On November 22, 2013, Judge Barbara Crabb ruled that Internal Code Section 107(2) which exempts from income tax amounts, designated as housing allowances, paid to "ministers of the gospel" is unconstitutional. Whatever you might think of the decision, you have to give Judge Crabb credit for being a gutsy lady. The decision negatively impacts tens, if not hundreds, of thousands of clergy, some of whom have a great deal of political influence. According to the Joint Committee on Taxation, clergy housing exclusion is a tax expenditure that costs $700,000,000 per year. The Committee does not break that down between in-kind housing (Section 107(1)), which is unaffected by the decision and cash allowances (Section 107(2)) which the decision declares to be unconstitutional as violating the First Amendment establishment clause. Church owned parsonages have gone out of favor in the last several decades, so I would put a fair estimate of the effect of this decision at about half a billion per year.
National media have not been paying very much attention to the controversy about the housing allowance. I have been following it pretty closely and am offering here something of a round-up of my coverage for the last three and a half years. The posts are broken down topically rather than chronologically and include posts from my pre-Forbes blog with the catchy title Passive Activities And Other Oxymorons.
The Controversy
There are two aspects to the controversy about the clergy housing allowance exclusion (often referred to as "parsonage") . The two aspects frequently get confounded. One is whether the exclusion is constitutional and the other is whether it is good tax policy. I actually think that constitutional purists are pretty rare. Activists and advocates tend to use the Constitution like a drunk uses a lamppost, more for support than illumination. When you get into a discussion like this it is useful to remember that something could be a good idea, but unconstitutional or constitutional, but a bad idea.
Work, Fight or Pray – Vestige of the Medieval in Our Tax Code January 12, 2011
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 excludable 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. Since at least historically, housing tended to go with their jobs, monetary allowances paid in lieu of actual housing are exempt from tax.
IRS Veteran Carries Fight Against Clergy Tax Abuse Into Retirement February 18, 2012 Guest Post from Robert Baty, bane of the basketball ministers and my most constant commenter.
Southern Baptist Minister Defends Clergy Tax Benefit February 21, 2012 Guest post from Reverend William Thronton.
Should Jeremy Lin's College Coach Get A Tax Break For Being A Congregationalist? February 22, 2012
Contraception Exception And Mansions For Televangelists – Retired IRS Officer Connects The Dots March 2, 2012 More from Bob Baty.
The Unconstitutionality Of The Parsonage Exemption March 20, 2012 Guest post from Andrew Seidel of the Freedom From Religion Foundation.
Cash Parsonage Allowances – Constitutional But Bad Tax Policy – Law Professor Argues March 25, 2012
In this setting, there are no disentangling alternatives. If religious entities and actors are taxed, they are subjected to the inherently intrusive relationship between the tax collector and the taxpayer. If religious entities and actors are not taxed, there are inevitable tensions policing the boundaries of exemption. The choice between borderline entanglement and enforcement entanglement is inherent in the relationship between the modern state's tax system and contemporary religious institutions and their personnel.
Take Alarm At The First Experiment On Our Liberties March 22, 2012 Another guest post from Andrew Seidel in which he responds to my complaint that FFRF sometimes seems a bit overzealous.
Where Do Romney And Obama Stand On Special Tax Status For Ministers? September 1, 2012
Best Casino Companies To Own For 2014
Southern Baptists Against Clergy Tax Abuse September 2, 2012 (This post is mainly selections from Reverend William Thornton's SBC Plodder)
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.
In Defense Of Special Tax Treatment For Clergy September 6, 2012 Lawyer/CPA Frank Sommerville gave me a guest post where he defends the constitutionality of Code Section 107
Jill Stein Lining Up With Freedom From Religion Foundation On Parsonage Exclusion? October 9, 2012
In my interview with Green Party Presidential Candidate Jill Stein, I only asked her one tax question that was not covered in the Green Party Platform. The question concerned the parsonage exclusion, Code Section 107.
Retired IRS Officer Launches Petition Against Clergy Tax Benefit December 26, 2012
Will Liberal Ministers Challenge Their Own Tax Loophole? January 5, 2013
Pastor Loses Parsonage Exclusion To Poor Planning - July 31, 2013
Should Humanist Groups Seek Church Status? October 1, 2013
Harvard University recognizes Greg Epstein as a chaplain. He is ordained as a rabbi. Yet he does not get part of his salary as tax-free housing allowance.
A Mighty Trumpet And Some Big Bucks
Phil Driscoll, formerly of Blood Sweat and Tears and for a while a beneficiary of tax-free federal housing courtesy of the Bureau of Prisons, had a ministry that looked more like a record label. His litigation was over the question as to whether a housing allowance could be used for more than one home. At issue was over $400,000 in exclusion for the years 1996-1999. Driscoll won in Tax Court, but the IRS won on appeal.
Parsonage Exclusion – Shouldn't Enough be Enough? December 19, 2010
Blowing My Own Horn January 4, 2011
No comments:
Post a Comment