Clergy Act, Pub. L. No. 119-148, §§ 1–3, 140 Stat. 88 (Oct. 20, 2026) (enacting H.R. 227, 119th Cong. (2026); non-codified provision impacting 26 U.S.C. § 1402 and 42 U.S.C. § 401 et seq.)

Legislative Overview and Background

On October 20, 2026, the President signed into law H.R. 227, 119th Congress, officially designated as the Clergy Act. Passed with overwhelming bipartisan support—by a roll call vote of 350 to 5 in the House of Representatives on April 27, 2026, and by Unanimous Consent in the Senate on September 30, 2026—this enactment addresses a long-standing structural challenge in the taxation of ordained and licensed religious ministers under the Self-Employment Contributions Act (SECA).

The House Committee on Ways and Means, in House Report 119-425 accompanying H.R. 227, succinctly stated the core objective of the legislation:

“The bill, H.R. 227, the ‘Clergy Act,’ as ordered reported by the Committee on Ways and Means on December 10, 2025, allows for the permanent revocation of an exemption from payment of Self-Employment Contributions Act (SECA) taxes on income associated with ministerial services performed by certain church ministers, members of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order), and Christian Science practitioners...”

For tax practitioners—specifically CPAs and Enrolled Agents advising clergy clients—the enactment of the Clergy Act provides a critical, time-limited planning opportunity. Congress last provided a statutory window to revoke a ministerial SECA tax exemption over a quarter-century ago under Section 403 of the Ticket to Work and Work Incentives Improvement Act of 1999 (Pub. L. No. 106-170). As House Report 119-425 emphasizes in its background analysis:

“Every year, roughly 2,000 members of the clergy apply for and receive an exemption... By law, this exemption must generally be sought early in a clergy member’s ministerial career and, after being granted, is irrevocable. As a result, some members of the clergy who received an exemption at the start of their career may struggle to prepare for retirement in later years. The Social Security Amendments of 1977, the Tax Reform Act of 1986, and the Ticket to Work and Work Incentives Improvement Act of 1999 provided members of the clergy with temporary, time-limited opportunities to revoke their exemption from SECA taxes and Social Security coverage. However, it has been roughly 26 years since members of the clergy were provided with this option.”

Mechanics of IRC Section 1402 and Ministerial Elections

To properly evaluate the impact of the Clergy Act, practitioners must review the dual employment classification that governs ministers under Title 26 of the United States Code. Under Internal Revenue Code (IRC) Section 1402(c)(4) and (c)(5), services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of ministry, by a member of a religious order (not under a vow of poverty), or by a Christian Science practitioner are treated as a “trade or business” for self-employment tax purposes. Consequently, ministerial compensation—even when paid by an exempt church employer that reports earnings on Form W-2—is subject to SECA tax under IRC Section 1401 rather than FICA tax under IRC Section 3101.

IRC Section 1402(e)(1) establishes an affirmative exemption mechanism, providing in relevant part:

“Any individual who is (A) a duly ordained, commissioned, or licensed minister of a church or a member of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order) or (B) a Christian Science practitioner, upon filing an application... together with a statement that either he is conscientiously opposed to, or because of religious principles he is opposed to, the acceptance (with respect to services performed by him as such minister, member, or practitioner) of any public insurance which makes payments in the event of death, disability, old age, or retirement or makes payments toward the cost of, or provides services for, medical care... shall receive an exemption from the tax imposed by this chapter with respect to services performed by him as such minister, member, or practitioner.”

To secure a valid exemption, the taxpayer must file IRS Form 4361 (Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners) under the timing rules of IRC Section 1402(e)(3):

“Any individual who desires to file an application pursuant to paragraph (1) must file such application on or before the due date of the return (including any extension thereof) for the second taxable year for which he has net earnings from self-employment... of $400 or more, any part of which was derived from the performance of service described in subsection (c)(4) or (c)(5).”

Crucially, IRC Section 1402(e)(4) mandates statutory irrevocability for approved exemptions:

“An exemption received pursuant to this subsection shall be effective for the first taxable year for which he has net earnings from self-employment... and for all succeeding taxable years. An exemption received pursuant to this subsection shall be irrevocable.”

Because IRC Section 1402(e)(4) explicitly locks in the exemption for all subsequent tax years, a minister who elected out of Social Security early in their career—often due to financial constraints or incomplete financial guidance—was historically barred from ever entering or re-entering the Social Security system based on ministerial earnings, absent specific intervention by Congress.

Non-Codified Statutory Design and Structural Impact

A critical technical detail for tax research and statutory analysis is that the Clergy Act does not alter the underlying text of Title 26 of the United States Code. Specifically, H.R. 227 does not insert new language into, or strike text from, IRC Section 1402 itself.

This non-codified structure is explicitly highlighted in House Report 119-425 under Part VI (“Changes in Existing Law Made by the Bill, as Reported”):

“Pursuant to clause 3(e) of rule XIII of the Rules of the House of Representatives, H.R. 227, as reported by the Committee, makes no changes to existing law.”

Instead of amending the statutory language of IRC Section 1402(e)(4), Section 2(a) of the Clergy Act functions as a standalone, non-codified statutory provision that temporarily overrides the irrevocability restriction by operation of a non-obstante clause:

“Notwithstanding section 1402(e)(4) of the Internal Revenue Code of 1986, any exemption which has been received under section 1402(e)(1) of such Code by a duly ordained, commissioned, or licensed minister of a church, a member of a religious order, or a Christian Science practitioner, and which is effective for the taxable year in which this Act is enacted, may be revoked by filing an application therefor...”

In tax practice, this statutory drafting technique mirrors the prior revocation windows enacted in 1977, 1986, and 1999. In official and commercial tax services (such as the United States Code Annotated and United States Code Service), the provisions of the Clergy Act will appear as a statutory “Note” appended beneath 26 U.S.C. § 1402 rather than within the text of subsection (e). Practitioners must recognize that non-codified public law provisions possess equal legal authority to codified provisions of Title 26 and govern tax liability for all covered years.

Applicable Tax Years, Filing Deadlines, and Back-Tax Mechanics

Section 2 of the Clergy Act outlines the explicit scope, procedural rules, application deadlines, effective tax years, and mandatory tax payment obligations required to execute a revocation.

Qualifying Taxpayers

To be eligible to revoke an existing exemption under Section 2(a) of the Clergy Act, the taxpayer must be a duly ordained, commissioned, or licensed minister, a member of a religious order (not under a vow of poverty), or a Christian Science practitioner who holds an exemption under IRC Section 1402(e)(1) that is:

“...effective for the taxable year in which this Act is enacted...”

Because the Clergy Act was enacted in calendar year 2026, the exemption must be effective for the 2026 taxable year.

Filing Deadline Window

Eligible individuals must file an application for revocation with the Internal Revenue Service within a multi-year statutory window established under Section 2(a):

“...if such application is filed no later than the due date of the Federal income tax return (including any extension thereof) for the applicant’s second taxable year beginning after December 31, 2028.”

For calendar-year taxpayers, the “second taxable year beginning after December 31, 2028” is the 2030 taxable year. Consequently, the absolute statutory deadline for submitting the revocation application is the due date for the 2030 Form 1040—April 15, 2031, or October 15, 2031 if a valid extension is obtained.

Effective Date Choices and One-Way Election Rule

Section 2(a) permits the taxpayer to select the effective start date of their revocation between two designated tax years:

“Any such revocation shall be effective (for purposes of chapter 2 of the Internal Revenue Code of 1986 and title II of the Social Security Act (42 U.S.C. 401 et seq.)), as specified in the application, either with respect to the applicant’s first taxable year beginning after December 31, 2028, or with respect to the applicant’s second taxable year beginning after such date, and for all succeeding taxable years; and the applicant for any such revocation may not thereafter again file an application for an exemption under such section 1402(e)(1).”

Under this provision, a taxpayer may elect to make the revocation effective beginning in Taxable Year 2029 (the first taxable year beginning after December 31, 2028) or Taxable Year 2030 (the second taxable year beginning after December 31, 2028). Once revoked, the exemption cannot be reinstated; the taxpayer is permanently barred from filing any future Form 4361 exemption application.

Mandatory Back-Tax Payment Rule

A vital technical requirement applies if the application for revocation is filed after the original tax return due date for an effective year. Section 2(a) mandates full payment of retroactive SECA taxes:

“If the application is filed after the due date of the applicant’s Federal income tax return for a taxable year and is effective with respect to that taxable year, it shall include or be accompanied by payment in full of an amount equal to the total of the taxes that would have been imposed by section 1401 of the Internal Revenue Code of 1986 with respect to all of the applicant’s income derived in that taxable year which would have constituted net earnings from self-employment for purposes of chapter 2 of such Code (notwithstanding paragraphs (4) and (5) of section 1402(c)) except for the exemption under section 1402(e)(1) of such Code.”

Section 2(b) reinforces this effective date mechanism across both the Internal Revenue Code and the Social Security Act:

“Subsection (a) shall apply with respect to service performed (to the extent specified in such subsection) in taxable years beginning after December 31, 2028, and with respect to monthly insurance benefits payable under title II of the Social Security Act on the basis of the wages and self-employment income of any individual for months in or after the calendar year in which such individual’s application for revocation (as described in such subsection) is effective (and lump-sum death payments payable under such title on the basis of such wages and self-employment income in the case of deaths occurring in or after such calendar year).”

Agency Notification and Outreach Plan

Recognizing that clergy members often lack awareness regarding complex tax elections and Social Security credit requirements, Congress inserted a mandatory agency reporting directive in Section 3 of the Act:

“Not later than 90 days after the date of enactment of this Act, the Commissioner of Internal Revenue, in consultation with the Commissioner of Social Security, shall develop and submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a plan to inform duly ordained, commissioned, or licensed ministers of a church, members of a religious order, and Christian Science practitioners of their eligibility to revoke any prior election of exemption from Social Security participation.”

Because the bill was enacted on October 20, 2026, the joint IRS-SSA outreach plan must be submitted to the congressional tax-writing committees by January 18, 2027. Practitioners should anticipate official IRS guidance, updated Form 4361-A or equivalent revocation forms, and official Treasury regulations in early 2027.

Professional Planning Considerations for Tax Practitioners

When advising clergy clients who currently hold an active IRC Section 1402(e) exemption, CPAs and EAs should perform a comprehensive quantitative and qualitative evaluation before recommending revocation. Key considerations include:

Quarters of Coverage (QCs) and Benefit Eligibility: Under Social Security rules, individuals generally require 40 quarters of coverage (10 years of covered earnings) to qualify for Social Security retirement benefits and premium-free Medicare Part A. Ministers who opted out early in their careers may lack sufficient non-ministerial QCs. Revoking the exemption allows ministerial earnings in 2029, 2030, and future years to build necessary QCs.
SECA Tax Liability vs. Alternative Investments: Revoking the exemption subjects net ministerial earnings to the 15.3% SECA tax rate (12.4% Old-Age, Survivors, and Disability Insurance + 2.9% Medicare, plus any applicable Additional Medicare Tax). CPAs must model the cash flow impact against the expected present value of Social Security retirement benefits, disability protection, and survivor benefits.
Housing Allowance Interaction: Under IRC Section 1402(a)(8), a minister’s net earnings from self-employment for SECA tax purposes are computed without excluding the rental value of a parsonage or parsonage allowance under IRC Section 107. When revoking an exemption, the 15.3% SECA tax will apply to both base cash salary and the housing allowance, creating a significantly larger tax obligation than income tax alone.
Filing Timeline Strategy: Because the revocation window applies to tax years beginning after December 31, 2028, and permits filing up through the 2030 tax return due date (April/October 2031), practitioners have an extended lead time to review client histories, calculate projected back-taxes, and coordinate with church employers regarding compensation adjustments.

Prepared with assistance from Gemini Notebook.