Originally published on Forbes.com Mar 2, 2014
Dave Camp’s tax plan includes several housing-related provisions. The limit on principal residence acquisition indebtedness would be scaled back to $500,000 from $1,000,000, interest on home equity indebtedness and real estate taxes would no longer be deductible. More obscurely, a limit would be placed on the amount of income that can be excluded under Code Section 119. Code Section 119 provides for the exclusion from gross income of the value of lodging that an employee is required to accept on the business premises of the employer as a condition of employment. The Joint Committee on Taxation explains the limitation this way:
Under the provision, the exclusion for housing provided for the convenience of the employer and for employees of educational institutions would be limited to $50,000 ($25,000 for a married individual filing a joint return). The exclusion also would be limited to one residence. The provision would be effective for tax years beginning after 2014.
JCT estimate: According to JCT, the provision would increase revenues by less than $50 million over 2014-2023.
What is intriguing about this reform is that there is an even more generous exclusion targeted to one particular profession. That would be Code Section 107 which provides an exclusion for housing provided to “ministers of the gospel” and what is even better cash allowances for housing when it is not provided in-kind. The latter provision is currently under constitutional challenge by the Freedom From Religion Foundation. FFRF has won the first round in District Court.
The interesting question, for which I do not have an answer, is why Dave Camp targeted Section 119 for limitation and ignored Code Section 107. According to Wikipedia, Dave Camp is a Roman Catholic, one denomination that does not appear to have a dog in this fight. As this investigative report by Stuart Watson of WCNC shows clergy in other denominations have some pretty stupendous residences.
Note the handsome CPA, Mr. Watson interviewed. That is his maiden appearance on broadcast television.
With all due modesty, I have to say that I think that I have been following the clergy housing allowance issue more intensely than, well, anybody. So it was reasonable for Stuart Watson to interview me on the issue. Mr. Watson became interested in the housing allowance issue through his investigation of Steve Furtick and the Elevation Church.
He reported on Reverend Furtick’s 1.7 Million dollar home. (In some markets, $1.7M would not be all that impressive. If you moved my less than 200k condo in North Oxford MA to Boston or Manhattan, it would probably be worth something like that even not considering the attached garage.) As you can see from the pictures in the report $1.7M buys a lot of house around Charlotte.
As I have been following the parsonage controversy, I have developed something of a brain trust. I reached out to them for comments on Camp’s lack of attention to Code Section 107, while addressing Code Section 119.
Adam Chodrow , a law professor at Arizona State University wrote:
That Congress would put limits on tax-free housing allowed under IRC 119 and not under IRC 107 is simply untenable. Limiting the amount of in-kind, on premises housing that lay persons can receive tax free, while leaving the allowance for clergy unchanged merely highlights and exacerbates the problems with IRC 107. There is no justification whatsoever for allowing cash payments to clergy, as opposed to in-kind housing, to go untaxed.
Reverend Frank Jones, author of Stop The Prosperity Preachers is concerned that the unlimited housing allowance, which can be double-dipped with deductible mortgage interest, and lack of financial transparency attracts the wrong type of people into ministry. He wrote me
This appears to be a step in the right direction, but I wish the limit would also apply to the ministers housing allowance. I also read there is a proposal to reduce the home interest deduction to the first $500,000.00 in value. That too is a step in the right direction.
Robert Baty is a retired IRS appeals officer who has made exposure of the abuse of the clergy housing allowance something of an obsession. If Code Section 107 were a white whale, Bob Baty would be Ahab. He wrote:
Really, is the religious lobby that good to be able to tell Congress and the President to keep their hands off and their mouths shut about it; even in light of Judge Crabb’s decision and the appeal?
I’m not that passionate about it, but just like telling the story. So you can call me Ishmael, but be sure to follow me on twitter @peterreillycpa.
Afternote On My “TV Career”
I started blogging over four years ago. The Stuart Watson interview is the first time that the blog has landed me on TV. I actually had another opportunity in the run-up to the 2012 election. MSNBC wanted to interview me about Romney’s return. That ended up being rather amusing. It was during my brief tenure as a not quite partner in a not quite Big 4 firm. I looked up the policy for such an eventuality and called the appropriate person who then referred me to another person. Both of them discouraged me from going on the show, but would not outright order me not to.
They told me that going on the interview might cause “senior leadership” be displeased with me. That was troubling because I had spent most of my career not worrying too much about aggravating managing partners, who in regional firms tend to be dictators of greater or lesser benevolence. MSNBC said that they would send a car to pick me up, which sounded way cool. I felt though that I was already causing enough aggravation for “local leadership” and didn’t want to make them look bad with “senior leadership”. After all, they were younger than me and still had careers to worry about. I resolved the dilemma by persuading the office managing partner to outright order me not to go on the interview.