1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the taxable year in

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

T.C. Memo. 1996-531

UNITED STATES TAX COURT

RICHARD G. AND ANNE C. GREENE, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5293-95. Filed December 2, 1996.

Frank Sommerville, for petitioners.

Sheri Wilcox, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

ARMEN, Special Trial Judge: This case was assigned pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1
 

2 Pursuant to sec. 7482(b)(2), the parties stipulated that

the venue for purposes of an appeal from this decision will be

the U.S. Court of Appeals for the District of Columbia Circuit.

Respondent determined a deficiency in petitioners' Federal

income tax for the taxable year 1992 in the amount of $998.

The sole issue for decision is whether petitioner Richard G.

Greene, an Assemblies of God missionary, was an employee or an

independent contractor in 1992. The answer will determine

whether his expenses constitute deductible business expenses on

Schedule C under section 62(a)(1), or are miscellaneous itemized

deductions allowable on Schedule A under section 67 to the extent

that they exceed 2 percent of petitioners' adjusted gross income.

FINDINGS OF FACT

Some of the facts have been stipulated, and they are so

found. Petitioners are husband and wife and resided in

Bangladesh at the time that their petition was filed with the

Court.2

1. General Background

Petitioner Richard G. Greene (petitioner) was licensed and

ordained as a minister of the National Assemblies of God Church

(the National Church) in May 1987 and May 1989, respectively. 

Petitioner pastored an Assemblies of God church in Leesville,

Louisiana, at least from the time he became licensed until

December 1990, at which time he resigned as a pastor in order to

pursue a career as a missionary. During 1992, petitioner

performed services as an Assemblies of God missionary.
- NEXTRECORD -

The National Church is a nonprofit corporation headquartered

in Springfield, Missouri. The National Church operates in

accordance with the Constitution and Bylaws of the General

Council of the Assemblies of God (Constitution and Bylaws). The

Constitution and Bylaws explain the National Church's internal

laws, structural organization, polity, and guiding policies. 

These laws and policies are administered at the national level

through the General Council and its various agencies. The

General Council, which consists of a body of ordained ministers

and delegates of the affiliated local churches, is charged with

preserving and promoting established positions on the faith and

practice of the National Church. It meets biannually to conduct

the general business of the National Church and determine the

services that it will provide.

The laws and policies of the National Church are

administered at the district level through District Councils. 

The United States is divided into 55 geographical District

Councils, which serve as the connecting link between the

affiliated local churches and the General Council. Local

churches apply for affiliation at the district level. Each

District Council, which is subordinate to the General Council,

consists of ordained ministers, licensed ministers, and delegates

from the local churches within the district. The District

Councils supervise all of the National Church's activities within

their prescribed field. The District Councils examine, approve,
- NEXTRECORD -

 

3 The bylaws of the National Church provide qualifications

for ministerial licensing and ordination. The bylaws provide,

inter alia, that in order to be licensed as a minister an

applicant must: (1) Have a thorough understanding of and be in

agreement with the National Church's doctrinal position as

contained in the Statement of Fundamental Truths; (2) have an

active loyalty to the National Church's constitutional

agreements, a cooperative spirit, and a readiness to seek and

receive the counsel of older brethren; (3) demonstrate religious

knowledge acquired through education or experience by passing a

standard test; and (4) be interviewed and recommended by a

district credentials committee.

Licensed ministers must meet additional requirements in

order to be ordained. For example, a licensed minister must

complete 2 consecutive years of full-time preaching ministry,

pass at least one written test, and submit to additional

interviews.

 

4 According to the constitution and bylaws, the credentials

committee consists of the Executive Presbytery.

and recommend candidates who qualify as certified, licensed, and

ordained ministers.3 Final approval and issuance of ministerial

credentials, however, is made by the General Council's

credentials committee (the credentials committee).4 Petitioner

met all of the requirements set forth by the National Church, and

as indicated, is a licensed and ordained Assemblies of God

minister.

Individuals holding ministerial credentials are amenable to

both the District Council and the General Council in matters of

doctrine and conduct. Causes for the discipline of a minister

include: (1) Any moral failure involving sexual misconduct; (2)

any moral or ethical failure not involving sexual misconduct; (3)

general inefficiency in the ministry; (4) a failure to represent

the Pentecostal testimony correctly; (5) a contentious or
- NEXTRECORD -

noncooperative spirit; (6) an assumption of dictatorial authority

over a church; (7) an arbitrary rejection of district counseling;

(8) a declared open change of doctrinal views; (9) habitual debt

that harms the church's reputation; and (10) a marriage in

violation of the church's stand on marriage and divorce. The

Credentials Committee has final authority in matters of doctrine

and the personal conduct of all ministers, including the power to

withdraw the approval and recommend the recall of ministerial

credentials.

2. Missionary Service

The National Church, as one of its stated missions, seeks to

promote and encourage world evangelization. Towards this end,

the National Church created the Division of Foreign Missions (the

DFM), an unincorporated agency, to coordinate foreign missionary

efforts. The DFM is supervised by the Foreign Missions Board,

and together they select, endorse, establish requirements, and

uphold standards for missionaries.

a. The Endorsement Process

The process of becoming an endorsed missionary is lengthy

and is handled primarily at the national level by the DFM and the

Foreign Missions Board. An individual applying for a missionary

position must submit an application, along with an autobiography,

character references, and transcripts to the DFM. The applicant

must obtain formal approval from his or her appropriate district

before the DFM will begin to process the application. After an
- NEXTRECORD -

applicant has obtained district approval and completed the

application, the DFM evaluates the application. At some point

during evaluation, a DFM representative conducts a home-interview

with the candidate. Finally, if all indications are favorable,

the DFM asks the candidate to travel to Springfield, Missouri,

for additional orientation, tests, and interviews. The

applicant's geographical foreign field location is defined in the

final interview. If the tests and interviews are satisfactory,

the DFM will recommend the candidate to the Foreign Missions

Board for endorsement.

b. The Missionary's 5-year Cycle

The National Church and the missionary candidates consider

missionary service to be a lifetime career. Missionary service,

however, is generally divided into repeating 5-year cycles. 

Missionaries spend the first year in the cycle, frequently

referred to as the year of "deputational ministry", itinerating

local Assemblies of God churches seeking financial support for

the foreign mission. They spend the remaining 4 years in the

cycle ministering in the foreign field. At the conclusion of the

fourth year in the foreign field, missionaries return to the

United States and begin another year of deputational ministry,

thus initiating a new 5-year cycle.

The DFM provides no formal training with respect to

deputational ministry. Generally, missionaries solicit funds

from churches and individual donors through pledges that
- NEXTRECORD -

demonstrate the donor's commitment to support the missionary on a

monthly basis. The donor can pledge to support a missionary for

life, one 5-year cycle, or less; however, if support is limited

to one 5-year cycle or less, the missionary must visit the donor

during the next phase of deputational ministry in order to renew

the financial commitment. If a donor fails to provide the

pledged support, the DFM will not send a past due notice to or

make any other contact with the donor; rather, the individual

missionary is responsible for contacting the donor and reestablishing the financial support. Deputational missionaries

may, at their own expense, hire individuals to assist them in

their fund-raising efforts.

The DFM provides donors with a receipt verifying the amount

of the pledge and certifying that the DFM, as an agency of the

National Church, is a tax-exempt organization. Contributions

made to and receipted by DFM are not personally owned by the

missionary, even though they may be designated for that

missionary's ministry. Rather, the DFM owns the funds raised by

the missionaries and maintains administrative control of such

funds. The DFM deposits contributions into an individual account

maintained for each missionary.

Missionaries must raise sufficient funds to support their

foreign ministry before the DFM will "clear" them for departure

to their foreign field. In this regard, the DFM prepares a

proposed budget for endorsed missionaries to use as a guideline
- NEXTRECORD -

in determining the amount of funding necessary to support their

foreign ministry needs. Deputational missionaries, however, are

not required to comply with the exact figures in the budget so

long as they obtain adequate funding for their ministry.

Deputational missionaries are required to file with the DFM

monthly "deputational reports" that detail the offerings received

and the expenses incurred by the missionary. Along with the

deputational report, missionaries forward the net cash offerings

and receipts verifying the offerings and expenses. Additionally,

during their deputational ministry, missionaries prepare a field

budget approximating the amount of mission-related expenses they

will incur in the foreign field. Once a missionary departs for

the foreign field, the DFM advances funds to the missionary from

his or her DFM missionary account to cover the anticipated

mission expenses. Missionaries in the foreign field are required

to file quarterly field reports with the DFM explaining how the

budget advances were spent.

During both deputational and foreign field ministry, the DFM

records the reported expenses and the pledges received on behalf

of the missionaries and mails monthly disbursement statements to

each missionary detailing the missionaries' total pledged support

and expenses.

Missionaries are free to resign at any time. However,

missionaries are not entitled to the balance of their DFM account

upon resignation. Rather, a resigning missionary may reallocate
- NEXTRECORD -

the funds in his or her foreign ministry account to another

missionary's ministry.

c. Compensation and Benefits

Missionaries are paid a monthly living allowance (a personal

allowance) from the funds secured by them in their year of

deputational ministry. The DFM sets an upward limit on the

personal allowance amount that missionaries may receive from

their respective accounts. The DFM does not guarantee

missionaries a minimum level of support. In fact, missionaries

have the power to designate any amount below the limit set by the

DFM as their personal allowance.

The DFM maintains an association group health care plan

administered by the Christian Fidelity Life Insurance Co.

(Christian Fidelity). The DFM informs missionaries with respect

to the plan but does not require them to participate in the plan. 

The monthly premiums are transferred from each missionary's

account with DFM to Christian Fidelity. The disbursement reports

mailed to petitioner in 1992 indicate that petitioner

participated in the health insurance plan.

The DFM maintains a group retirement plan called the

"Minister's Benefit Association" (MBA) plan. The MBA plan allows

missionaries to defer a portion of their monthly living allowance

to the plan for retirement. The DFM does not require

missionaries to participate in the plan. The disbursement
- NEXTRECORD -

reports mailed to petitioner in 1992 indicate that petitioner

participated in the MBA plan.

The DFM has no official policy with respect to sick leave;

however, it does recommend that missionaries limit their vacation

days to 30 or fewer per year. Missionaries are not required to

report to the DFM either sick leave or vacation days taken. 

Thus, the DFM does not maintain any records reflecting the days

and hours worked by its missionaries. Missionaries continue to

receive their personal allowance while on vacation and sick

leave.

d. Communication With the DFM

Apart from the monthly deputational and disbursement

reports, petitioner and the DFM communicated on an irregular

basis during his year of deputational ministry. The DFM did not

contact petitioner at all during that year, and petitioner called

the DFM only occasionally for information relating to shipping

his belongings to Bangladesh. Other than the quarterly field

reports and the monthly disbursement reports, there was no

regular form of communication between petitioner and the DFM

during his foreign field mission work.

The DFM requires missionaries to attend the "School of

Missions" during their deputation year of each 5-year cycle. The

School of Missions is not for training purposes; rather, it is a

"spiritual debriefing" for missionaries and their families that

have been exposed to foreign cultures for long periods of time. 
- NEXTRECORD -

This is the only meeting that missionaries are required to

attend.

e. Disciplinary Matters

Disciplinary matters related to missionary status are

handled by the DFM. Causes for disciplinary action with respect

to missionary status include, inter alia: (1) Any conduct

unbecoming to a missionary as a representative of Christ and the

Assemblies of God; (2) loss of ministerial credentials with the

National Church; (3) indiscretions concerning morals; (4) failure

to properly manage and report the use of mission funds; (5) a

declared open change in doctrinal views or practices, resulting

in variance from those of the National Church, or deliberate

variance from the values, purposes, or objectives of DFM; and (6)

a contentious or noncooperative spirit.

The DFM has no authority to recall a missionary's

ministerial credentials. The most severe form of discipline that

the DFM can exercise is to withdraw its endorsement of, and

effectively disassociate itself from, a missionary. In the event

that the DFM withdraws an endorsement, the DFM notifies the

missionary's district, closes the missionary's account, and

returns to the donors any future offerings received on behalf of

the missionary.
- NEXTRECORD -

f. Unendorsed Missionaries

Ministers may serve as Assemblies of God missionaries

without official endorsement from the DFM. Assemblies of God

churches can and do financially support unendorsed Assemblies of

God missionaries. The DFM provides no assistance of any kind to

unendorsed missionaries; thus, unendorsed missionaries must

personally collect pledges, issue receipts, and maintain

financial records with respect to their foreign ministry.

g. The Missions Manual

The DFM has written and produced a missions manual (the

missions manual) containing both general and specific information

about foreign ministry. The DFM provides all endorsed

missionaries with a copy of the missions manual. The missions

manual provides information about the structure of the DFM, the

endorsement process, deputational ministry, budgeting, personal

allowances, disciplinary action, equipment, overseas freight and

shipping, health insurance, the pension program, children of

missionaries, foreign field housing, and vacation.

Jerry Burgess (Mr. Burgess) is a member of the Foreign

Missions Committee that is responsible for establishing foreign

mission practices and procedures and for implementing the

decisions of the Foreign Missions Board. Mr. Burgess also worked

as the financial comptroller of the DFM for 16 years. Mr.

Burgess testified at trial as follows:
- NEXTRECORD -

A: [The missions manual] is a guide. You know, if

Reverend Greene needs to know what he should do in

a certain situation that might relate to a move on

the field, or how he can best accomplish some part

of his ministry, a good place for him to go is to

the missions manual or ask another missionary on

the field, but essentially, it is a guide and a

broad set of parameters as to how the cooperative

relationship should work.

* * * * * * *

Q: Are the provisions of this manual enforceable

against a DFM missionary?

* * * * * * *

A: Well, the provisions of the manual relate to

the activities of missionaries. Most of those are

suggestions, anyway, and we don't even intend to

enforce them.

Some of the provisions in the manual define

the cooperative relationship between the

missionary and the Division of Foreign Missions,

and if that missionary chooses to be uncooperative

and to do things that are harmful or detract from

the work, then the manual spells out our

prerogative to disassociate ourselves from that

missionary, and we no longer have an obligation to

process his finances or to cooperate with him if

he won't cooperate with us.

Mr. Burgess' testimony, which we accept, also revealed: (1)

Many persons in top management positions of DFM have not read the

missions manual, and (2) the DFM considered missionaries to be

independent contractors, not employees.

The missions manual states that the DFM does not consider

their relationship with missionaries to be one of employer and

employee.
- NEXTRECORD -

3. Petitioner's Missionary Experience

In petitioner's final interview in Springfield, Illinois,

petitioner identified Bangladesh as the country in which he

wished to minister. The DFM expressed reservations about

petitioner's choice, but petitioner made the ultimate decision. 

Petitioner began itinerating local churches and raised

approximately $600 in monthly support before he was officially

endorsed in 1992. Petitioner received a proposed budget from the

DFM detailing the amount necessary to sustain 4 years of foreign

ministry in Bangladesh; however, petitioner set a fund-raising

goal in excess of the amount proposed because he desired to do

things not accounted for in the proposed budget.

Petitioner maintained a routine schedule during his

deputational ministry. On Wednesday evenings and Sunday mornings

petitioner ministered at Assemblies of God churches raising

support for his mission. The DFM did not require that petitioner

adhere to a particular schedule or method of fund-raising in his

year of deputational ministry. In deciding the best way to

prepare and present his deputational services on Sundays and

Wednesdays, petitioner talked with experienced missionaries and

coordinated with the pastor of the church that was hosting him.

Petitioner spent approximately 3 days per week locating and

contacting new churches to itinerate and writing thank-you notes

to donors. Petitioner also prepared and distributed a newsletter

to encourage donors to contribute towards his ministry. 
- NEXTRECORD -

Occasionally petitioner hired individuals to assist him in

producing his newsletter; however, the assistants usually

declined payments for their services.

The DFM did not provide petitioner with an office, supplies,

support staff, car, or any other equipment to facilitate his

work. Petitioner used his personal car to itinerate local

churches and used his personal telephone to contact such

churches. Petitioner withheld these expenses from the pledges

received prior to forwarding the balance to the DFM.

Petitioner began receiving a personal allowance on December

31, 1991, in the amount of $1,125 per month. Petitioner was

eligible to receive a monthly allowance before that time;

however, he declined to receive his allowance for some time

because his wife was working and the family was able to meet its

expenses without depleting petitioner's missionary account with

the DFM.

Petitioner and his family departed for Bangladesh on March

30, 1993. The DFM did not assign petitioner to work on a

particular project in Bangladesh. Petitioner chose to become

involved in student ministry development in Bangladesh that

involves teaching classes in an Assemblies of God Bible School. 

Petitioner also coordinates an outreach program where he

supervises students that are starting new churches in various

villages. Petitioner was not directly supervised or evaluated by

anyone from the DFM or elsewhere.
- NEXTRECORD -

While serving as a missionary, petitioner became aware of

widespread drug addiction in Bangladesh. Petitioner has traveled

to drug-infested areas in Bangladesh and has visited with many of

the drug-addicted individuals. Petitioner's experiences and

conversations with the local Bengalis have led petitioner to

believe that there is a need for a drug-rehabilitation program in

his area. In his next phase of deputational ministry, petitioner

plans to raise funds to sponsor such a program. Petitioner has

not informed the DFM of his interest in sponsoring a drugrehabilitation clinic and to the best of his knowledge, the DFM

is unaware of his activity in this area.

At the time of trial, petitioner intended to return to the

United States in June 1996 to begin his second phase of

deputational ministry. Although most missionaries serve 4 years

in the foreign field before returning to the United States,

petitioner planned to return after approximately 3 years. In

making this decision, petitioner considered the needs of his

school-aged children and the schedules of other missionaries in

his region. Additionally, petitioner was eager to begin

soliciting funds necessary to support his drug-rehabilitation

program. It appears that the DFM's involvement in planning

petitioner's field departure date was minimal and that petitioner

decided on his return date independent of the DFM.

Petitioner owns a copy of the missions manual, but he has

never actually referred to it in making his missionary decisions;
- NEXTRECORD -

rather, he has consulted fellow missionaries when he has had

questions about missionary activities.

4. Petitioners' Tax Return and the Notice of Deficiency

The National Church issued petitioner Form 1099-MISC. Such

Form reflected nonemployee compensation for services rendered and

indicated that Federal income tax was not withheld from that

compensation. Petitioner reported his missionary-related income

and expenses on Schedule C.

Respondent does not challenge the amount of petitioners'

claimed business expenses. Rather, in her notice of deficiency,

respondent determined that petitioner was an employee rather than

an independent contractor in 1992. As a result of this

determination, respondent reclassified the expenses claimed by

petitioner on his Schedule C as Schedule A expenses deductible

only as miscellaneous itemized deductions, subject to the 2-

percent limitation under section 67.

ULTIMATE FINDING OF FACT

Petitioner, an endorsed Assemblies of God missionary, was an

independent contractor in 1992.

OPINION

Petitioners contend that petitioner was an independent

contractor and, as such, was entitled to deduct the full amount

of his business expenses on Schedule C pursuant to section 162. 

Respondent determined that petitioner was an employee during

1992. Petitioners bear the burden of proving that respondent's
- NEXTRECORD -

determination is not correct. Rule 142(a); Welch v. Helvering

290 U.S. 111, 115 (1933).

Whether an individual is an independent contractor or a

common law employee is a question of fact. Professional &

Executive Leasing, Inc. v. Commissioner, 862 F.2d 751, 753 (9th

Cir. 1988), affg. 89 T.C. 225 (1987); Wolfe v. United States, 570

F.2d 278, 281-282 (8th Cir. 1978); Weber v. Commissioner, 103

T.C. 378, 386 (1994).

Among the relevant factors to consider in determining the

nature of a work relationship are the following: (1) The degree

of control exercised by the principal over the details of the

work; (2) which party invests in the facilities used in the work;

(3) the taxpayer's opportunity for profit or loss; (4) the

permanency of the relationship; (5) the principal's right of

discharge; (6) whether the work performed is an integral part of

the principal's business; (7) what relationship the parties

believe they are creating; and (8) the provision of benefits

typical of those provided to employees. NLRB v. United Ins. Co.,

390 U.S. 254, 258-259 (1968); Professional & Executive Leasing,

Inc. v. Commissioner, 862 F.2d at 753, 89 T.C. at 232; Weber v.

Commissioner, supra at 387; Simpson v. Commissioner, 64 T.C. 974,

984-985 (1975). No one factor is determinative; rather, all the

incidents of the relationship must be weighed and assessed. 

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992);

NLRB v. United Ins. Co., supra at 258; Azad v. United States, 388
- NEXTRECORD -

F.2d 74, 76 (8th Cir. 1968); Weber v. Commissioner, 103 T.C. at

387.

A. Degree of Control

The principal's right to control the manner in which the

taxpayer's work is performed is ordinarily the single most

important factor in determining whether a common law employment

relationship exists. Azad v. United States, 388 F.2d at 76;

Leavell v. Commissioner, 104 T.C. 140, 149 (1995); Weber v.

Commissioner, 103 T.C. at 387. In order for a principal to

retain the requisite control over the details of a taxpayer's

work, the principal need not stand over the taxpayer and direct

every move made by that person. Weber v. Commissioner, 103 T.C.

at 388; Professional & Executive Leasing, Inc. v. Commissioner,

89 T.C. at 234; Simpson v. Commissioner, 64 T.C. at 985. In

addition, the degree of control necessary to find employee status

varies according to the nature of the services provided. Weber

v. Commissioner, 103 T.C. at 388. Finally, we must consider not

only what actual control is exercised, but also what right of

control exists as a practical matter. Professional & Executive

Leasing, Inc. v. Commissioner, 862 F.2d at 754, 89 T.C. at 233-

234; Weber v. Commissioner, 103 T.C. at 387-388.

In determining whether an individual is under sufficient

direction and control of another to warrant the finding of an

employer-employee relationship, the courts often have referred to

the regulations promulgated under the employment tax provisions. 
- NEXTRECORD -

Professional & Executive Leasing, Inc. v. Commissioner, 89 T.C.

at 231. Under section 31.3401(c)-1(b), Employment Tax Regs., an

employer-employee relationship--

Generally * * * exists when the person for whom

services are performed has the right to control and

direct the individual who performs the services, not

only as to the result to be accomplished by the work

but also as to the details and means by which that

result is accomplished. That is, an employee is

subject to the will and control of the employer not

only as to what shall be done but how it shall be done.

* * * In general, if an individual is subject to the

control or direction of another merely as to the result

to be accomplished by the work and not as to the means

and methods for accomplishing the result, he is not an

employee.

As a preliminary matter we note that the parties dispute the

identity of the principal in applying the control test. 

Petitioners contend that in analyzing whether petitioner is an

employee, only the control exercised by the DFM should be

considered. Respondent contends that the DFM is a division of

the National Church and that the collective right to control

maintained by the DFM and the National Church must be considered.

We agree with respondent on this point. The National Church

prosecutes its activities, in part, through general offices such

as the DFM. The DFM is merely an extension of the National

Church charged with the specific task of coordinating Assemblies

of God missionary efforts outside the United States. As an

agency of the National Church, the DFM performs this task on

behalf of the National Church. Thus, we think that the control

exercised by both the National Church and the DFM should be
- NEXTRECORD -

considered together in determining whether petitioner is an

employee.

Respondent contends that the DFM exercised control, or had

the right to exercise control, over petitioner to such a degree

that we must conclude that he was an employee. In this regard,

respondent points out that as a missionary, petitioner qualifies

as a professional who required little supervision and that the

absence of actual control should not be confused with an absence

of the right to control.

The threshold level of control necessary to find employee

status is generally lower when applied to professional services

than when applied to nonprofessional services. Azad v. United

States, supra at 77, Professional & Executive Leasing, Inc. v.

Commissioner, 89 T.C. at 232. However, the precise degree of

control required to find an employer-employee relationship varies

with different occupations. United States v. W.M. Webb, Inc.,

397 U.S. 179, 193 (1970). In the present case, even applying a

lower standard of control because of petitioner's status as a

professional, we find that neither the National Church nor the

DFM exercised, or had the right to exercise, a sufficient degree

of control to support a finding that petitioner was an employee.

Neither the National Church nor the DFM provided any type of

professional training for petitioner. The DFM did not assign

petitioner to minister in a particular country; petitioner

selected Bangladesh, notwithstanding the reservations expressed
- NEXTRECORD -

by the DFM. The DFM did not direct petitioner to work on a

particular project in Bangladesh; rather, petitioner

independently chose to become involved in student ministry. 

Petitioner decided to expand his foreign ministry to include a

drug-rehabilitation program. He was able to make this decision

without seeking permission from the DFM. In fact, it appears

that at the time of trial, the DFM was not even aware of

petitioner's plans to initiate a drug-rehabilitation clinic in

Bangladesh.

Petitioner determined his own work days and hours. He was

able to use his vacation and sick leave without notifying or

seeking permission from the DFM. Petitioner decided to return

from his foreign ministry after only 3 years in the foreign

field. He made this decision considering the needs of his

school-aged children and the schedules of the other missionaries

in his area. It appears that the DFM played little or no role in

determining petitioner's field departure date. Petitioner

decided when his personal allowance would begin, and he had the

power to designate the amount of his personal allowance up to the

limit imposed by the DFM.

Petitioner was required to attend only one meeting every 5

years. Apart from filing periodic disbursement, deputational,

and field reports, petitioner and the DFM did not communicate

regularly. Specifically, the DFM did not contact petitioner at

all during petitioner's year of deputational ministry. Likewise,
- NEXTRECORD -

the DFM communicated with petitioner infrequently while

petitioner served in the foreign field. Petitioner was not

directly supervised or evaluated by anyone.

Respondent emphasizes that the DFM maintained control over

petitioner through its missions manual that dictated the manner

in which petitioner was to conduct his deputational and foreign

ministry. We think that respondent overstates the role of the

missions manual. The missions manual was intended by the DFM to

be an informational reference for missionaries, not a set of

rules controlling their day-to-day conduct.

We recognize that the missions manual contains extensive

information with respect to foreign ministry; however, most of

the manual's provisions provide general information and guidance,

rather than impose requirements on missionaries. To the extent

that the missions manual appears to impose requirements on

missionaries, we are reminded of Mr. Burgess' testimony that the

DFM never intended to enforce the manual's provisions.

In this regard, the DFM's only method of enforcing the

manual's provisions is to withdraw its endorsement of a

missionary. We observe that the withdrawal of a missionary's

endorsement does not prevent the missionary from serving in the

foreign field; rather, it merely precludes the missionary from

using DFM's services. Thus, to a substantial degree, "mandatory"

provisions in the missions manual are toothless. Because the DFM

intended that the missions manual be used only as a guideline,
- NEXTRECORD -

and because the DFM lacks any real ability to enforce its

provisions, we reject respondent's contention that the manual

dictated the manner in which petitioner performed his missionary

duties.

In summary, the DFM lacked the control and lacked the right

to control the manner and means by which petitioner performed his

duties as a foreign missionary. Rather, the DFM facilitates

foreign ministry by processing a missionary's collections and

pledges and providing useful information to missionaries through

the missions manual and a proposed foreign living budget. In

other words, we view the DFM as a service provider relieving

endorsed missionaries from the administrative burdens of

collecting and processing their pledges and obtaining information

regarding their country of service.

Respondent also contends that the record in this case shows

that the National Church exercised control, or had the right to

exercise control, over petitioner's ministerial credentials to

such a degree that we must conclude he was an employee. In

support of her position, respondent points out that the National

Church: (1) Maintains specific requirements for ministerial

licensing and ordination; (2) has the authority to discipline

ministers based on their behavior and conduct; and (3) has the

authority to withdraw ministerial credentials. Specifically,

respondent argues that the National Church's ability to revoke

petitioner's credentials, if petitioner did not perform his
- NEXTRECORD -

duties in the correct manner, gives the National Church the power

to control his day-to-day conduct.

Respondent's emphasis on the National Church's control of

petitioner's ministerial credentials is misplaced for two

reasons. First, although petitioner was an ordained Assemblies

of God minister, he was engaged as a missionary. The National

Church's requirements for ministerial licensing and ordination,

as well as its authority to discipline petitioner and withdraw

his ministerial credentials, have little or no bearing as to the

details and means by which petitioner performed his duties as a

missionary.

Second, we do not think that the control test is satisfied

where the manner in which a service is performed is controlled by

the threat of the loss of professional credentials. Carried to

its logical extreme, this argument would serve to classify all

ordained ministers as employees of the National Church,

regardless of the type of service performed. We reject

respondent's contention that the National Church's ability to

revoke petitioner's ministerial credentials dictated petitioner's

daily conduct as a foreign missionary.

We are aware of the recent case, Alford v. United States,

Civil No. 94-1074, in which the District Court for the Western

District of Arkansas considered whether an Assemblies of God

ordained minister serving as a pastor of an affiliated local

church was an employee or an independent contractor. The
- NEXTRECORD -

District Court concluded that the local church, through its

supervision by the District Council and the National Church,

demonstrated significant control over the manner in which the

taxpayer performed his work, and therefore held that the pastor

was an employee. In so holding, the District Court emphasized

the National Church's control over the taxpayer with respect to

preaching, doctrine, and conduct.

We observe as an initial matter that we are not bound by the

District Court's holding. In any event, we think that

petitioner's circumstances in the present case are very different

from those of the taxpayer's in Alford v. United States, supra.

Petitioner was employed as a foreign missionary, not a

pastor. We think that the National Church's authority over the

manner in which a pastor performs his or her duties is not highly

probative in analyzing the National Church's control over the

daily activities of a foreign missionary. This is because

pastoring a local church and engaging in foreign mission work are

two different jobs involving different qualifications, duties,

and bodies of authority. Pastors are subject to the controls of

a local church whereas missionaries are subject to the authority

of the DFM. As previously discussed, the DFM exerted very little

control over petitioner.

In summary, the DFM's and National Church's lack of control

over, and lack of the right to control, the manner and means by

which petitioner performed his duties as a foreign missionary
- NEXTRECORD -

support a finding that petitioner was an independent contractor,

not an employee.

B. Investment in Facilities and Equipment

Petitioner's sole compensation as a missionary was in the

form of a "personal allowance" secured from funds that he raised

during his deputational ministry. In this regard, we observe

that if a donor fails to remit a pledged amount, the DFM makes no

effort to contact the donor, much less obtain the donation. 

Additionally, the National Church does not guarantee missionaries

minimum compensation or support. Petitioner used his personal

car and telephone to raise funds during his deputational

ministry. Petitioner occasionally hired assistants at his own

discretion and accepted responsibility for paying those

assistants.

Respondent contends that petitioner was reimbursed for his

expenses when he withheld costs from the offerings remitted to

the DFM. Even if petitioner were regarded as receiving

reimbursement for his expenses, this matter is more than

outweighed by other evidence probative of his being an

independent contractor, e.g., petitioner's efforts in securing

the funding for his foreign ministry and his investment in his

automobile and telephone. Thus, this factor supports a finding

that petitioner was an independent contractor, not an employee.
- NEXTRECORD -

C. Opportunity For Profit or Loss

The National Church does not guarantee missionaries minimum

compensation. The compensation received by missionaries is in

the form of a personal allowance, the amount of which depends, in

part, on the total amount of funding that missionaries are able

to secure during their deputational ministry. Additionally, upon

resignation, missionaries forfeit any account balance they may

have with the DFM and must reallocate their funds to another

ministry.

Because petitioner had some opportunity for profit and risk

of loss, this factor supports a finding that petitioner was an

independent contractor, not an employee.

D. Permanency of the Relationship

Petitioner concedes that missionary ministry is a lifetime

career. This factor supports a finding that petitioner was an

employee.

E. DFM's Right of Discharge

The DFM did not have the power to prevent petitioner from

serving as an Assemblies of God missionary in Bangladesh. The

DFM's most extreme form of discipline is the withdrawal of a

missionary's endorsement. For a missionary, the practical

consequence of losing the DFM's endorsement is one of

administrative inconvenience, namely, that the missionary must

collect and process pledges without the assistance of the DFM. 
- NEXTRECORD -

In any event, unendorsed Assemblies of God missionaries can and

do serve in the foreign field.

Respondent contends that because petitioner is an Assemblies

of God minister, the General and District Councils have the right

to revoke petitioner's ministerial credentials, and that,

therefore, the National Church can effectively discharge

petitioner. Indeed, the credentials committee has the authority

to withdraw the approval and recommend the recall of ministerial

credentials. Although petitioner is an Assemblies of God

minister subject to the disciplinary proceedings in the

constitution and bylaws, he presently serves in the capacity of a

foreign missionary. Thus, we think the more appropriate analysis

considers the DFM's right to discharge petitioner in his capacity

as a missionary, rather than the National Church's right to

recall petitioner's ministerial credentials.

Because the DFM lacked the power to discharge petitioner as

a missionary to Bangladesh, this factor supports a finding that

petitioner was an independent contractor, and not an employee.

F. Integral Part of Business

The DFM's primary mission is world evangelism. Petitioner's

work as an Assemblies of God missionary was directly related to

the accomplishment of that mission. This factor supports a

finding that petitioner was an employee.
- NEXTRECORD -

G. Relationship Petitioner and DFM Believed They Had Created

Jerry Burgess, who had worked as the financial comptroller

of the DFM for 16 years, testified that the DFM considered its

missionaries independent contractors, not employees. Mr.

Burgess' testimony is supported by the fact that the National

Church issued petitioner Form 1099-MISC reflecting nonemployee

compensation for services rendered. Additionally, the fact that

Federal income tax was not withheld from petitioner's

compensation is consistent with the DFM's view that petitioner

was an independent contractor.

Petitioner also thought he was an independent contractor, as

evidenced by the fact that he reported his foreign ministry

receipts and expenses on Schedule C. 

Because the National Church and petitioner thought that

petitioner was an independent contractor, this factor would

support a finding that petitioner was an independent contractor,

not an employee.

H. Employee-Type Benefits

The DFM offered petitioner access to the MBA pension plan

and a health insurance plan. Petitioner participated in the MBA

pension plan and the health insurance plan. The premiums for

petitioner's health insurance and the money transferred into

petitioner's MBA account were paid directly from petitioner's

account with the DFM.
- NEXTRECORD -

The DFM has no policy regarding sick leave and does not

maintain records reflecting either vacation or sick leave taken

by missionaries. Missionaries continue to receive their personal

allowances while on vacation and sick leave.

Although the matter is not free from doubt, we think that

these facts support a finding that petitioner was an employee,

not an independent contractor.

I. Conclusion

Some aspects of the relationship between petitioner and the

National Church indicate that petitioner was an employee, whereas

other aspects of the relationship indicate that he was an

independent contractor. After weighing the above factors, giving

particular weight to the lack of control and the lack of the

right to control that the National Church and the DFM had over

endorsed missionaries, we conclude that petitioner was an

independent contractor, and not an employee, in 1992.

Because of our determination that petitioner was an

independent contractor for purposes of section 62(a),

petitioner's trade or business expenses are deductible "above the

line" on Schedule C and need not be relegated to Schedule A.
- NEXTRECORD -

To reflect our conclusion herein,
- NEXTRECORD -

Decision will be entered

for petitioners.