The clergy housing allowance, that magnificent tax break provided by Uncle Sam to ordained ministers which allows them to exclude from income taxes a sizable chunk of their clergy income, is under scrutiny. Nothing new here. Among the many lawsuits the Freedom From Religion Foundation keeps juggling is one that seeks to have the cash clergy housing allowance unconstitutional. The FFRF website describes their suit thusly,
FFRF is asking the court to rule the provision unconstitutional because it provides preferential and discriminatory tax benefits to ministers of the gospel. The section “directly benefits ministers and churches, most significantly by lowering a minister’s tax burden, while discriminating against the individual plaintiffs, who as the leaders of a nonreligious organization opposed to governmental endorsements of religion are denied the same benefit.” Clergy are permitted to use the housing allowance not just for rent or mortgage, but for home improvements, including maintenance, home improvements and repairs, dishwashers, cable TV and phone fees, paint, towels, bedding, home décor, even personal computers and bank fees. They may be exempt from taxable income up to the fair market rental value of their home, particularly helping well-heeled pastors.
The FFRF won a federal district court judgment a couple of years ago but it was overturned on appeal because the plaintiffs (couple of FFRF employees) lacked standing. They think they have this point addressed. I’m told that we can look for a ruling this Summer. Perhaps the court will time it with the SBC annual meeting in June for maximum weeping and gnashing of teeth.
A weighty paper by Professor Adam Chodorow of Arizona State University is arguing that the allowance is unconstitutional. I’ve read the 57 page paper, “The Parsonage Exemption,” but then I am retired and have time for such things. I prefer the summary article by my CPA friend from north of the Mason-Dixon Line, Peter Reilly, who has taken an interest in the housing allowance. Why should a busy semi-retired pastor do the heavy lifting when someone as astute as Peter is willing to do it? He quotes the Professor,
Placing the parsonage exemption in its proper tax context makes clear that (1) other tax-free housing provisions and exemptions for religious organizations cannot provide the parsonage exemption constitutional cover; (2) the parsonage exemption involves significantly more entanglement than would the generally applicable housing provision; (3) permitting ministers to receive taxfree housing violates the core tax principles of horizontal and vertical equity; and (4) other exemptions for religious organizations cannot justify the parsonage exemption.
To the average Southern Baptist pastor or staff member (or professor, or Christian school basketball coach, or teacher, ordained of course) all these arguments are more impenetrable than the smattering of Koine Greek that most of us know and more like Hebrew which reads backwards and doesn’t use regular letters. We will be spectators on the matter, although we expect our lobbying arm, the Ethics and Religious Liberty Commission, to speak up for us and file a heavy amicus on the case.
I’ve discussed this matter enough to know that my clergy brethren like to appeal to a couple of justifications for taking part of their salary in cash and being able to spend that, income tax free courtesy of our wonderful government, on living in their owned or rented domicile.
- I deserve a housing allowance for my home just like ministers who are required to live in church-owned parsonages because I am expected to entertain church folks, have receptions, and maybe hold prayer meetings at my home. Sorry, this is about as asthenic an argument as can be advanced. (I alliterate out of respect for my brethren who think this way).
- I deserve a housing allowance because I have to pay self-employment taxes, all of it, on my entire salary and the housing allowance. Woe is us on this point. But this is irrelevant to the constitutionality of the cash housing allowance.
- It’s a small tax break. I need it. This might be the best argument.
There are some messy, confusing, conflicting church-state issues. This is one that would both stink and sting if it is ruled unconstitutional.
We may just have to trust the Lord no matter what.
The photo is Dave Miller’s house. He can exclude from income tax up to the fair rental value of the house, furnished, with utilities…if the church pays him that much.