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Civil Law Considerations—Financial Law | D-3
Written Agreement
All elements of compensation to the religious
worker should be identified in a written agreement
between the sponsoring US diocese, eparchy, or reli-
gious order and its foreign counterpart. In addition
to identifying the precise nature, location, and dura-
tion of the religious worker’s assignment as well as
the party with responsibility for the costs of trans-
portation to the assignment, the written agreement
should include the following elements:
1. Salary (annual amount and frequency of
payments);
2. Health benefits (describe any required partici-
pant contributions);
3. Retirement benefits (describe any required par-
ticipant contributions);
4. Car (state whether in kind, allowance, or per-
sonal responsibility; provide details of ownership
and access, of responsibility for car payments, if
any, and of responsibility for insurance, repairs,
and license fees);
5. Social security obligations (identify responsibil-
ity for these payments, which depend on appli-
cable treaty provisions, if any);
6. Housing arrangements (state whether in kind,
housing allowance, or personal responsibility;
provide details regarding services, amenities);
7. Dependents (state whether dependents will
accompany the religious worker; identify finan-
cial responsibility for dependent travel, school-
ing for minors, and other related expenses);
8. Additional benefits and allowances, if any;
9. Contribution, if any, from receiving diocese,
eparchy, or religious order to sending diocese,
eparchy, or religious order;
7
10. Return visits to home country (state frequency,
duration, and responsibility for costs);
11. Limitations on fund-raising activities while in
the United States.
The written agreement should include a provi-
sion indicating that the religious worker is subject
to US income taxation on the value of remunera-
tion provided for ministry services, unless a specific
tax law exclusion or tax treaty exclusion applies. It
should also indicate that the religious worker may
7 In order to avoid tax liability for the religious worker, any contri-
bution to the sending diocese, eparchy, or religious order should be
addressed independently from salary paid to the religious worker,
who should have no right to receipt of such contribution.
be subject to income tax withholding at the federal,
state, or local level.
It is recommended thatUSdioceses and eparchies
consider the use of similar written agreements for
international seminarians whom they sponsor. The
seminarian agreement should identify benefits (both
cash and in kind) to be provided by the diocese or
eparchy, expenses that are the seminarian’s respon-
sibility, and provisions indicating that the seminar-
ian is subject to US income taxation on the value of
benefits provided unless a specific tax law exclusion
or tax treaty exclusion applies. Seminarians may also
be subject to income tax withholding at the federal,
state, or local level.
General US Income
Tax Concepts
Under basic principles of US law, federal income tax
is imposed on all income, cash or in kind, from what-
ever source derived, unless a specific tax law exclu-
sion or tax treaty exclusion applies.
8
International
religious workers, their sponsoring organizations,
and other church employers must understand that
there is no blanket exception for compensation paid
to clerics, non-ordained members of religious orders,
or seminarians in the exercise of religious ministry.
Labeling payments as stipends, allowances, gifts, and
“walking around money” and utilizing similar desig-
nations do not render these payments non-taxable.
A religious worker is subject to US income tax-
ation on the value of compensation, whether cash
or in kind, provided for ministry services, unless a
specific tax law exclusion or tax treaty exclusion
applies. Certain international religious workers (for
example, permanent deacons and priests of Eastern
Catholic Churches
sui iuris
) may be accompanied by
dependent spouses or children. Payment of expenses
for a dependent spouse or children is the personal
responsibility of the religious worker. If the sponsor-
ing organization or church employer agrees to pay
such personal expenses, it will result in additional
taxable income for the religious worker.
Social security obligations of the religious worker
are determined according to the provisions of any
applicable totalization treaty (see the
“Social Security
(“Totalization”) Treaties”
section on p. D-10, below).
8 IRC § 61.