Guidelines for Receiving Pastoral Ministers in the United States

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D-10 | Civil Law Considerations—Financial Law
or lay person in the same manner as a nonresident
alien diocesan or eparchial priest or nonresident
alien lay religious worker.
Nonresident Alien Seminarians. Typically, non-
resident alien seminarians are present in the United
States on F student visas. Nonresident alien students
with F visas are considered to be engaged in a trade
or business in the United States. The taxable part of
any scholarship or fellowship grant that is US source
income is treated as effectively connected with a
trade or business in the United States. Payments
are sourced according to the location of the payer.
If a seminarian’s training and related expenses are
being paid by a US diocese, eparchy, or other church
employer, these payments will be considered US
source income. Expenses paid by a non-US diocese
or eparchy would not. The taxable portion of any US
source scholarship paid to or on behalf of a nonresi-
dent alien seminarian is subject to withholding at a
14 percent rate (reduced from the 30 percent with-
holding rate applicable to nonresident aliens gener-
ally). The taxable portion of a US source scholarship
should be reported on Form 1042-S. No withholding
is required with respect to the nontaxable portion of
any US source scholarship.
A seminarian in F visa status generally may
not perform work for wages or salary while in the
United States. He may, however, be permitted to
participate in a curricular practical training pro-
gram that is an integral part of an established cur-
riculum. Curricular practical training includes:
work/study programs, internships, and cooperative
education programs. If a nonresident alien semi-
narian is paid for curricular practical training per-
formed in a parish, his wages would be considered
effectively connected with a trade or business in
the United States, and they would be taxed at the
same rates that apply to US citizens and resident
aliens. If the seminarian is an employee, his wages
should be reported on Form W-2. There is a FICA
exemption for nonresident aliens in F visa status
who are providing employment services for pur-
poses specified in their visas.53 Thus, no FICA taxes
need be withheld from wages paid to nonresident
alien seminarians employed by parishes as part of
their curricular practical training. If the seminarian
is an independent contractor, his payments should
be reported on Form 1042-S. Nonresident aliens
are not subject to SECA taxes unless a social secu-
rity treaty provides otherwise.
53 IRC § 3121(b)(19).
Treaty Exceptions
The general tax rules outlined above with respect to
nonresident aliens (and certain resident aliens) can
be overridden by the provisions of a treaty between
the United States and a particular country. There
are two types: tax treaties and social security trea-
ties. Thus, before reaching conclusions concerning
liability for taxation, withholding, or reporting for
an international religious worker or seminarian, the
diocese, eparchy, or other church employer should
determine whether there is a treaty between the
United States and the individual’s country of origin.
Then, it should determine whether any provision
of that treaty would alter the result of the general
analysis above.
Tax Treaties.54 A tax treaty is a bilateral agree-
ment between the United States and another
country that may affect applicability of the tax
laws of each country in order to avoid double tax-
ation of the same income. A tax treaty may affect:
determination of residency status;55 taxability
of wages or other income (e.g., reduction of the
30 percent withholding rate on non-effectively
connected US source income); or taxability of
scholarship payments.
In order for an individual to claim a treaty
exemption from withholding at the time of payment
with respect to either wages or independent contrac-
tor payments, he or she must submit Form 8233 to
the withholding agent (church employer). To claim
a treaty exemption from withholding at the time of
payment with respect to scholarship payments, the
individual must submit Form W-8BEN to the with-
holding agent.
Social Security (“Totalization”) Treaties. The
United States has also entered into bilateral social
security treaties in order to permit individuals work-
ing in two countries to qualify for social security ben-
efits in one country and to avoid double taxation. The
SSA publishes the complete texts and explanations
of these treaties, which are available at
international. 56 Under the provisions of a totalization
54 The texts of most US tax treaties are available at using
“tax treaties” as the search term. IRS Publication 515, Withholding
of Tax on Nonresident Aliens and Foreign Entities, contains detailed
charts of the withholding rates on personal services income and
non-personal services income under various tax treaties.
55 For example, if a tax treaty defines an individual as a resident of a
foreign country, that individual will be classified as a nonresident
alien for tax purposes, regardless of whether the green card or sub-
stantial residence test is met. Treas. Reg. § 301.7701(b)-7.
56 Agreements are currently in effect between the United States and
the following countries: Australia, Austria, Belgium, Canada, Chile,