So you want to know more about how to designate a church parsonage? That's all well and good, unless you've neglected to learn more about the ordination process itself... which necessarily precedes any such designation. The process of ordination takes many church leaders by surprise. And that is what often leads to ordinations that may not qualify for a church parsonage, or a housing allowance if ministers plan to rent or own their homes.

What is an inappropriate ordination? Let's say that a church hires an accountant and his or her pay is entirely derived from that administrative work. Let's say that the church also allows the accountant to perform some sacerdotal functions, and has even "ordained" him or her for that purpose. The question is whether the accounting services are "services performed in the exercise of ministry." If not, then the "ordained" accountant may not be able to exclude his gross income from taxation. And that means any attempted church parsonage designation may be inappropriate.

U.S. courts have addressed this in what is known as the Knight decision. There, the U.S. Tax Court set forth five factors for consideration in determining whether or not a person is a minister:

1. Does the individual administer the sacraments;
2. Does the individual conduct worship or religious services;
3. Does the individual perform services in the “control, conduct, or maintenance of a religious organization” under the authority of a church or religious denomination;
4. Is the individual “ordained, commissioned, or licensed”; and
5. Is the individual considered to be a spiritual leader by his or her denomination. 

This is usually the point where most church leaders throw their hands up and realize that issues such as church parsonage, understanding ordination, and federal tests for the purposes of giving special tax benefits, should really be left to expert guidance. Most churches recognize that expert guidance to be the amazing church-starting resource entitled Building On Faith: Everything You Need To Know About Starting Your Own Church. It's the gold standard in use today by hundreds of churches nation-wide. It's written by Abe Hernandez, Esq., a devoted Christian and church law expert. You own it to yourself to take a closer look.