The CFO at Saltwater Christian College (SCC), a private college that is exempt under I.R.C. section 501(c)(3), had questions regarding the house that SCC’s president lives in tax free.  They were concerned that the IRS might deem the fair rental value of their president’s house – on campus – to be taxable to the president.  We answered that the housing should be tax-free if the three stipulations of I.R.C. section 119 are met.  Those stipulations are:  for the convenience of the employer, on the business premises, as a condition of employment.  We advise SCC that the location (on the business premises) and condition of employment (requirement in contract) can generally be objectively met.  However, more and more, the “convenience of the employer” stipulation is being questioned – and it can be difficult to prove after the fact if it is not documented somewhere.


Two considerations:

First, documenting that the President maintains an office in the house where he/she regularly holds bona fide business meetings, that he/she holds college-sanctioned events (donor dinners, dignitary dinners, student events) in the house and/or on the grounds, etc. may go a long way toward establishing – to the satisfaction of the IRS – that the house is “for the convenience of the employer”.  Documentation is key.

Second, if the three criteria of I.R.C. section 119 cannot be met, consider a “reduced” inclusion in income under I.R.C. section 119(d) – this is only for “qualified campus lodging defined at I.R.C. section 119(d)(3).

Section 119(d)(1) – In the case of an employee of an educational institution, gross income shall not include the value of qualified campus lodging furnished to such employee during the taxable year.

119(d)(2) Exception in cases of inadequate rent.

Paragraph (1) shall not apply to the extent of the excess of—

119(d)(2)(A)  the lesser of—

119(d)(2)(A)(i)  5 percent of the appraised value of the qualified campus lodging, or

119(d)(2)(A)(ii) the average of the rentals paid by individuals (other than employees or students of the educational institution) during such calendar year for lodging provided by the educational institution which is comparable to the qualified campus lodging provided to the employee, over

119(d)(2)(B)  the rent paid by the employee for the qualified campus lodging during such calendar year.


A faculty member pays $300 a month for lodging. Other employees pay $400 for similar lodging. The appraised value** of the lodging is $100,000. Five percent of this amount is $5,000. The faculty employee would have to include a total of $1,400 in his income for the year ($5,000 – (12 × $300)).

**The appraisal must be made by a qualified appraiser. It may not be made by the employer institution, or any of its officers, trustees, or employees. A new appraisal need not be obtained each year. However, the appraisal must be reviewed annually in accordance with IRS regs to be issued.

Bottom Line

Providing your college’s president with a house/residence on campus can raise issues with regard to taxability and/or other tax rules. Not only compensation, but property tax rules could come into play. It is good idea to review presidential/executive housing that may be provided by your institution (along with Minister’s Housing Allowances which we’ll look at in a few weeks) to ensure that you are in compliance with all of the rules (federal, state, and local) in this arena.

Specific questions? Email Dave Moja


The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.