In January 1986, pastor Brad Thomas took the district superintendent to dinner at Denny's prior to a church committee meeting. He carefully noted the purpose on the receipt he kept. When he next figured his taxes, he planned to deduct the amount of the meal from his taxable income. Since the church gave him an expense allowance, Brad was not spending personal income for church business, nor would he pay income tax on what amounted to a reimbursement for expenses the church intended him to incur. Thousands of pastors have operated this way for years.

If, in January 1987, Brad ate the same meal uniter the same circumstances and followed the same accounting procedure, he might not be able to deduct any of the expenses from his taxable income.

The Tax Reform Act of 1986 has made significant changes in the way many churches should compensate their pastors and in the way many pastors will figure their taxes, beginning in 1987.

In brief, if Brad continues with business as usual, he will pay more ...