Ministers’ Housing Allowance Under Attack Again

Ministers across the country cheered in June 2011 when the plaintiffs in a California lawsuit voluntarily dismissed their challenge to the ministerial housing allowance. However, the celebration was a little premature in that the housing allowance is now under attack from two separate fronts.

First, the Freedom From Religion Foundation and three of its officers have recently filed a new lawsuit in federal court in Wisconsin, contending that the ministerial housing allowance, for both active and retired ministers, is unconstitutional. The plaintiffs contend that they receive housing allowance but such is taxed as income to them. On the other hand, ministers who receive housing allowance are able to exempt such from taxation. The plaintiffs contend that this difference creates unconstitutional discrimination that benefits religious organizations and not others. The complaint alleges that because employees of secular organizations are not allowed these tax preferences, secular groups incur comparatively greater compensation costs, placing them at a “competitive disadvantage.”

The Wisconsin lawsuit requests that the ministerial housing allowance be found in violation of the “Establishment Clause” of the First Amendment of the Constitution. They further have requested that the court prohibit the use of the ministerial housing allowance under federal law.

Secondly, Senator Charles Grassley (R-Iowa), working in conjunction with the Evangelical Council for Financial Accountability (ECFA) and other non-profit religious organizations, has formed the “Commission on Accountability and Policy for Religious Organizations” to look into a variety of issues involving the financial practices of religious groups. The Commission is chaired by Michael Batts, the managing partner of an Orlando-based accounting firm that serves non-profit organizations. In their review, the Commission has been asked to look into a variety of issues including: 

  • Whether churches should file the same highly-detailed annual information return (Form 990) that other non-profits must file.
  • Whether the income tax exclusion for housing allowance paid to clergy should be limited in some manner.
  • Whether legislation is needed to remove uncertainty about the taxability of “love offerings’ paid by church attendees to ministers through a church.

Unofficial reports out of the early committee meetings of the Commission have raised concerns that even the Commission report, a report that is not expect until 2013, may raise concerns about the constitutionality of the housing allowance.

You can be assured that we will continue our efforts to keep the ministerial housing allowance in place for both active and retired ministers. We have already had discussions with those advising the Commission, as well as with some Commission members, and will continue in that dialogue. Further, if allowed by the court, the Benefits Board, in conjunction with other religious organizations, may seek to enter as a party to the lawsuit on the side of maintaining the housing allowance. We expect this to be a battle that will take several years to resolve.

About benefitsboard

Art Rhodes is the President and CEO of the Church of God Benefits Board, Inc. - the administrator of the Ministers' Retirement Plan and the Church Loan Fund, Inc. The corporate offices of the Benefits Board are in Cleveland, TN.
This entry was posted in Chaplains/Evangelists, Expenses, Form W-2, Internal Revenue Service, Ministerial Housing Allowance, Ministers, Retirees, Retirement Distributions, Tax Information. Bookmark the permalink.

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