S. 639 — Clergy Act

This section permits duly ordained, commissioned, or licensed ministers of a church, members of a religious order, or Christian Science practitioners (i.e., individuals eligible for exemption from Social Security self-employment taxes under IRC §1402(e)(1)) to irrevocably revoke an existing exemption—previously irrevocable under IRC §1402(e)(4)—by filing an application no later than the due date (including extensions) of their federal income tax return for their second taxable year beginning after December 31, 2027. (1) The revocation takes effect, as specified in the application, for the individual's first or second taxable year beginning after December 31, 2027, and all succeeding taxable years; (2) no subsequent exemption application is permitted; and (3) if effective for a taxable year after the return due date, full payment of self-employment taxes under IRC §1401 is required for that year's qualifying income. The changes apply to services performed in taxable years beginning after December 31, 2027, and to Social Security benefits payable based on such income for months or deaths on or after the calendar year of revocation effectiveness. (As background, the exemption allows eligible religious workers to opt out of Social Security coverage and self-employment taxes on ministerial earnings; revocation reinstates coverage and eligibility for retirement, survivors, and disability benefits.)

This section directs the Commissioner of Internal Revenue, in consultation with the Commissioner of Social Security, to develop and submit to the House Committee on Ways and Means and the Senate Committee on Finance, not later than 90 days after enactment, 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 exempting them from Social Security self-employment taxes. (As background, such individuals may opt out of Social Security coverage via an irrevocable election unless revoked under specified conditions.)