Unless one of my ministerial colleagues has been off on a mission trip to Mars for a few months, he or she will know that the housing allowance, our sacred clergy tax break, was ruled unconstitutional last fall by a federal district judge. Fear not, the implementation has been stayed pending appeal and the decision only applied to cash housing allowances, that is, those who do not live in church provided housing and who instead receive a check from their church for their housing. This tax treatment is not altogether different from any employee who lives in an employer's house for the employer's convenience. Think caretakers (though I recognize that we pastors abhor being considered as such), those who live in an apartment that is part of a motel or mini-warehouse - stuff like that.
After the court decision, our own Russell Moore very new at his job with the Ethics and Religious Liberty Commission was interviewed by Forbes tax blogger pal of mine, Peter Reilly, who has become the go-to guy on the housing allowance. He reads the manuals, cites the subsections, and peruses the court decisions. He didn't find Moore in much of a mind to weigh in on the matter, perhaps because he wasn't all that up to speed on it. We can count on Moore to stir the ERLC for an amicus brief somewhere in this process, though.
Absent federal court decisions, the clergy housing allowance isn't much of a news item unless you start poking around and find ministers in huge homes who allegedly take enormous sums of their pay in the income tax free housing allowance.
Stuart Watson is a reporter in Charlotte who has given some scrutiny to a minister there who is fabulously compensated and who lives in an palatial home. No, not Jim Bakker. He is out of jail and back to work elsewhere. Watson is onto Stephen Furtick and others. His recent story featured images of honest-to-goodness clergy mansions, all of which are eligible for huge sums of income tax exclusion. This is news, not your local pastor who might have a housing allowance of two thousand dollars a month or so.
What Watson is demonstrating is that the amount of income that clergy can exclude from income tax (this isn't a deduction, all money paid to clergy as a housing allowance is not reported as income at all) is virtually unlimited. That is, the limit is only on how expensive a mansion the minister can find to buy. If he lives in a hovel whose fair market rental is $500 per month (furnished, including utilities) he has a limit of $6,000 per year. If a megaminister finds a fabulous mansion on the beach whose fair market rental is $150,000 per month, he can exclude $1.8 million in income from his income tax bill. Biltmore house? Same deal. Let a megaminister rock star buy that and the government will allow the exclusion of whatever its fair rental value is.
Suggestion for my clergy brethren: Print out nice, color photos of the houses Watson features and take them to church. Show them to the ordinary working people in your church, to young couples with a runny nosed toddlers, to single moms, to fixed income seniors. Ask them if they think a minister ought to be able to have government assistance in living in such an expensive home?
If you find any who say "yes" immediately put them on the church committee that sets your salary. Chances are, people will scratch their heads and wonder how this came to be. It just doesn't smell right.
Stuart Watson called me a while back to explore the housing allowance. I gave my opinion: I don't think it is an unreasonable bit of tax policy but should be capped. As it stands, the average SBC minister benefits a small amount. Not that big of a deal in regard to tax revenue and not unfair at the average church level.
Why we hesitate to consider any reasonable changes that might eliminate the mansions is beyond me. Seems like that would be a prudent, ethical move. Then again, the judiciary might just scrap the whole business for us. Poof! No more housing allowance. You wake up one morning and you are just like a mere mortal, only a little poorer.
Seems that clergy have dipped in the degree of respect they receive here in America. Surveys rank us below dentists who inflict grievous pain on patients, baby sitters who get less than the minimum wage, and cooks (next time you are in Waffle House, be more respectful of the cook, he/she is ahead of you). The housing allowance as it presently stands doesn't help us in this regard.
One day these chicken will come home to roost. Until then, feel free to fashion some defense for the megapastor nearby whose income that is excluded from taxation is several times your entire compensation package.
Try not to feel like a chump when doing so.