Federal judge: Clergy housing tax breaks unconstitutional

download (2)A federal judge has ruled that an IRS ruling that gives clergy tax-free housing allowances is unconstitutional.

U.S. District Judge Barbara B. Crabb, who made the ruling last week, said the tax exemption:

provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.

You can read more here. As Sharon pointed out (and as wasn’t reflected in the original post), and as written here, the:

judge has found unconstitutional a law that lets clergy members avoid paying income taxes on compensation that is designated part of a housing allowance.

This is interesting, to me, as is the whole idea of tax-free faith groups (and not just their houses). I know we’ve had the discussion here before whether faith groups should be tax exempt. Here’s one perspective (tax ’em, though the writer appears particularly focused strictly on churches, read: Christians).

And here’s the IRS’s take on it.

Your thoughts?

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13 Responses to Federal judge: Clergy housing tax breaks unconstitutional

  1. Sharon says:

    The first time I read about this over the weekend, and of course I won’t find it now if I go looking for it, the problem was the double-dipping of taking the tax-free housing allowance and using it to buy a home and taking the mortgage deduction. I have to dig into thus further, but my impression was that the problem wasn’t the tax-free housing, but the way both the parish and the recipient declared it, or didn’t.

  2. Jay Croft says:

    This certainly will be appealed up to the Supreme Court. Stay tuned.

  3. leftover says:

    I think the FFRF statement explains their position a little clearer here. It’s also interesting to note that a minister given a home to live in can deduct from taxable income the “fair rental value” of the home and the utilities. (PDF pg. 19) The amount exempted cannot be more than the “reasonable pay” for the minister’s services.
    The rules for secular employees and religious employees need to be the same.

    I think the IRS Filing Requirements need to be amended to require all churches to file the annual information return, (Form 990), like everybody else.
    I think the Special Rules Limiting IRS Authority to Audit a Church need to be trashed altogether in order to create increased oversight concerning Unrelated Business Income and Restrictions on Political Campaign Intervention that will naturally follow from inspection of annual information returns.

    Organized religion is big business in America. Estimates vary, because of the special treatment from the government, but organized religion probably involves $70 to $80 billion dollars every year. Taxpayers, as well as congregants, deserve to know where this money comes from and how it’s used…exactly. Other charitable organizations are required to make this information known. Organized religion should be no different.

    • Susan Campbell says:

      I obviously have needed some help with the original post, so thank you, as well.

      • leftover says:

        I didn’t think you needed any help really. I just think the RNS article misses the mark a little and gets a little sidetracked. Kind of unusual for them, actually.

        Sorry about the subscription thing. I thought I forgot to click the button.

  4. leftover says:

    …for subscription purposes…

  5. Jay Croft says:

    I’m a clergyman so obviously I have a vested interest in this topic.

    Yes, the tax deduction has long been available to ordained clergy. Likewise the home interest deduction, which is available to everyone.

    Many people do not realize that the cleric has to pay ALL the FICA tax on the total salary, including housing. I have always received the total amount, with no deductions and have always been responsible for paying all Federal, state and local taxes four times a year. That’s why you might find me a bit grouchy on January 15, April 15, June 15 and September 15.

    (Note that three of the four payments are required in the first half of the calendar year.)

    The reason for the cleric receiving the whole salary and being responsible for payment of taxes is that it’s easier to haul the cleric off to prison than to indict the church treasurer, governing board, etc.

    So, there is a big plus in the tax deduction for housing, but a big minus regarding Social Security
    payments, laughingly called by the IRS “contributions.”

    The Lord giveth, and the IRS taketh away.

    • sharon says:

      “Render unto Caesar what is Caesar’s,….”

    • sharon says:

      The ruling was aimed at these folks, and it’s a shame that Jay and other clergy like him are going to have to take the hit for them.

      “The law’s tax exemption has been contested since a decade-old dispute between the IRS and California mega-church pastor Rick Warren. In 2002, the IRS attempted to charge Warren back taxes after he claimed a housing allowance of more than $70,000.

      “He eventually won the federal court case, and that led Congress to clarify the rules for housing allowances. The allowance is limited to one house, and is restricted to either the fair market rental value of the house or the money actually spent on housing.


      “The Southern Baptist pastor of one of the nation’s fastest-growing churches is building a 16,000-square-foot gated estate near Charlotte, N.C. The tax value on the 19-acre property owned by Steven Furtick of Elevation Church is estimated to be $1.6 million.”


    • leftover says:

      That’s very strange, Jay. It sounds like the government considers you to be self-employed…an independent contractor. Doesn’t sound fair…or equitable.