A tightly focused petition has cleared the first hurdle on the White House We The People site. The petition calls for the repeal of Section 107 of the Internal Revenue Code. Section 107 provides that housing or a cash allowance in lieu of housing received by “ministers of the gospel” is excluded from taxable income. The Freedom From Religion Foundation has a challenge to the constitutionality of the housing allowance. If you are, like me, not much of a constitutional purist, you might find the most disturbing thing about the housing allowance the fact that, unlike the similar military benefit, there is no dollar limit to the clergy housing allowance. The Reverend William Thornton, who has modestly benefited from the allowance, states the problem quite eloquently:
Someone make the case that Joe Sixpack has to pay taxes on his income and doesn’t get any exclusion for his singlewide complete with a deck and a mangy dog sleeping under it, while Kenneth and Gloria Copeland live in an 18,280 square-foot lakefront parsonage on 25 acres valued at $6.2 million and exclude hundreds of thousands of dollars from income taxes under the housing allowance.
Evangelicals And The Housing Allowance
Reverend Thornton is a Southern Baptist, which is probably the denomination with the most at stake in the controversy. It is the second largest denomination in terms of number of members but by far the largest in terms of clergy serving congregations and number of churches. Thus it has many small congregations where a couple of thousand bucks to the preacher could make a big difference in viability. Southern Baptists also have a goodly share of the mega-churches, where out-sized housing allowances might seem a bit scandalous to some. There is a problem about the housing allowance that Southern Baptists might not have, though.
A friend of mine, a fellow CPA, is a very devout evangelical Christian. We have a great time with one another while the other guys are talking about how the Patriots are doing. When I talk to him about the clergy housing allowance being not such a hot idea, he explains to me why it is not problem. Society should be supporting those godly men. We are a Christian country after all. We then move onto me asking me why Christians are so enthusiastic about Ayn Rand, while everybody else shifts to the Red Sox and the Celtics.
What About Religious Liberals
Religious liberals can be political conservatives, but it is not all that common. The Reverend Thomas Schade, a Unitarian Universalist minister, recently suggested that there may be a fundamental inconsistency between the two:
I am asking that conservative UU’s “show their work.” How did they get from liberal religion to political conservativism?
I’ll be blunt. I don’t think that they can. I think that there are two separate compartments in their minds — the religious and the political. They don’t leak into each other. It’s easy to be loyal to both. But there is this discomfort. I am saying that that discomfort will not go away easily. It’s a spiritual dilemma for them.
UU ministers qualify for tax free housing allowances even though, theologically speaking, they might not, strictly speaking, be thought to be “ministers of the gospel”. “Minsters of the gospels, etc” might fit a little better. The UUA is enthusiastic about the housing allowance:
The clergy housing allowance exclusion is the most important tax benefit available to ministers and to retired ministers.
As a CPA, who has been on a UU governing board, I’m pretty enthusiastic about it too, but I have very low expectations of taxes being fair and reasonable. It is what it is. Deal with it. When I put on my religious liberal hat, I have a pretty hard time justifying it. I’m going to make up a UU minister to talk to.
According to UUA fair compensation standards, which admittedly may have a fantasy island aspect to them, the minster of a very large UU church should be making about $150,000 per year. Here is my question for her. Your governing board has designated $40,000 of your package as housing allowance. In your congregation there is a self-employed psychiatrist netting $150,000. What are the spiritual principles that explain why you should pay about $10,000 less in federal income taxes than your psychiatrist parishioner ?
I Have A Dream
I’d really like to see a group of UU ministers, Episcopal priests and Reform rabbis come out against the special tax treatment that is just for the clergy. In my dream, they will end up being embarrassed, because their congregations will spontaneously raise their packages so that they are in the same position after tax. Probably to some extent the housing allowance exclusion is more of a subsidy to congregations than the ministers, although maybe the proportions vary. If you are all for closing loopholes, shouldn’t you start with your own ?
You can follow me on twitter @peterreillycpa.
Afternote:
As we wait to see whether the Obama administration will take a stand on this issue, it is worth remembering that at least one of the 2012 presidential candidates did come out against Code Section 107.
Originally published on Forbes.com Jan 5th, 2013