Originally Published on forbes.com on August 23rd, 2011
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Laura Saunders has a great piece in the Wall Street Journal about Phil Driscoll, formerly of Blood Sweat and Tears, who now ministers the Gospel with his trumpet playing. After coming home from federal prison for tax evasion, Reverend Driscoll won a victory in tax court establishing that a tax free housingallowance to a “minister of the gospel” can cover multiple homes. Just goes to show you how nimble footed bloggers can be. My own piece on the Driscoll case – Parsonage Exclusion – Shouldn’t Enough be Enough ? was posted in December. I should not be so petty though. Ms. Saunders is an actual reporter. I just read the original cases and comment on them. She has to track down additional information to tell a fuller story.
The Internal Revenue Code excludes from income at least three types of housing benefits. I explained them in my post – Work, Fight or Pray- Vestige of the Medieval in our Tax Code:
When it comes to housing, it would seem that Section 119 is sufficient. If your employer provides you with a place to live, so that you will be near at hand, the value of that place to live is excludible from your gross income. If that place happens to be a room in a hotel for the manager, a rectory or fifteen square feet on a nuclear submarine, the principle is the same. That’s not the way it is, though. The military and the clergy are special.
The clergy and the military have traditionally been provided housing in connection with their employment, so it has evolved that cash payements in lieu of housing have been excluded from taxable income. The military benefitdoes not invite abuse and it strikes me as fairly modest. It varies by rank and region, more so by region. A brigadier general in Washington DC will get less than $3,000 per month in tax-free housing allowance. From a tax complexity viewpoint, there isn’t much to it as it is really clear who is entitled to it.
The clergy housing allowance is an entirely different matter. It raises constitutional issue, although the most recent challenge by the Freedom From Religion Foundation has sputtered out. Unfortunately, it involves the government in determining who is or is not a “minister of the gospel” (The language in the Code dates back a bit. The exclusion does cover rabbis and imams, etc.) It invites abuse. There is no dollar limit at all and if the Driscoll decision is upheld no limit on the number of homes. On the other hand repealing the exclusion would be a blow to small congregations.
My own view is that a fairly simple fix would be to put in a dollar limit in effect. Rev you can buy as many houses as your want but your tax-exempt housing allowance is limited to 4 grand. If that’s good enough for an admiral on Nantucket, it should be good enough for you. I’m not knocking religion here. I really think that the exclusion inviting abuse is bad for religion. How a about a little WWJD here:
Foxes have holes, and birds of the air nests; but the Son of man hath not where to lay his head