Tax-Exempt Clergy Housing Allowance Under Fire

CHICAGO, IL (April 8, 2002) - Proposed legislation to protect tax-exempt housing allowances for clergy is likely to be introduced as members of Congress return from spring break tomorrow.

The future of the tax benefit was placed in doubt after the Ninth U.S. Circuit Court of Appeals in San Francisco decided to review the constitutionality of tax-exempt housing allowances.

The housing allowance makes it possible for a pastor to avoid paying income tax on that portion of salary that is declared as housing allowance. It is estimated that some 850,000 clergy in the United States - rabbis, pastors, priests and others - take advantage of this tax break at an estimated cost to the treasury of between $400 and $500 million a year.

The Internal Revenue Service contends that the amount of the housing allowance should be determined by the fair market rental value of the property used as a parsonage for the clergy. A federal tax court disagreed, stating that while IRS rules cap the amount a minister can claim as a housing allowance, the law doesn't.

Supporters of the tax-exempt housing allowance argue that repeal would hit pastors of small congregations the hardest, as salaries usually are lower and the positive financial impact of the tax break is proportionately larger.

"I probably couldn't be a pastor here without it (allowance)," said Pastor Ed Salas in an interview published in the Los Angeles Times. Salas pastors Tapestry Covenant Church in Santa Ana, California. "The church isn't large enough to give me a salary increase . . . right now, we scramble to make ends meet."

Critics charge that the allowance constitutes subsidization of religion by the government, which they contend violates the First Amendment prohibition against establishment of religion.

To University of Southern California law Prof. Erwin Chemerinsky, the warnings of potential hardship on ministers provides evidence that the separation of church and state is adversely affected by the allowance. "The more someone says that getting rid of this will affect them," he is quoted as saying in the Times article, "the more proof there is that the government is subsidizing them."

A Minnesota congressman, Jim Ramstad, is expected to introduce legislation that would redefine the method by which the housing allowance value is determined, in an effort to avoid a constitutional confrontation.

To read more of the Los Angeles Times story, visit Housing Allowance Controversy. To learn more about the tax case that is at the heart of this dispute, visit a web site sponsored by the Evangelical Lutheran Church in America and select the Call to Action link in the upper right area of the page.

Individuals interested in voicing their opinions with their elected members of Congress can obtain the necessary contact information by visiting House of Representatives or U.S. Senate.

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