A Southern Baptist pastors dispute with the Internal
Revenue Service now threatens to affect the ability of all ministers to participate
in a housing allowance arrangement.
Indeed, a federal court in California has requested briefs
on the question of whether to allow ministers to have a housing allowance is
constitutional or not.
A Southern Baptist pastors dispute with the Internal
Revenue Service now threatens to affect the ability of all ministers to participate
in a housing allowance arrangement.
Indeed, a federal court in California has requested briefs
on the question of whether to allow ministers to have a housing allowance is
constitutional or not.
The case in question involves Rick Warren, pastor at Saddleback
Community Church near Los Angeles.
In 1998, Warren sought to deduct $79,999 on his house, relying
on a 1921 statute that gives ministers the right to a housing allowance.
The law allows an ordained minister to use a portion of his
or her salary to provide for a residence and not claim that money as taxable
income.
However, the Internal Revenue Service has ruled that ministers
may only claim an amount equal to the fair market rental value of their homes
as a housing allowance.
In other words, there are limits to how much can be claimed
as housing allowance.
In Warrens case, the IRS objected to the amount he sought
to claim, setting the “fair market rental value” of his particular
home at $59,479.
However, Warren questioned the IRS interpretation of the housing
allowance law, insisting the allowance did not have to be limited to the fair
market rental value. He appealed to a federal tax court for a ruling on the
matter.
Surprisingly, the tax court agreed with Warren, ruling 14-3
that a ministers housing allowance did not have to be limited to the fair
market rental value, effectively voiding the IRS interpretation of the law.
This time, the IRS appealed the matter, sending the dispute
to the U.S. Ninth Circuit Court of Appeals.
That is where the case took on ominous overtones for ministers
throughout the nation who claim housing allowances.
Instead of merely ruling on the case of Warren and the IRS,
two of the three appeals court judges opened the issue even wider, opting to
determine if the housing allowance law even is constitutional.
The judges moved in that direction based on a 1989 U.S. Supreme
Court case Bullock v. Texas Monthly, Inc. In that case, the nations
high court ruled that a sales tax exemption that applied only to religious organizations
was unconstitutional.
For the Ninth Circuit Court of Appeals, the Texas case raised
the question does the same logic apply to the ministerial housing allowance?
In a March 5 order, the court opened the door wide to the question,
asking for briefs on a trio of questions:
Does the court have the authority to consider the
constitutionality of the housing allowance law?
If so, should the court exercise that authority?
Is the housing allowance law constitutional under
the Establishment Clause of the First Amendment?
In addition to requesting briefs from the two parties involved,
the court also appointed Erwin Chemerinsky of the University of Southern California
Law School to file briefs on all three questions as well.
In comments accompanying the order, one of the judges noted
that Chemerinsky was appointed to address the issue because neither of the involved
parties has “the slightest interest in our deciding the constitutional
questions, because it is in both their interests to retain the IRS exemption
and not to have its constitutionality reviewed by the courts.”
In his concurring comments to the order, Judge Stephen Reinhardt
also insisted the request for briefs does not mean the judges already have decided
the issue but that they wish to gather information to determine how to decide
the case.
However, he also acknowledged the possibility of ruling the
housing allowance as unconstitutional exists. “A just resolution
of this case may well mean no deduction for the parson, if the statute violates
the Establishment Clause,” Reinhardt explained.
Judge Richard Tallman disagreed with the request for briefs
and with opening the door to the constitutional question.
“Inflating this case to constitutional stature is wholly
unnecessary to resolve the narrow issue … presented to us,” Tallman wrote
in dissenting comments.
However, it is clear the constitutional question will be considered
and could be decided by early summer.
Indeed, the court origianlly asked for briefs within 45 days.
However, on April 4, the judges issued a second order, extending the deadline
for the filing of the briefs on the three questions to May 3, with reply briefs
to be filed by May 24.
Following that, the wait will begin.
But not all are waiting for the court to act.
A Minnesota congressman says he will introduce legislation
to protect the 81-year-old housing allowance.
Rep. Jim Ramstad (Rep.) charged that the court of appeals has
“hijacked” the case to push its own agenda. He said he will file legislation
that blocks the court from revoking the parsonage exemption.
“Thousands of American ministers need our help to stop
this travesty,” the Minnesota congressman insisted .
Ramstad said removing the exemption could result in clergy
paying $2.3 billion more in taxes in the next five years.
(This article includes information from a Religion News Service
release)