UPDATE 2: Here is a good overview and guide to the clergy housing allowance.
UPDATE: Family Research Council President Tony Perkins said that this judgment is against the Constitution.
“We have seen many courts over the years attempt to banish God in various ways from the public square, but this case in particular reveals a level of supreme arrogance,” Perkins said in a statement. “Once again, Judge Crabb has neglected to consult the Constitution that she was sworn to uphold.”
Perkins went on to say that this is another example of “banishing God from the public square.”
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On Friday, a federal judge ruled that the tax exemption which gives clergy the ability to write off housing expenses from their federal taxes is unconstitutional. According to a report from Religious News Service,
U.S. District Court Judge Barbara Crabb ruled on Friday (Nov. 22) in favor of the Freedom From Religion Foundation, saying the exemption violates the establishment clause because it “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.”
The housing allowances of pastors in Wisconsin, where the ruling was made, remain currently unaffected as the ruling has been stayed by the judge until appeals are exhausted.
The court’s ruling says that the tax exemption for housing violates the establishment cause because it grants a special privilege to clergy and thus amounts to preferential treatment for religion. It warns that such treatment could easily be turned on its head: “…if the government were free to grant discriminatory tax exemptions in favor of religion, then it would be free to impose discriminatory taxes against religion as well.”
The RNS article notes that Rick Warren of Saddleback Church was engaged in a dispute with the IRS for ten years over a charge that he owed back taxes related to his housing. Pastor Warren won the case, and rules for the clergy housing allowance were clarified as a result of the decision.
Though I am not now enjoying this tax exemption, I did for many years, and may one day qualify for it again. The way it works is this:
- In advance, a church board can designate a portion of their ordained pastor’s salary as housing allowance.
- “Housing” includes anything spent to provide, furnish and maintain a house. If the church furnishes a parsonage, then the fair rental value of the house is to be considered when calculating housing costs.
- If the pastor makes $50,000, for example, and the board designates $20,000 of that to cover the minister’s housing expenses, then the pastor pays federal income taxes on $30,000 if he or she spends the full 20K on housing expenses. If $18,000 is spent, then the pastor would be responsible for paying taxes on $32,000.
- The housing allowance portion of the minister’s salary is exempt from federal income taxes, but not from social security taxes (unless he or she has opted out of the program for religious reasons). So, when figuring his or her social security tax responsibility, it must be calculated on the entire $50,000.
The opinion of the court regarding this benefit was clearly stated:
Although it is undoubtedly true that taxes impose a burden on ministers, the same is true for all taxpayers. Defendants do not identify any reason why 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. In any event, the Supreme Court has rejected the view that the mere payment of a generally applicable tax may qualify as a substantial burden on free exercise.
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