Monday, November 25, 2013

Chipping away at a familiar clergy housing allowance exemption

A federal district court judge has declared a portion of U.S. law that allows "a minister of the gospel" to not pay income tax on a specific portion of their compensation is "unconstitutional."  The judge was Barbara B. Crabb.  The court has determined, in agreement with the plaintiffs, that "§107(2) does not have a secular purpose or effect.” Judge Barbara B.Crabb concluded that a reasonable observer would view it “as an endorsement of religion” and therefore an unconstitutional benefit.

You can read the opinion here.  Although I am sure this is not the last word on the subject, it does represent a significant erosion of something that has long been established law and practice.  While it will surely be appealed and it is currently an opinion only for the federal district in which it was rendered, congregations and pastors in the Western District of Wisconsin are affected by the ruling right now.  It is not clear what, if any, affect this has on parsonages or rectories owned by churches.

I will leave it to others to comment.  Let me remind most of my readers that this has only small effect upon the tax bill of most clergy since the bigger issue for most pastors is the full freight of the social security tax which is payable on all income and from which there is no exemption.  If clergy were not considered self-employed, they would share this cost with the congregation and for most of us it would be a better benefit than the federal income tax exemption on the part of the compensation used to provide a home (as IRS defines it).

1 comment:

Anonymous said...

and how exactly did this plaintiff gain standing to sue over this issue, hmm?