My megacompensated SBC clergy brethren might have to reassess their use of the Sacred Clergy Housing Allowance for their homes in Sedona or on Virgin Gorda.
Last year I wrote about the housing allowance in You can have my Housing Allowance when you pry my cold, dead hands off of it...or when lawmakers get fed up with the abuse of the minister’s housing allowance by rich ministries, religious racketeers, and greedy pastors who have a second home and put much of their income in a housing allowance for that home, every dollar of it completely free from any income tax at all.
The piece linked above is on the scandal of trumpeter Phil Driscoll who was using about $200,000 of his clergy housing allowance for a second home. Not his first – a second (in some court filings the phrase the plural “second homes” is used).
I might have called it a scandal by a greedy ex-con ordained musician but it was perfectly legal. Join the ministry and shelter hundreds of thousands of dollars in income from any income tax, perfectly legal, and enjoy sun and fun while doing it.
Ridiculous.
The idea that Joe Sixpack is paying taxes and Phil Driscoll is being given tax breaks for money he uses to pay for vacation homes is both abhorrent and absurd to this retired SBC pastor who continues to receive part of his retirement in the form of a housing allowance.
CPA Peter J. Reilly, far more of an expert on this business than I, has a contribution in Forbes on the latest developments: Court Stomps on Clergy Tax Abuse
Seems that a federal appeals court has ruled that when the tax code refers to the housing allowance as “that rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home” it means A home, not a bunch of homes.
I offer a Baptist hurrah for the singular being interpreted as one and not many.
The problem for us non-trumpet playing hackers and plodders in ministry is that folks are always suing the government to eliminate the housing allowance. Cases like Driscoll’s may eventually arouse sufficient indignation at religious racketeers and greedy preachers to cause lawmakers to severely restrict or eliminate even our modest housing allowances.
I don’t care how many homes Phil Driscoll has. I do care if his use of the housing allowance brings down the ire of sensible people on ordinary, one domicile, clergy like myself and almost all of my colleagues.
I appreciate Peter Reilly calling my attention to the matter. Frank Page, Richard Land and GuideStone - pay attention, please.
We knew it was coming: Housing Allowance challenged, again.
Our sacred tax loophole, the housing allowance, survives once again
15 comments:
I always wonder, "how much do we really save on the housing allowance?"
What I mean is: most small churches can't pay a whole lot. They mostly want to hire someone with kids. And, even though the housing allowance allows part of our money to not fall into an income tax bracket, we pay the whole 15% of our social security on our full income (aka including housing allowance).
Last time I checked, Joe Sixpack was paying between 6-7% of SS, since his employer pays the rest.
If we lost our housing allowance, but the church had to pay 1/2 of our SS like other employers...how much would we really be loosing? Especially for the families that can claim multiple dependents?
Tim
You are right with respect to those ministers whose AGI is low. The HA doesn't save them much.
And churches can, I believe, make a one time election to pay SS taxes on their ministers but I know of no SBC churches that do this.
You really cannot say that an ordinary worker pays only half of his SS because his employer figures that into the cost of his employment. Joe Sixpack just doesn't see the bill paid, but it's effectively coming out of his pocket one way or another.
Some churches pay their minister a payment in lieu of SS. It is just ordinary income to them, reported on W-2 but it does remind the church that their minister pays his own SS.
I don't think there is a possibility that any tax change would lower the taxes for self employed ministers. If anything they will go up.
Employees pay their full Social Security, as Rush Limbaugh often points out, just do ministers who have not opted out of paying Social Security tax. It's just an accounting gimmick that makes it look like the employee is splitting it with the employer.
Grassley wouldn't do anything about the housing allowance problems, and so the FFRF continues to litigate its challenge on constitutional grounds. Though a theist, I support the FFRF challenge. The law, as written and administered, is, I and others so often have proposed, is unconstitutional.
Ridiculous!
I agree, but it's even more.
The floodgates were opened for such ridiculous results when Bush and Burleson put the squeeze on the IRS during the Nixon years; on behalf of Abilene Christian College.
As a result, an administrative rule was issued that recognized such private schools as if they were the church (shades of ObamaCare and the flap over contraception).
So, employees could register as ministers and start taking their pay as income tax free housing and even opt out of paying Social Security tax if they were so inclined.
So, we now have:
Horn-playin, tax-cheatin' ministers.
Basketball ministers.
Math ministers.
Etc., etc., etc.
They could have cleaned up the mess when Rick Warren had his housing problem, but they would not.
They could have cleaned up the mess when Grassley completed his investigation, but they would not.
Maybe the FFRF challenge will bring about some much needed, overdue change.
"Clergy Tax Abuse" is probably a mistitle on my part but the original title wasn't attracting too much notice.
Does anybody have any idea who ordained Phil Driscoll? His "ministry" based on its website is more like a record label than anything else. It does not purport to be a church and files a 990.
The most disturbing thing about the parsonage allowance is that it involves the government in saying who is or is not a "minister of the gospel". Of course that tension exists regardless because the first amendment not only forbids establishment of religion which is the part FRF gets excited about but also forbids interference with "free exercise".
Peter,
I guess you missed the following comment that I posted after you raised the issue after Wood's article on the same issue:
See:
http://www.chattanoogan.com/2006/5/24/86430/Driscolls-Don-t-Take-Stand-Case-Going.aspx
There, it is reported that Ron Halvorson of the Bethel Christian Center testified that:
> “Driscoll applied at his church to be
> ordained, and he said the ordination
> was approved by the church
> credentialing committee.”
In many churches, having a “priesthood of the believer” doctrine, it is no big deal to get the church to “ordain” one as a “minister”.
Reply
Southern Baptists are pretty big on the priesthood of all believers and practice local church autonomy, meaning that only an individual congregation, an autonomous body, can ordain ministers.
While a church could ordain anyone, at any age, with or without education, and for proper reasons or devious ones, I have never known an SBC church to ordain strictly for tax purposes. No doubt one could find some among the 45k SBC churches to have done so.
Regardless, we would find it objectionable for either the denomination or government to prescribe requirements for ordination. Every single church reserves that for themselves and no other.
I recognize that with an issue like the housing allowance, there must be some standards or limits on recipients making this one of the places where church and state rub together and cause friction.
In my view cases like Driscoll's only serve to sour the greater populace on us all.
I don't know of an SBC minister who takes a HA on a second home.
On this court decision, I haven't heard from the religious liberty watchdogs in denominational leadership. We did (through denominational leadership) weigh in on Rick Warren's side (he is SBC) a few years ago.
Years ago, the IRS office I worked in tried to challenge the housing claimed by a private school "basketball minister". The public record in that case revealed the following regarding his "ordination":
> (Basketball coach) approached
> the elders of his congregation
> and requested that he be
> certified as a minister of the
> gospel.
> In their letter, the elders of
> (basketball coach's) congregation
> certified him as being authorized
> to perform services normally
> performed by ministers of the
> gospel.
> The letter was filed of record in
> the office of the county Court
> Clerk.
He was hired from secular coaching, coached at the private school for a few years, and, as far as I know, returned to secular work.
The IRS failed in its effort to challenge the allowance (that Bush/Burleson ruling and the politics of it all were just too much).
The Faith and Freedom is reportedly committed to helping Driscoll with further appeals.
See:
http://blogs.wsj.com/totalreturn/2012/02/10/appeals-court-rejects-clergy-tax-benefit/
Here are some excerpts from the recently released Grassley Report:
> According to a report in the
> L.A. Times, televangelist Paul
> F. Crouch, president of Trinity
> Broadcasting Network, makes a
> habit of ordaining the network‘s
> station managers and department
> heads as ministers so that they
> could deduct 100% of their
> housing costs as a parsonage
> allowance.
and
> After receiving this response,
> a VoA insider met with
> Committee staff. The insider
> provided a list of almost 200
> employees who were designated
> as ministers for tax purposes.
The housing allowance is largely tax policy suited for a past era of religion in the United States. The congregations where it would more justly apply would not attract much attention of the pastors that follow this blog or many like it.
Quoted From Mr. Thornton:
"I don't know of an SBC minister who takes a HA on a second home."
I do/I did. For propriety's sake, I won't name names.
This man has bounced around from church to church as a hireling (John 10), having 14-28 month tenures, for years. He occupies the local church parsonage rent-free, and THEN takes 100% of his compensation (~$75K per annum) as 'housing allowance' for his mansion in a 'major Texas city.'
He occupies the rent-free parsonages singly, leaving behind his wife and kids in the 'major Texas city' to 'sell the house.' Which never sells because he takes it off and on the market every 3 months.
This type of duplicity and deceit did not occur in isolation; it was sadly part of a larger pattern (extensive and pervasive sermon plagiarism, etc.). We eventually fled (I Tim 6:11) this church because we raised extensive, documented red flags to our church leadership on this man (including the tax issues). They dismissed us out of hand (see Burleson posts on church authoritarianism) and things deteriorated further after we left.
They finally saw the light and recently secured his resignation with a healthy severance package.
This man has duped three recent pastor search committees, and I pray he doesn't dupe another.
Tim Snider
Tim, I would not maintain that there are not SBC clergy who do so. I just don't know any.
Such examples are the reason we will continually have to fend off challenges to the HA.
william
Forbes has posted a guest column in conjunction with the two recent columns regarding the Driscoll case.
Some here might be interested. Here's the address:
http://www.forbes.com/sites/peterjreilly/2012/02/18/irs-veteran-carries-fight-against-clergy-tax-abuse-into-retirement/
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