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D-8 | Civil Law Considerations—Financial Law
Resident Alien Religious
.
The taxability of resi-
dent alien religious will depend on the identity of
the religious order of which he or she is a member. If
the religious is a member of a US religious order or
a non-US religious order with a US province that
is tax-exempt under the USCCB Group Ruling,
tax liability will be determined by applying Rev.
Rul. 77-290.
A religious who is a member of a non-US reli-
gious order with no tax-exempt US province will be
taxable individually, in accordance with his or her
status as cleric or lay person and in the same manner
as a resident alien diocesan or eparchial priest or res-
ident alien lay religious worker.
Resident Alien Seminarians
. International semi-
narians may be in either R (religious worker) or F
(student) visa status. Only those in R visa status
could qualify as resident aliens. The scholarship
rules of section 117 of the Code apply to resident
alien seminarians on the same basis as to US sem-
inarians. Thus, if the seminarian is a degree can-
didate, the amount of a scholarship that is used to
pay for tuition, fees, books, supplies, and equipment
required by the educational institution is excluded
from income.
39
However, any part of a scholarship or
payment for other expenses, including room, board,
monthly living expense stipends, and health insur-
ance, is included in income. IRS regulations do not
require reporting of the taxable portion of scholar-
ship payments, although some dioceses or eparchies
report these amounts on Form 1099-MISC.
40
A seminarian in R visa status, who is assigned
to parish work during summers or vacations or for
a year-long pastoral training assignment, is liable
for income tax and social security taxes on amounts
earned from such services. If the seminarian has been
ordained to the diaconate, he should be treated in
the same manner as a permanent deacon for tax pur-
poses. If the seminarian has not been ordained to the
diaconate, he should be treated in the same manner
as a lay religious worker for tax purposes.
39 IRC § 117(b)(2).
40 Treas. Reg. § 1.6041-3(n). Dioceses or eparchies, however, should
provide each seminarian a valuation of room, board, and other ben-
efits in order to enable the seminarian to properly report taxable
amounts on his Form 1040. It is also recommended that any taxable
cash payments made to seminarians, e.g., monthly living expense
stipends, be reported on Form 1099-MISC to the extent they exceed
$600 annually.
FBAR Obligations of
Resident Aliens
An individual described in this sectionwho is deemed
a resident of the United States is a “United States
person” for purposes of having to file FinCEN Form
114,
Report of Foreign Bank and Financial Accounts
(FBAR), if he or she has a financial interest in or
signature authority over any financial account(s)
(e.g., savings and/or checking accounts)
41
outside
the United States and the aggregate maximum value
of the account(s) exceeds $10,000 at any time during
the year. FBAR reports are due on June 30 of the year
following the calendar year being reported. The due
date may not be extended. The FBAR is not filed
with the individual’s Federal income tax return (if
any); rather, it must be filed electronically through
the Bank Secrecy Act (BSA) E-Filing System.
42
Tax Obligations of
Nonresident Aliens
An individual who does not qualify as a resident
alien under either the green card test or the sub-
stantial presence test is classified as a nonresident
alien for tax purposes. Nonresident aliens are subject
to income tax on all payments that constitute US
source income,
43
including: wages, compensation,
payments received as an independent contractor,
royalties, commissions, dividends, interest, hono-
raria, stipends, book allowances, prizes, awards, living
allowances, per diem payments, and travel expense
reimbursements. Special reporting and withholding
rules apply to such payments made to nonresident
aliens. IRS Publication 515,
Withholding of Tax on
Nonresident Aliens and Foreign Entities,
is an essen-
tial resource for dioceses or eparchies that make pay-
ments to or on behalf of nonresident aliens. Dioceses
or eparchies are responsible for deducting and with-
holding applicable tax, which varies depending on
the type of payment and whether the income is
“effectively connected with a trade or business in
41 “Financial accounts” include personal accounts and signature
authority over any accounts of his sending diocese or eparchy or his
or her religious order.
42 Help completing FBAR is available Monday through Friday, 8 a.m.
to 4:30 p.m. Eastern Time, at (866) 270-0733 (toll-free within the
United States) or (313) 234-6146 (international callers, not toll-
free), or by sending an email to
FBARquestions@irs.gov.
43 IRC §§ 861 through 865 deal with income from sources within and
outside the United States.