Originally published on Forbes.com.
The battle over clergy housing allowances (Code Section 107(2)) entered the next stage last week. The United States and intervenors represented by the Becket Fund have filed appeals in the Seventh Circuit challenging Judge Barbara Crabb’s October ruling that tax exemption of cash housing allowances to “ministers of the gospel” violates the Establishment Clause of the First Amendment.
Thus, any reasonable observer would conclude that the purpose and effect of § 107(2) is to provide financial assistance to one group of religious employees without any consideration to the secular employees who are similarly situated to ministers. Under current law, thattype of provision violates the establishment clause.
And In The Court Of Public Opinion
The Becket Fund supplemented its notice of appeal with some public relations outreach and actually you can learn pretty much everything you conceivably want to know about the controversy by considering what is wrong about Becket’s presentation beginning with the title – The $1 Billion Threat to Churches.
I asked Ryan Colby where the billion came from and he sent me to the Joint Committee on Taxation’s Estimates of Federal Tax Expenditures. On Page 37, you will find “Exclusion of housing allowances for ministers” scored at 0.8 billion. I get that they round it up to the nearest billion. I mean what is $200 million between friends, but there is another problem.
That score is for both in-kind housing and cash allowances. Exemption for in-kind housing (Code Section 107(1)) is not being challenged making the stakes more like half a billion, which leads to some other issues with their video. Stop at 1:15 if you want to follow along.
That is where the video tells us about the housing allowance being something that benefits business leaders, teachers, military service members, and pastors. It almost makes me want to break out Sesame Street, but keep in mind we are talking about the tax law here.
What is different about the pastors? The cash housing allowance for “ministers of the gospel” has no dollar limits, like the military, and no convenience of the employer requirement like the in-kind benefit that private businesses can offer to employees who are required to live on-site.
Becket has chosen to focus on poster boy pastors who are heavily engaged in community service implying that they could not live in the neighborhood without the tax exclusion. Not televangelists or the mega-pastors or mega-churches who can and do get tax free housing allowances in the hundred of thousands. Nothing will prevent struggling inner-city parishes from renting apartments for their pastors to live in and have that excluded under 107(1) if Judge Crabb’s decision stands.
I’m not sure what Becket is up to. Maybe it is fundraising. Becket is a pretty substantial organization with revenue over $6 million. It has some deep-pocket donors as you can tell from looking at its public support percentage of 64.25%. Freedom From Religion Foundation, the atheists referred to in the video, is in the same league with just short of $4 million in revenue. FFRF is less dependent on the deep pockets with its public support percentage just a hair below 90%.
I reached out to my parsonage brain trust for reactions to the Becket package.
Bane Of The Basketball Ministers
First up is retired IRS appeals officer Robert Baty, Kent Hovind’s worst nightmare and bane of the basketball ministers. Bob included something on the Becket release on his website – Kent Hovind v. Robert Baty – The Great Debates! He uses the measured title – “Is Luke Goodrich of Becket Lying?”
In a brief article today, February 12, 2018, One News Now reported that Becket’s Luke Goodrich made the following statement:
“This law applies not just to ministers but to lots of other professionals, and this lawsuit is an attack by an atheist group trying to take away housing allowances only for ministers.”
I believe that statement to be false; a lie if you will.
I figure anyone familiar with the law, as Mr. Goodrich should be, should know that, in fact, IRC 107 ONLY applies to “ministers” and that everyone else has to comply with more restrictive tax benefits allowed for housing without regard to the invocation of “minister” status.
Here is the piece by Chris Woodward that Bob is referring to. Be sure to check out the comments section.
A Clergy View
Reverend William Thornton, a modest beneficiary of the housing allowance, who blogs about its abuse wrote me:
Some of my colleagues explain the cash HA as enabling them to live on the field, as if every other worker has no need to live near their workplace. While most churches expect their ministers to live on the church field, I don’t think it is a strong argument that the state should step in to assist in high cost areas. But, I still like the tax break and hope the outcome is positive for clergy.
The Professors
Samuel Brunson, Professor of Law at Loyola University of Chicago wrote:
Beckett’s description of the parsonage allowance is confounding. By lowering the after-tax cost of housing, it actually makes it easier for pastors who serve in underserved neighborhoods to live outside of their communities, assuming that the underserved communities are cheaper than outlying areas. It does make it easier for pastors who serve wealthy communities to afford to live in the communities in which they serve.
And I have no idea what Beckett means by invoking teachers and police. They do not qualify for tax-free housing or tax-free housing allowances; invoking them underscores the unfairness of allowing tax-free housing for pastors while denying it to other professions that are also undercompensated.
Professor Adan Chodorow of Arizona State University wrote:
The tax code allows those, including ministers, who are required to live on-site so that they can perform their jobs to exclude the value of such housing from income. The parsonage exemption affords ministers-and ministers alone-tax-free housing under all circumstances , even when they receive cash allowances. Eliminating this special benefit would not discriminate against ministers, as The Beckett Fund claims. To the contrary, it would ensure that they were treated like everyone else. No one disputes that clergy often engage in valuable work. However, the question in this lawsuit is whether the Constitution permits the government to support them in form of a tax-free cash allowance for housing.
As usual, the award for the most nuanced answer goes to Professor Edward Zelinsky of Yeshiva University, author of Taxing The Church: Religious Exemption Entanglement and the Constitution:
Much of the discussion of the parsonage allowance conflates the issue of constitutionality with questions of policy.Opponents of the parsonage allowance exclusion often point to (quite real) abuses of that provision and suggest that such abuses indicate that the exclusion must be unconstitutional. Conversely, proponents often make the argument that the exclusion serves useful purposes and therefore must be constitutional.
Neither of these perspectives is ultimately persuasive. Decisions like Walz indicate that the parsonage allowance is constitutional since the government can make reasonable accommodations to prevent excessive entanglement of government with church and church personnel. Conventional tax policy criteria suggest that it is not wise to exclude from clerical gross incomes cash parsonage allowances. Hence, a truth which dissatisfies many of the partisans on this topic: Section 107, which creates the parsonage allowance exclusion, is constitutional but not good tax policy.
I would observe that the new tax law reenforces this conclusion. Many of the lowest paid clergy won’t pay tax anyway because of the expanded standard deduction of the new law. Hence, even if they must report housing allowances as income, they won’t pay income tax because of the higher standard deduction of the new law.
Activists and advocates tend to use the Constitution like a drunk uses a lamppost – more for support than illumination. Unsatisfying as it may be, I think I like Professor Zelinsky’s answer best. Congress should fix the parsonage exclusion. It is bad tax policy. Also, churches should not invest their dwindling moral capital in defending a special tax break that most helps the wealthiest among them.
Other Coverage
Managing Your Church ran with the Becket release pretty uncritically.
Michael Gryboski of The Christian Post gave a more balanced treatment as did Jardine Malado of The Christian Times.
Trackbacks/Pingbacks