Colbert v. Commissioner, 61 T. C. 449 (1974)

A rental allowance paid to an ordained minister is excludable from gross income under Section 107 of the Internal Revenue Code only if the services performed are considered the conduct of religious worship.

Summary

In Colbert v. Commissioner, the Tax Court ruled that James D. Colbert, an ordained Baptist minister employed by the Christian Anti-Communism Crusade, could not exclude his rental allowance from gross income under Section 107. The court found that Colbert’s duties primarily involved educating about the dangers of communism, not conducting religious worship, which is required for the exclusion. The decision hinged on the interpretation of what constitutes the “conduct of religious worship” under the relevant tax regulations, emphasizing that such services must align with the tenets and practices of the minister’s faith.

Facts

James D. Colbert, an ordained Baptist minister, was employed by the Christian Anti-Communism Crusade as director of missions and later chairman of the board. He received a rental allowance as part of his compensation, which he claimed as a parsonage allowance under Section 107 of the Internal Revenue Code. The Crusade’s primary purpose was to combat communism through lectures and educational programs. Colbert spoke in churches about the dangers of communism, occasionally substituting for ministers or aiding in administering Communion, but these were not required duties of his employment with the Crusade.

Procedural History

The Commissioner of Internal Revenue determined deficiencies in Colbert’s federal income tax for the years 1967, 1968, and 1969, disallowing his claimed parsonage allowance exclusions. Colbert petitioned the Tax Court for a redetermination of the deficiencies. The sole issue before the court was whether Colbert was entitled to exclude his rental allowances from gross income under Section 107.

Issue(s)

1. Whether James D. Colbert’s services for the Christian Anti-Communism Crusade constituted the “conduct of religious worship” within the meaning of Section 107 of the Internal Revenue Code.

Holding

1. No, because Colbert’s primary duties involved educating about the dangers of communism, which did not align with the tenets and practices of the Baptist faith and thus did not constitute the conduct of religious worship.

Court’s Reasoning

The court applied the regulations under Section 107, which require that a rental allowance be compensation for services that are ordinarily the duties of a minister of the gospel. The court focused on the regulation stating that services must be the conduct of religious worship, determined by the tenets and practices of the minister’s religious body. The court found that Colbert’s speeches and activities were primarily educational about communism, not religious worship. The court emphasized that while support of foreign missions is a tenet of the Baptist faith, the preaching of anticommunism is not. The court declined to adopt a subjective test based on individual beliefs, instead relying on generally accepted principles within the Baptist denomination. Testimony from a range of Baptist representatives supported the conclusion that Colbert’s services did not constitute religious worship.

Practical Implications

This decision clarifies that for a minister to exclude a rental allowance under Section 107, the services must directly relate to the conduct of religious worship as defined by the minister’s religious body. Legal practitioners advising ministers should ensure that any claimed parsonage allowance is tied to services that align with the religious tenets and practices of their faith. The ruling may affect how ministers employed in non-traditional roles or by non-religious organizations structure their compensation to qualify for tax exclusions. Subsequent cases, such as Tanenbaum v. Commissioner, have further explored the boundaries of what constitutes ministerial service for tax purposes.