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Our clergy housing allowance: unconstitutional...again

PostPosted: Thu Oct 12, 2017 7:49 am
by William Thornton
I can almost guarantee that all of my clergy colleagues have seen this, since it is our sacred clergy tax break and puts real money in our pockets every year.

Simple evaluation of the ruling that the housing allowance is unconstitutional is my article.

Baptist Press: here

BNG, Bob Allen: here

My insightful and HA expert CPA friend Peter Reilly's Forbes tax blog: here

One pastor's defense Taking away the parsonage allowance is religious discrimination

My view: It's not an establishment of religion but a pretty sweet tax break.

For laity who may care and are puzzled: Qualifying clergy (most any ordained person, rabbi, imam, etc.) may receive part of their income as "housing allowance" and completely exclude that amount from income for income tax purposes. The clergy must pay social security on the amount, though. The average SBC pastor with cash income of around $70,000 probably excludes $20,000 or so of this through the HA.

Re: Our clergy housing allowance: unconstitutional...again

PostPosted: Thu Oct 12, 2017 1:46 pm
by Sandy
It's much more complicated than it appears on the surface.

It seems like it might be easier to keep the allowance if its use is expanded to all employees of non-profit agencies, instead of being limited to religious entities. The establishment clause doesn't mean that it's OK if the law applies to all religions equally, the Lemon Test, which has been applied by the federal courts for quite some time, means that establishment occurs unless there is a singularly secular purpose that has been established. By making the allowance available to the leadership of anything that can be defined as "religious," the government is simply establishing all religions equally. By including the employees of organizations that might have a secular mission and purpose, it would avoid that establishment.

As an ordained minister of the gospel working for a "religious" institution, I could get a HA if I wanted one, but past experience has taught me that I wind up saving a little bit more money by taking the FICA match, and avoiding the quarterly tax filing headache.

Re: Our clergy housing allowance: unconstitutional...again

PostPosted: Thu Oct 12, 2017 3:36 pm
by Dave Roberts
I'm afraid it's the same plaintiffs and the same judge all over again. Now it will go back through the same appellate process. We probably won't know what this ruling means for two to five years.

Re: Our clergy housing allowance: unconstitutional...again

PostPosted: Mon Oct 16, 2017 12:34 pm
by Tim Bonney
Dave Roberts wrote:I'm afraid it's the same plaintiffs and the same judge all over again. Now it will go back through the same appellate process. We probably won't know what this ruling means for two to five years.


Last I read, this one doesn't apply to those of us in church owned parsonages.

I'd be OK with them dropping the housing exemption if the IRS would treat us like employees for SSI purposes and us not pay 15.3% Self Employment tax. We get a credit on one side and a ding on another. In many years, when I was renting or buying, the extra self employment tax basically wiped out much of the value of the housing allowance.

Now I'm back in a parsonage, so the circumstances are a bit different for me.

Re: Our clergy housing allowance: unconstitutional...again

PostPosted: Wed Oct 18, 2017 11:03 am
by Dave Roberts
Tim Bonney wrote:
Dave Roberts wrote:I'm afraid it's the same plaintiffs and the same judge all over again. Now it will go back through the same appellate process. We probably won't know what this ruling means for two to five years.


Last I read, this one doesn't apply to those of us in church owned parsonages.

I'd be OK with them dropping the housing exemption if the IRS would treat us like employees for SSI purposes and us not pay 15.3% Self Employment tax. We get a credit on one side and a ding on another. In many years, when I was renting or buying, the extra self employment tax basically wiped out much of the value of the housing allowance.

Now I'm back in a parsonage, so the circumstances are a bit different for me.


I think that treating us like employees would be advantageous, but churches will scream to have to pay 7.65%.