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The intersection of taxes and religion has been one of the major features of this blog.  The controversy over the parsonage exclusion has been the big story there, but there is more.

One of my long running story arcs has been the controversy over the constitutionality of Code Section 107(2) and the tax policy problems it creates.  Here is 107 in its entirety

26 U.S. Code § 107 – Rental value of parsonages

In the case of a minister of the gospel, gross income does not include—

(1)the rental value of a home furnished to him as part of his compensation; or
(2)the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.

In the classic case of the parsonage next door to the church, where the minister is required to live, 107(1) seems to duplicate Section 119 – Meals or lodging furnished for the convenience of the employer.  There were religious liberty concerns about the level of scrutiny that might be required in applying 119 to a church so a broader exemption was created.  This was in the twenties which you might infer from the non-inclusive language. The cash exclusion came into effect in the fifties

For now the constitutional issue is settled.  The Seventh Circuit ruled that 107(2) is constitutional and the Freedom From Religion Foundation decided not to take the case any higher. Here is a roundup of my coverage of the issue.

Parsonage: Religious Liberty Smuggles Sex Discrimination Into Tax Law – March 20, 2019

Discrepancy or Discrimination? Doesn’t matter – March 18, 2019

Seventh Circuit Blesses Tax Free Housing Payments To Clergy – March 15, 2019

Parsonage Showdown In Seventh Circuit This Week – October 27, 2018

Law Professors Argue That Housing Tax Break For Ministers Is Unconstitutional – July 24, 2018

A Christian Not An Atheist Sparked Lawsuit On Clergy Tax-Free Housing Allowances – May 18, 2018

Religious Organizations Rally To Preserve Favorable Tax Treatment Of Clergy Housing Allowances – May 6, 2018

‘God And The IRS’ Stakes Out Controversial Positions On Religion And Taxes – April 30, 2018

God And The IRS – And Kent Hovind! – April 20, 2018

Appeals Filed On Ruling That Exemption Of Clergy Housing Allowances Is Unconstitutional – February 16, 2018

Clergy Housing Tax Exemption The Times Square Of Religion And Taxation – October 15, 2017

Clergy Housing Tax Break Ruled Unconstitutional – Again – October 7, 2017

‘Taxing The Church’: Can’t Build That Wall Of Separation – September 27, 2017

Clergy Housing Tax Break Seen As Unconstitutional – February 10, 2017

Argument For The Constitutionality Of The Parsonage Exclusion – February 10, 2017

President Trump Exaggerates Limits On Clergy Speech At Prayer Breakfast – February 5, 2017

Decision On Clergy Housing Tax Benefit Coming This Summer – January 31, 2017

Pastor Calls For Church Transparency With IRS Form 990 – January 14, 2017

Becket Fund Helps Clergy Intervene In Parsonage Lawsuit – December 15, 2016

IRS Denies Exempt Status To Christian Coffee Shop – November 26, 2016

Freedom From Religion Foundation Has Clear Path To Challenge Clergy Housing Tax Break – September 2, 2016

The Atlantic Sensationalizes Religious Property Tax Case – May 12, 2016

Radio Station Considered House of Public Worship For Ohio Property Tax – May 12, 2016

Freedom From Religion Foundation Attacking Clergy Housing Tax Benefit Again – April 8, 2016

Sending IRS Against Phony Churches Is Bringing A Knife To A Gun Fight – August 24, 2015

John Oliver Should Not Blame IRS For Televangelist Tax Abuse – August 23, 2015

Church Attendance Held Against Under Armour Exec In Tax Domicile Case – August 13, 2015

Will IRS Force Gay Marriage On Conservative Churches? – July 9, 2015

Campaigning For Bishopric Not A Valid Exempt Purpose – Kent Hovind Update – June 17, 2015

Limits Of Hobby Lobby – Priests For Life Denied Rehearing On Contraception Mandate – May 27, 2015

Religious Arbitration Clause Does Not Hurt Million Plus Gift Tax Exclusion – May 11, 2015

Islamic Teaching On Usury Kills Property Tax Exemption In Tennessee –  February 16, 2015

Thespians And Pagans Fight Assessors In New York Court – November 26, 2014

Clergy Housing Tax Break Withstands Challenge – Atheist Group Lacks Standing – November 13, 2014

IRS Promises To Target Churches – Eventually – July 23, 2014

Military Housing Allowance Much More Limited Than Clergy’s – June 30, 2014

Freedom From Religion Foundation On Clergy Housing Income Tax Break – June 4, 2014

Church 501(c)(3) Status Is A Good Deal – Do Not Ruin It With Corporation Sole – May 23, 2014

American Atheists Denied Standing To Challenge Church Tax Breaks – May 22, 2014

Inaugural Guest Post – Robert Baty On Presuppositionalism – May 22, 2014

Did Clergy Lobby Get To Dave Camp? No Limit Proposed On The Mega Housing Allowances Of The Mega Pastors – March 2, 2014

Pilot To Black Panther To Pastor Calls For Financial Transparency In Churches – February 11, 2014

Benefit Of Clergy – Why Special Tax Treatment For Ministers Needs To Go – February 9, 2014

Obama Administration Weak On Church State Separation? Clergy Housing Allowance Appeal – January 25, 2014

Kind Christmas Wishes To Those Behind Bars And The Tax Collectors Too – December 25, 2013

How To Tax Kody Brown And The Sister Wives And Other Polygamous Families? – December 17, 2013

Catskill NY Pagan Phryganium Exempt From Real Estate Taxes – December 11, 2013

Do We Need A Clergy Tax Simplification Act Of 2014? – December 1, 2013

Southern Baptist Leadership Unconcerned About Clergy Abuse Of Tax Break For Housing – November 27, 2013

Judge Declares Tax Exclusion For Clergy Housing Payments Unconstitutional – November 23, 2013

Historian Views Kennedy Assassination As Climax Of American Catholic History – November 22, 2013

Freedom From Religion Foundation Demands Financial Transparency From Churches – September 7, 2013

Open Atheists Already Collect Tax-Free Clergy Housing Allowances – August 26, 2013

Group Claiming To Teach True Meaning Of Islam Denied Exempt Status – August 21, 2013

Government Lawyers Advocate For Atheism As A Religion – August 18, 2013

Did Scientology Critic Get Turned Down By IRS For Church Status? – August 2, 2013

Pastor Loses Parsonage Exclusion To Poor Planning – July 31, 2013

Megachurch Denied Property Tax Exemption For Gym And Bookstore/Cafe – April 10, 2013

Tax Court Does Not Buy Vow of Poverty of Prophetess – March 27, 2013

No Fans Of Sister Wives At The IRS ? – March 12, 2013

Render Unto Caesar – Mormon Tithe Not A Necessary Expense In IRS Collection Case – March 8, 2013

Maryland Exempts Residence For Mormon Temple Workers As “Convent” – February 7, 2013

Will Liberal Ministers Challenge Their Own Tax Loophole ? – January 5, 2013

Retired IRS Officer Launches Petition Against Clergy Tax Benefit – December 26, 2012

Evangelicals And Corporation Sole – Not A Marriage Made In Heaven – November 2, 2012

Jill Stein Lining Up With Freedom From Religion Foundation On Parsonage Exclusion ? – October 9, 2012

Phil Driscoll To Supreme Court – Enough Not Enough – September 7, 2012

In Defense Of Special Tax Treatment For Clergy – September 6, 2012

Southern Baptists Against Clergy Tax Abuse – September 2, 2012

Challenge To Clergy Tax Break Gets Green Light — Next Stop, Scientology? – August 30, 2012

Did Mormons Benefit From The IRS Scientology Deal ? – August 12, 2012

Chief Apostle Bishop Corletta Vaughn Still Liable For Ministry Payroll Taxes – August 1, 2012

Is Independent Scientology The Key To Unlock The Church Of Scientology’s Secret Agreement With The IRS? – July 26, 2012

That’s How They Got Al Capone But Scientology Maybe Not – July 22, 2012

IRS Veteran Weighs In On Deduction For Scientology Auditing In Secret 1993 Agreement – July 19, 2012

Should Scientology Entities Be Recognized As Exempt Organizations? – Part 1 – July 17, 2012

Don’t Use 501(c) Status As A Hallmark Of Credibility – July 15, 2012

IRS Scientology “Thirty Years War” – Village Voice Legal Expert Argues “Treaty” Is Unconstitutional – July 14, 2012

If Katie Holmes Has A Problem With Scientology – So Did IRS Until 1993 – July 11, 2012

Pennsylvania Court Denies Property Tax Exemption To Another Religious Camp – June 16, 2012

Cash Parsonage Allowances – Constitutional But Bad Tax Policy – Law Professor Argues – March 25, 2012

Take Alarm At The First Experiment On Our Liberties – March 22, 2012

Catholic Church As Bulwark Of Religious Liberty ? What Would Pius IX Say ? – March 22, 2012

The Unconstitutionality of the Parsonage Exemption – March 20, 2012

Obamacare Contraception and the Bishops – Extremes Converge – March 20, 2012

Would Obama Force Jesus to Hand Out Birth Control Pills ? – March 11, 2012

Contraception Exception and Mansions for Televangelists – Retired IRS Officer Connects the Dots – March 2, 2012

Should Jeremy Lin’s College Coach Get a Tax Break for Being a Congregationalist ? – February 22, 2012

Southern Baptist Minister Defends Clergy Tax Benefit – February 21, 2012

IRS Veteran Carries Fight Against Clergy Tax Abuse into Retirement – February 18, 2012

Court Stomps on Clergy Tax Abuse – February 15, 2012

“Occupy Cabrini” Does Not Spare Boston Archdiocese from Property Taxes – January 8, 2012

Bishop Corletta Vaughn, Chief Apostle, Held Personally Responsible for Ministry’s Payroll Withholding – October 27, 2011

Wall Street Journal Catches Up With Me on Clergy Tax Abuse – August 23, 2011

Suit Against Parsonage Exclusion Dropped – July 5, 2011

Work Fight or Pray – Vestige of the Medieval in Our Tax Code – January 12, 2011

Blowing My Own Horn – January 4, 2011

Parsonage Exclusion – Shouldn’t Enough be Enough? – December 19, 2010

Threat to Parsonage Exclusion – July 29, 2010

—————————————————————————————————————————————————————–

Originally published on Forbes.com.

For great value continuing professional education.  I recommend the Boston Tax Institute

You can register on-line or reach them by phone (561) 268-2269 or email vc@bostontaxinstitute.com.  Mention Your Tax Matters Partner if you contact them.


For articles oriented toward tax professionals check out Think Outside The Tax Box.