April 22, 2002
House seeks to undercut challenge
to ministerial housing allowances
___By Robert Marus
___ABP Washington Bureau
___WASHINGTON (ABP)--The U.S. House of Representatives may have short-circuited an anticipated constitutional challenge to the special tax privilege enjoyed by American clergy, but threats to the perk still loom.
___On April 16, the House passed the Clergy Housing Allowance Clarification Act on a 408-0 vote. The bill, sponsored by Rep. Jim Ramstad, R-Minn., was intended to pre-empt a case now before the U.S. 9th Circuit Court of Appeals, based in San Francisco. Legal observers say the court likely will use the case to overturn tax exemptions for ministerial housing expenses. This perk--provided for in the federal tax code since 1921--has enabled many small and low-income congregations to hire full-time pastors, rabbis or priests.
___The exemption means that ordained clergy can deduct housing expenses--often including rent, mortgage payments, utilities and even furniture purchases--from their taxable income, as long as the deduction amount is approved by the clergyperson's religious governing body.
___The case now before the 9th Circuit originally stemmed from an Internal Revenue Service dispute with Rick Warren, a nationally-known Baptist pastor and author of "The Purpose-Driven Church." Warren's Saddleback Valley Community Church in suburban Los Angeles is affiliated with the Southern Baptist Convention.
___The IRS, in auditing some of Warren's tax returns, said he was claiming too high an amount of his income as his tax-free housing allowance. Warren attempted to claim $79,999--about 80 percent of his income from the church--as a housing allowance, but the IRS auditor asserted that $59,479 was the maximum Warren could claim. The auditor relied on an IRS standard--not found in the original law providing for clergy housing tax exemptions--of "fair rental value" being the cap for the amount clergy could claim under the housing allowance. However, the IRS never clarified how to determine "fair rental value" in such cases.
___Warren challenged the standard, claiming it gave IRS auditors too much latitude in determining what "fair rental value" was. A California tax court ruled 14-3 in his favor.
___The IRS appealed the ruling, and it ended up in the 9th Circuit. That's when an unexpected development took place. A three-judge panel of the court voted 2-1 to ask for briefs from both sides as to whether the housing allowance tax exemption for clergy was constitutionally acceptable. The majority judges appointed a University of Southern California law professor, Erwin Chemerinsky, to weigh in on the issue with a brief on the constitutionality of the practice. The professor has been asked to file his brief by May 3.
___Chemerinsky already has said publicly he believes exempting clergy housing costs from taxes violates the Establishment Clause of the First Amendment. That clause prevents the government from supporting or endorsing religion.
___"If the government wants to subsidize journalists because it feels they aren't paid enough, I don't have any problem with that. But if they want to do the same thing with regards to religion, they can't," he told the Los Angeles Times.
___Several observers, including Rep. Ramstad, have termed the 9th Circuit's move "judicial overreach" because neither Warren nor the IRS are challenging the allowance's constitutionality.
___Frank Sommerville, a Dallas attorney who specializes in clergy tax law, said the 9th Circuit has no right to decide whether housing allowances violate the First Amendment. "Since the parties are not in dispute over the constitutionality, then we believe the court doesn't have authority or jurisdiction to decide the procedural issue," he said in a phone interview. Sommerville participated in oral arguments before the 9th Circuit on behalf of Warren's case.
___And, Sommerville noted, the government provides housing-allowance tax exemptions to other professionals as well, such as U.S. military personnel and U.S. employees living overseas.
___As for the strategy behind Ramstad's bill, it would codify and slightly clarify the IRS's "fair rental value" standard in hopes that would lead to dismissal of the 9th Circuit case before the court could decide the constitutional question. It was introduced in the House just last week and rushed through to approval with unprecedented speed. The bill had the support of the Church Alliance, which represents the benefits-administering arms of several Jewish, Catholic, and Protestant denominations--including the Annuity Board of the Southern Baptist Convention.
___However, Ramstad's bill does nothing to prevent future, more direct constitutional challenges to the exemption. That's why the National Association of Church Business Administration--while supporting the measure--has noted problems with the legislative quick-fix.
___Ramstad's bill "still raises the question, 'How do you define the fair rental value?'" noted NACBA's education director, Phill Martin. "There are not clear guidelines to help in that case. That is part of what brought the issue to a court battle in the first place."
___Meanwhile, a version of Ramstad's bill still has to be introduced and passed in the Senate and signed into law by President Bush before the 9th Circuit rules on the case, which could happen as early as the first week of May. As of press time, no senators had introduced such legislation, nor was the House version of the bill scheduled for an introduction into the Senate.
___The bill is House Resolution 4156.
___The case before the 9th Circuit is Warren vs. Commissioner of Revenue.
The Baptist Standard
News of religion, faith, missions, Bible study and Christian ministry among Texas Baptist churches, in the BGCT, the Southern Baptist Convention ( SBC ) and around the world.
Contents/ Masthead / Why We're Here / Links / Archive / E-mail us/ SUBSCRIBE!/ Signup for FirstLook
|