Transparency In Ministry

A pastor purchases selected shirts and pays to have the ministry logo embroidered on the shirts. He wears the ministry shirt in the performance of his duties and the cost is not reimbursed by the church? Is this a legitimate business expense deductible on his tax return?

The fact that church or ministry logo is embroidered on some of the shirts may help in the argument that (at least for those shirts), the suits are not suitable for private and personal wear. In Levitt v. Commissioner, TC Summary Opinion 2001-147, petitioner testified that he was required to purchase and maintain tuxedo shirts with a company logo. The tax court ruled that the petitioner "satisfied the elements under Yeomans v Commissioner (cited in earlier posting), supra; therefore, he is entitled to a deduction for the costs of the .....shirts." In the same case, the Tax Court disallowed the deduction of black shoes required by the employer because they were suitable for general or personal wear. In Risicato v. Commissioner, TC Memo 1984-238, the Tax Court examined whether or not a "jacket with a business identification on it constitute the sort of work clothing that is properly deductible." It concluded that "the purpose of the jacket was to advertise and identify petitioner's business" and concluded that the jacket was deductible.

Answer...yes, it is an allowable business deduction, if not reimbursed by the Church.

A pastor would like double-breasted, black suits for special television events. He did not wear these suits in his private life and he maintained the suits at his residence. The church did not pay for these suits, but the pastor incurred these costs and wants to know if this is a business expense, deductible in his personal tax return?

In Hynes v. Commissioner, 74 TC 1266, the taxpayer-petitioner, a TV newscaster, contended that he was entitled to deduct the expense of his on-the-air wardrobe that he kept at home because he was restricted in his selection of colors and patterns of such clothes and because he did not wear the clothes when he was not at the station on camera. The court did not agree with his contention and observed that "the restriction on the petitioner's selection of his business attire is not significantly different from that applicable to other business people who must limit their selection of business clothes to conservative styles and fashions. The fact that the petitioner chose not to wear his business clothes when he was away from the station does not mean that such clothes were not suitable for his private and personal wear. Indeed, most people do not wear their business clothes at home."

In Gerres v. Commissioner, TC Memo 1986-573, the petitioner was a welder and, as such, purchased fire resistance clothes. The Tax court ruled that the clothing was suitable for general wear and disallowed the deduction, even though the petitioner testified that he only wore the fire resistant clothes at work.

Answer…specialized clothing that is suitable for private/personal wear, maintained at home is not a business expense…other professionals do not get to deduct the costs of the suits worn in the corporate world.

A pastor has special clothing or uniforms that are worn during television broadcasts. The church pays for the clothing or wardrobe and the pastor would like to keep the clothing at home instead of the television studio. Are these uniforms a legitimate expense of the church …and is it permissible to maintain the clothing at the pastor’s home?

The general rule is that the cost of clothing of an employee is deductible (and presumably can be provided tax-free by the employer) if both of the following tests are met:

...if the uniforms are specifically required as a condition of employment, and
...the uniforms aren't of a type adaptable to general or continued usage to the extent they take the place of regular clothing. Revenue Ruling 70-474, 1970-2 CB 34.

The Tax court (Yeomans v. Commissioner, 30 T.C. 757 (need link).applied an additional subjective test, which examines the suitability of the clothing for private or personal wear by the taxpayer seeking the deduction. In other words, the clothing must meet three criteria:

1) The clothing can't be suitable for general or personal wear;
2) It must be required or essential in the taxpayer's employment; and
3) It isn't, in fact, used for general or personal wear.

A case decided in 1966 (Nelson, Oswald, TC Memo 1966-224) allowed an actor to deduct clothing even though it was suitable for general or personal wear. The deciding factor in this case was that the clothes were kept at the studio, and never worn outside of the TV set.

So to answer the above questions..Are uniforms/specialized clothing a legitimate expense?? Yes, if the uniforms used by the pastor are required as a condition of employment. These benefits are provided “tax-free” to the pastor.

Can the uniforms or specialized clothing, not adaptable to general usage be maintained at the pastors personal residence? YES…based on the reasoning provided by the Nelson case. If the pastor takes the suits home, he would have to prove that the suits were not suitable for general or personal wear.

However….(there’s usually one in every case…) While there may an argument that the suits are not suitable for personal wear, the question is a subjective one, and could ultimately be decided by a court that has a difference of opinion than that above. The safest and most prudent course of action is to continue to keep the suits at the studio so that there is no question that the suits are not worn for personal use. And, of course, the issue as to suitability for personal wear remains moot if the suits are left at the studio.