[Vision2020] Clergy and tax breaks

Rosemary Huskey donaldrose at cpcinternet.com
Sun Nov 24 08:14:25 PST 2013

This will help to bring tax equity to those of us who aren't interested in
providing tax relief for every crackpot who calls him/herself a minister.
I'm betting that there are several local examples -

Rose Huskey

Judge strikes down law that gives clergy members tax-free housing allowances


A federal judge has found unconstitutional a law that lets clergy members
avoid paying income taxes on compensation that is designated part of a
housing allowance.

The decision
Friday by U.S. District Judge Barbara Crabb could have far-reaching
financial ramifications for pastors, who currently can use the untaxed
income to pay rental housing costs or the costs of home ownership, including
mortgage payments and property taxes.

"It's a really big deal," said Annie Laurie Gaylor, co-president of the
Madison-based Freedom From Religion Foundation, which filed the lawsuit. "A
church currently could pay a minister $50,000 but designate $20,000 of it a
housing allowance so that only $30,000 would be taxed as salary."

Crabb acknowledged in her decision that the exemption is a boon to
ministers, referencing a 2002 statement by then-U.S. Rep. Jim Ramstad of
Minnesota that the tax exemption would save clergy members $2.3 billion in
taxes from 2002-2007. But she said the magnitude of the benefit only
underscores what's wrong with the law.

The exemption "provides a benefit to religious persons and no one else, even
though doing so is not necessary to alleviate a special burden on religious
exercise," Crabb wrote.

The defendants in the case are U.S. Treasury Secretary Jacob Lew and acting
IRS commissioner Daniel Werfel. Attempts to reach those agencies late Friday
were unsuccessful.

Crabb said the defendants did not identify a reason that a requirement on
ministers to pay taxes on a housing allowance is more burdensome for them
than for the many millions of others who must pay taxes on income used for
housing expenses.

Gaylor called the lawsuit "a sleeper," saying it has received little media
attention and may not be widely known by religious organizations. That will
no doubt change with this win, she said. Given the dollar figures at stake,
she expects clergy members to pressure the White House to appeal the
decision to the 7th U.S. Circuit Court of Appeals in Chicago.

"Once the clergy get wind of it, I expect they will be very upset," she

Crabb is a judge in the U.S. District Court for the Western District of

The law, passed by Congress in 1954, allows a clergy member to use the
untaxed income to purchase a home, and then, in a practice known as "double
dipping," deduct interest paid on the mortgage and property taxes, the
foundation said.

"The court's decision does not evince hostility to religion - nor should it
even seem controversial," foundation attorney Richard L. Bolton said in a
statement. "The court has simply recognized the reality that a tax-free
housing allowance available only to ministers is a significant benefit from
the government unconstitutionally provided on the basis of religion."

Clergy may exempt from taxable income up to the fair market rental value of
their home, a measure particularly helpful to well-heeled pastors, Gaylor

"When you're dealing with some of these mega-church pastors with huge
mansions, they can be paid an enormous amount in housing allowances," she

On its website, GuideStone, a Christian financial services provider based in
Dallas, calls the housing allowance "the most important tax benefit
available to ministers."

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