Clergy Tax Free Housing Allowance Denied by Fed Judge

[Guest Taxed]

A federal judge has struck down a law that gives clergy tax-free housing allowances in a decision that could have far-reaching financial ramifications for pastors across the U.S.

In her decision Friday, U.S. District Judge Barbara Crabb in Wisconsin wrote that the exemption "provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise," the Wisconsin State Journal (http://bit.ly/18egoV8 ) reported.

http://www.foxnews.com/us/2013/11/23/federal-judge-in-wisconsin-strikes-law-that-gives-clergy-tax-free-housing/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews%2Fnational+%28Internal+-+US+Latest+-+Text%29

[kcjenkins]

WOW. I have no doubt that will be appealed. Churches see that as a way to pay less salary, of course.

[Guest Taxed]

It has been an established law for a while so what changed???

[Jack from Ohio]

It has been an established law for a while so what changed???

Seems that another "law of the land" has been challenged!!

What say ye Taxed, should it be left alone because it was the law of the land?

[Guest Taxed]

Seems that another "law of the land" has been challenged!!

What say ye Taxed, should it be left alone because it was the law of the land?

Leave it alone!

[kcjenkins]

From Wikipedia Her Notable rulings

On April 15, 2010, Crabb ruled in a suit that the Freedom From Religion Foundation filed in 2008 against the Bush administration that the National Day of Prayer is unconstitutional. This ruling was unanimously dismissed by a federal appellate court in April 2011 due to lack of standing.

On November 22, 2013 Crabb ruled in another suit the exemption of a housing allowance from the income of clergy was unconstitutional.

If you go to http://www.robeprobe.com/find_judges_result2.php?page=1&judge_id=2959 it's interesting the extreme opinions she generates from lawyers. I did not read them all, but I read enough to see a clear pattern, that lawyers who appear before her consider her very dictatorial, very biased, and very anti-religion. She had favorable ratings from those who were against the National Day of Prayer, a ruling that was unanimously reversed by the Appeals level Other than that one ruling, her most common rating was "Very Bad". the worst rating you can get.

[mrichman333]

I never understood why this law existed.

[JohnH]

It is based in the "convenience of the employer" doctrine. Similar to members of the military who must reside near military bases, ministers often find it necessary to live in areas they might not otherwise choose to live, due to the location of the churches they serve. Many ministerrs have little choice in the church assignment, especially those serving in church organizations which use a "connectional" system for assigning ministers to the churches chosen by their administrative hierarchy. Historicallly, the problem arose because they had little choice in determining the location of the housing (since a parsonage or manse was usually in close proximity to the church).

Another argument in its favor had to do with the low compensation most ministers are paid in relation to other professionals of similiar education & responsibilities. This fact is often overlooked because we as tax professionals tend to interact more often with the higher-paid clergy who have a need for tax advice and can afford to pay for it. We don't see the much larger population whose income is so low that there is very little tax planning to be done and many of them don't realize any significant tax benefit even from the H&U allowance, since their only tax liability is S/E tax. Furthermore, those who still minister in churches which provide parsonages never derive the benefits of building any equity in a home, which for many people is their only significant asset. This same issue still exists for members of the military as well.

As many churches moved away from the "parsonage" model, the H&U exclusion was extended to those ministers who are not provided a parsonage. That is a different issue, but many of them still find that the decision about where to live can be limited by the necessity to be in close proximity to their church. Although the overall situation is different from the parsonage model, the only way to treat these situations differently would be by having the IRS delve into the details of each minister's arrangement with their particular congregation, denomination, etc. Also, keep in mind that even though we discuss this in terms of "ministers", "churches", "denominations", etc, the H&U allowance extends to clergy of all religious faiths, so trying to differentiate among these various faiths and how they compensate their clergy could turn into a huge problem in and of itself.

Here's a pretty good article (which I acknowledge is pro-housing allowance):

http://www.forbes.com/sites/peterjreilly/2012/09/06/in-defense-of-special-tax-treatment-for-clergy/

[easytax]

A federal judge has struck down a law that gives clergy tax-free housing allowances in a decision that could have far-reaching financial ramifications for pastors across the U.S.

In her decision Friday, U.S. District Judge Barbara Crabb in Wisconsin wrote that the exemption "provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise," the Wisconsin State Journal (http://bit.ly/18egoV8 ) reported.

http://www.foxnews.com/us/2013/11/23/federal-judge-in-wisconsin-strikes-law-that-gives-clergy-tax-free-housing/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+foxnews/national+(Internal+-+US+Latest+-+Text)

One, I believe in this benefit and wonder why IF : church and state are to be separate -- then why are any "church" laws, ideas, property, etc. regulated by the government, etc. -- if they're separate !!!! Yes a very different discussion -- not to be done here -- maybe on the political board -- but not by me - here.

Two, any other argument withstanding; it will be overturned as if it stands, there will be president for "provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise," ---- which when you take out the words "religious persons", you could insert *** pick what ever you want *** any business, any commodity, any thing the "politicians" care to do that benefits any of their constituents over someone or something else. -------------- that's what makes politics --- doing something for someone/some thing to benefit them at the expense of something/someone else -- so they can get the money to be reelected.

[JohnH]

I believe part of the issue revolves around whether this benefit is provided to religious persons and "no one else". In addition to military personnel, there are other groups of people who receive preferntial tax treatment for housing (and meals) provided for the convenience of the employer.

At first blush, it appears that this judge's decision springs largely from an anti-religious bias, but she isn't alone in that regard. I've observed the same thing among some tax preparers on accounting/tax forums as well. I've even suggested on a couple of occasions that based upon their extreme biases against clergy, some tax preparers should refuse to prepare returns for this group of clientele.

It's silly of her to focus on this issue, since as you pointd out, there are many instances in which the tax code delliberately or indirectly favors one group of people over another. One simple example would be the favorable treatment of long term capital gains & qualifying dividends. There are others which are much more on point.

[kcjenkins]

Jack, I don't mean to be a bully, but I removed your last post, as it was diverting into Politics, which we are all trying to avoid in this forum.