The American Pope's International Tax Problem

When Robert Francis Prevost was elected Pope, Catholics around the world celebrated the arrival of a new spiritual leader. But for U.S. tax professionals, one biographical detail sparked a flurry of hypotheticals: the new Pope is American. Born in Chicago, Illinois, Pope Prevost is the first American-born pontiff in the history of the Catholic Church. And under U.S. tax law, that’s not just a trivia point - it’s a trigger for international tax consequences.

Let’s take a journey through what it might look like if I - an international tax advisor - were responsible for preparing the Pope’s U.S. tax return. Spoiler: he might not owe much, but he absolutely still has a filing obligation. And as you’ll see, even the Vicar of Christ isn’t exempt from Uncle Sam’s paperwork. Today, we’ll be exploring the international tax implications of Pope Robert Francis Prevost being a U.S. citizen.

Who Is Pope Robert Francis Prevost?

Pope Prevost was born in 1955 in Chicago and joined the Order of St. Augustine. After earning degrees in theology and canon law, he served as a missionary in Peru for nearly two decades. Eventually, he became Bishop of Chiclayo and was later brought into the Vatican’s inner circle as Prefect of the Dicastery for Bishops - essentially the Vatican’s head of HR for bishops around the world. In 2025, he was elected Pope, assuming the leadership of the Roman Catholic Church and the sovereignty of Vatican City.

Now residing in the Apostolic Palace and governing the smallest country in the world, Pope Prevost oversees spiritual and administrative matters for more than a billion Catholics. But if he retained his U.S. citizenship - which, as of now, there’s no public indication he has renounced - he also remains a taxpayer in the eyes of the IRS.

What Is Vatican City?

Vatican City is an independent city-state fully enclosed within Rome. It holds the title of the smallest country on Earth by both size and population, with fewer than 1,000 residents - mostly clergy, employees of the Holy See, and the Swiss Guard.

While geographically nestled in Italy, Vatican City is politically and legally distinct. It has its own government, banking system, postal code, and even its own legal code. The Vatican operates financially through a combination of donations (such as Peter’s Pence), investment income, real estate holdings, and museum fees.

Crucially, Vatican City imposes no income tax on its residents. The Pope does not receive a salary, and most of the people who live and work there are compensated in ways that do not resemble traditional employment. From the IRS’s perspective, however, the absence of local income tax doesn’t matter - because the United States taxes its citizens on their worldwide income.

A Reminder: The U.S. Taxes Citizens Wherever They Live

The United States is one of only a handful of countries that still taxes its citizens no matter where in the world they reside. Whether you’re a teacher in Thailand, a retiree in Portugal, or a bishop in Vatican City, if you hold a U.S. passport, you’re expected to file an annual Form 1040 and potentially other forms disclosing foreign income and assets.

In practice, many Americans abroad owe little or no U.S. tax after applying exclusions and credits. But the filing obligations remain - and the penalties for noncompliance can be severe.

So if Pope Prevost retained his U.S. citizenship after taking office, he’s likely still required to file. Even if he lives in a tax-free country. Even if he earns no personal salary. Even if he’s, well… the Pope.

What Might the Pope’s Finances Look Like?

While official details are scarce, it’s widely understood that Popes do not receive a traditional salary. Instead, their needs - housing, food, transportation, security - are fully covered by the Vatican. This arrangement is more akin to lifelong religious service than formal employment.

That said, there are precedents for Popes receiving personal income. Pope Benedict XVI reportedly earned royalties from book sales, even after his resignation. If Pope Prevost were to publish theological works or writings and receive royalties directly - especially if published by a U.S. firm - those payments could be considered earned income for U.S. tax purposes.

There’s no public indication that a sitting Pope has ever received personal compensation for speaking engagements, so we’ll keep that hypothetical off the main stage for now. But it’s not hard to imagine a scenario where the line between personal income and institutional representation becomes blurry.

It’s also possible that Pope Prevost has signature authority over foreign accounts through his position, such as accounts at the Vatican Bank (IOR). That would trigger filing requirements like the FBAR (FinCEN 114) and FATCA Form 8938, even if the funds are not legally his.

Finally, any charitable giving the Pope might do personally would have to be examined through the lens of U.S. tax law. Donations to foreign charities, including Vatican-based causes, generally aren’t deductible on a U.S. return unless made through IRS-recognized 501(c)(3) entities - like U.S.-based dioceses or missions.

Foreign Earned Income Exclusion (FEIE)

One of the more useful provisions for Americans abroad is the Foreign Earned Income Exclusion under IRC §911. This rule allows qualifying taxpayers to exclude up to ~$126,500 (2024) of foreign earned income if they:

• Have a tax home in a foreign country, and
• Meet either the bona fide residence test (based on long-term residence) or the physical presence test (330+ days abroad in a 12-month period).

Vatican City qualifies as a foreign country under this rule. So if Pope Prevost had personal income - say, from book royalties or other services performed abroad - he could potentially claim the exclusion, assuming all other requirements are met.

But since he likely has little or no earned income of his own, the benefit of this exclusion may be purely theoretical in his case.

Housing and Clergy-Related Exemptions

Under IRC §107, ministers of the gospel may exclude housing allowances from taxable income. This provision is primarily used by pastors and clergy in the U.S. who receive designated allowances from their congregations.

While the Pope certainly receives housing - he lives in Vatican-provided residences and incurs no out-of-pocket housing expenses - it’s unlikely that these benefits meet the formal designation and documentation requirements of §107. Still, it raises an interesting gray area: when your "employer" is a sovereign nation and your role is both spiritual and diplomatic, how do you define a housing allowance?

U.S.-Italy Tax Treaty

Because the Vatican is a separate sovereign state, the U.S.-Italy tax treaty doesn’t apply to the Pope’s situation. Any income sourced in Vatican City or earned through its institutions receives no special treatment or exemption under U.S. treaty law.

That means the default U.S. rules apply - worldwide taxation, reporting requirements, and all.

Diplomatic or Sovereign Immunity

Could the Pope claim diplomatic immunity from U.S. taxes? Possibly - but only under limited circumstances. The U.S. does exempt certain foreign heads of state from taxation under international law, especially when coordinated through the State Department.

However, that exemption usually applies to non-U.S. citizens serving as foreign leaders. If Pope Prevost is still a U.S. citizen, the IRS is unlikely to waive his filing obligations without formal proceedings. And even if no tax is due, the filing requirements themselves are still technically in force.

Should the Pope Expatriate?

For Americans living abroad with global income and assets, renouncing U.S. citizenship is sometimes considered a clean way to exit the U.S. tax system. But there are consequences - most notably, the Exit Tax under IRC §877A.

A U.S. citizen who gives up their passport may be classified as a covered expatriate if they:

• Have a net worth of $2 million or more,
• Averaged U.S. tax liability above ~$200,000/year for the past five years, or
• Cannot certify full tax compliance for the five years prior to renunciation.

Covered expatriates must file Form 8854 and may owe tax on the unrealized gains of their worldwide assets as if they were sold the day before expatriation. There’s an exclusion threshold (~$850,000 in 2025), but anything above that is taxable.

In Pope Prevost’s case, there’s little indication that he has substantial personal assets. His living expenses are covered, his income is likely minimal, and he may not meet any of the thresholds for being a covered expatriate.

So should the Pope expatriate? My recommendation: absolutely not. The complexity of his situation doesn’t justify the drastic and symbolic act of cutting ties with his native country. If anything, retaining U.S. citizenship adds to his unique global identity - a spiritual leader who bridges continents, cultures, and now… tax codes.

And if he ever wants to chat about Form 8938 thresholds or whether his Apostolic apartment qualifies under IRC §107, I’d be more than happy to advise His Holiness directly. Just have his people call my people. Preferably before April 15th.