{"id":33461,"date":"2018-04-24T06:00:27","date_gmt":"2018-04-24T10:00:27","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/geneveith\/?p=33461"},"modified":"2018-04-23T20:08:59","modified_gmt":"2018-04-24T00:08:59","slug":"pastors-housing-allowance-exemption-update","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/geneveith\/2018\/04\/pastors-housing-allowance-exemption-update\/","title":{"rendered":"Pastors’ Housing Allowance Exemption Update"},"content":{"rendered":"\n<\/head>

\"\"<\/a><\/p>\n

As we have blogged<\/a>, the housing allowance tax exemption for ministers of religion has been ruled unconstitutional in a Wisconsin lawsuit filed by the Freedom From Religion Foundation.\u00a0 Last week, an appeal of that decision was filed with Seventh Circuit Court of Appeals.<\/a><\/p>\n

The exemption allows ministers of religion\u2013which includes called teachers on the roster of the Lutheran Church Missouri Synod\u2013to deduct from their income taxes what they spend on housing, which congregations structure as a \u201chousing allowance\u201d in lieu<\/em> of a parsonage.\u00a0 This has become an important benefit for American clergy, 81% of whom receive part of their compensation as a housing allowance.<\/p>\n

\n

The Freedom From Religion Foundation argued that this benefit favors leaders of religious organizations, since it is not available to employees of non-religious companies.\u00a0 Supporters of the exemption are arguing that employees of non-religious companies sometimes do get a non-taxed housing allowance, as when a company requires an employee to live in a foreign country or in another specific location.<\/p>\n

The Alliance Defending Freedom, many religious organizations, and some 5000 pastors are supporting the appeal, which is being argued by\u00a0Becket<\/a>, a religious liberty legal foundation.<\/p>\n

The elimination of the housing allowance exemption would reportedly bring into the U.S Treasury some $1 billion.<\/p>\n

Kate Shellnutt<\/a>\u00a0in Christianity Today\u00a0<\/em>has written a fascinating article on the subject, going over the arguments on both sides and giving the history of the exemption.\u00a0 A sample:<\/p>\n

\n

Currently, 81 percent of full-time senior pastors in the US receive a housing allowance, according to the latest\u00a0compensation figures<\/a>\u00a0obtained by CT\u2019s\u00a0Church Law & Tax<\/em>. The typical church spends about 9 percent of its total budget on housing compensation.<\/p>\n

According to\u00a0congressional estimates<\/a>, by not paying taxes on this portion of their income, American pastors save a total of $800 million a year.<\/p>\n

Luke Goodrich, deputy general counsel for Becket, anticipates the appeals ruling will come down on the side of the pastors. The exemption for ministers dates back centuries in the US, and fits alongside today\u2019s tax code provisions for employer-provided housing.<\/p>\n

Historians\u00a0noted<\/a>\u00a0how the earliest American colonies exempted churches from paying property taxes, and that benefit expanded to apply to parsonages in all 50 states. In the 20th century, as fewer churches began to house pastors on church property, the tax code was amended so that ministers could claim an exemption on their housing allowance, or the portion of their income used to cover outside lodging, starting in 1954. (The current case before the courts specifically challenges the housing allowance, not parsonages.)<\/p>\n

The tax code offers similar exemptions to secular employees whose housing is furnished by their employers because they\u2019re required to live in a certain place due to the demands of the job\u2014think governor\u2019s mansions or special accommodations for overseas workers. But it\u2019s up to the Internal Revenue Service (IRS) to evaluate these \u201cconvenience of the employer\u201d instances to see if the provided housing is necessary and merits the exemption.<\/p>\n

\u201cWhen the taxpayer is secular, this inquiry is difficult,\u201d Becket\u2019s opening brief reads. \u201cWhen he is a minister, it is theologically charged.\u201d<\/p>\n

The pastors who have joined the suit argue that their jobs demand they live among their church members and use their residences for church activity; in some cases, their homes serve as the primary gathering place for the congregation. The group includes Chris Butler and Edward Peecher of Chicago Embassy Church, Patrick Malone of Holy Cross Anglican Church, and the Diocese of Chicago and Mid-America of the Russian Orthodox Church Outside of Russia.<\/p>\n

They say they deserve the tax breaks available to other workers\u2014and the benefits received by fellow clergy, often from more liturgical and established congregations, who live in church-owned properties.<\/p>\n

Goodrich argues that the tax code\u2019s special consideration for ministers\u2019 housing allowance does not amount to an establishment clause violation, as FFRF alleges, but instead is a means to prevent government entanglement in religious affairs.<\/p>\n

If the government were to scrutinize housing allowance recipients or to allow parsonage allowances but not stipends, \u201cit would be the IRS and the courts deciding what is the essence of the church,\u201d he said. \u201cIs what takes place in a minister\u2019s home really important to the church or not?\u201d<\/p>\n<\/blockquote>\n

If pastors lose this tax exemption, it will mean a significant hit to their income.\u00a0 If that happens, congregations would do well to find ways to make their pastors \u201cwhole\u201d by increasing their salaries if at all possible.<\/p>\n

This raises another issue, whatever the outcome of the case.\u00a0 Should churches go back to the practice of providing parsonages?<\/p>\n

In Australia, where I just came from, the Lutheran Church of Australia provides a \u201cmanse\u201d for all of their pastors, including seminary professors.\u00a0 The churches have owned these properties for decades, and now they have become very valuable.\u00a0 Having a manse allows a pastor to live in a city with very high housing prices.\u00a0 And if he is called to another parish, he can easily move, without the difficulty of selling his old home and buying a new one, which is especially helpful in small towns that have a slow real estate market.<\/p>\n

The argument for congregations replacing their parsonages with a housing allowance is that this allows pastors to own their own homes and thus build up equity.<\/p>\n

Is that argument as valid today, after the bursting of the real estate bubble?\u00a0 In some areas, such as California and most big cities, the price of a house is still far beyond the reach of most pastors, especially those just out of seminary.\u00a0 Wouldn\u2019t it help\u2013in those markets particularly\u2013if the church could provide a parsonage?<\/p>\n

One problem of the parsonage system is that pastors do not have a place to live when they retire.\u00a0 Are there other solutions for that?<\/p>\n

At any rate, pastors and their congregations need to be monitoring this court case and making plans if the decision goes against them.<\/p><\/div>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

As we have blogged, the housing allowance tax exemption for ministers of religion has been ruled unconstitutional in a Wisconsin lawsuit filed by the Freedom From Religion Foundation.\u00a0 Last week, an appeal of that decision was filed with Seventh Circuit Court of Appeals. 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