizza Fridays
– An enlarged expense account for staff to entertain outsiders
– A consultant to come and visit
– Offering the pastor a life coach process
– Marriage counseling (crisis or maintenance)
– On-site massages
– On-site car washes
– Child care
– School for the pastor’s kids
– Use of church-owned (or church-leased) vehicles
– Assisting with book publication
– Assisting with music/CD production
– Speaking opportunities at local and other conferences
– Memberships to health clubs, golf/tennis clubs etc.
Then I checked with David Middlbrook’s firm, Anthony & Middlebrook, P.C., based in Grapevine, Texas [LINK: www.amlawteam.com]. They are Christians, they work extensively with churches, and they can speak authoritatively about issues like this. David replied, “My tax law professor told us that every economic benefit is 100% taxable at the appropriate tax rate unless its subject to an exclusion, exemption or a deduction.” So would any of these benefits be taxable?
The answer is some yes, and some no. Here’s what one of David’s attorney’s, Bree G. Vopelak, said. “Without going through each individual item, my thoughts are that most can be classified as fringe benefits. A fringe benefit is a form of pay (including property, services, cash or the equivalent) in addition to stated pay for the performance of services. Fringe benefits for employees are generally taxable wages unless specifically excluded by a section of the Internal Revenue Code (“IRC”). Examples of fringe benefits that may be excluded from compensation are: meals for employer’s convenience; dependent care assistance programs; no additional cost services; working condition fringe benefit; and de minimis benefits. However, each exclusion is subject to its own set of requirements that must be met before such benefit can be excluded from wages. For example, a employer may provide a vehicle to an employee, however, the vehicle must be used exclusively for business purposes and substantiation requirements must be met for the benefit to be excluded from compensation. If the vehicle is used for business and personal purposes, then a separate set of rules apply. Moreover, the value of the fringe benefits below must also be considered when calculating reasonable compensation. A church that is considering implementing one of the types of services below should check with their advisor first to ensure proper planning and treatment of the benefit.
My response back to the person who phoned me? Find something from the list above that your pastor(s) would consider to be a real help, and figure out a legal and ethical way to provide them. Also if you’re part of a large church, download our free documents on compensation in larger churches at www.leadnet.org/salary, or write us an email to say your church would like to take part in the next large-church salary survey we conduct: firstname.lastname@example.org.
For thoughts on a related issue, “How Do We Report Gifts Provided to Volunteers?” see tax attorney Richard Hammar’s comments at