wfn.org | Episcopalians: Bush signs legislation protecting clergy housing allowance

[dmack@episcopalchurch.org]

May 21, 2002

2002-132

Episcopalians: Bush signs legislation protecting clergy 
housing allowance

by Jan Nunley

(ENS) President George W. Bush signed legislation May 20 that 
confirms that clergy can continue to exempt the fair rental 
value of housing from their income taxes. 

The bill, HR 4156, confirms established Internal Revenue 
Service policy that has previously lacked the force of law. The 
so-called "parsonage exemption" dates back to 1921.

It is expected to halt the progress of a court 
case, Warren v. Commissioner, currently pending before the 
9th Circuit Court of Appeals in San Francisco, which threatened 
to declare the housing allowance unconstitutional and would have 
cost American clergy $500 million each year.

The Justice Department will file a motion in the 9th Circuit 
Court requesting a dismissal of the Warren case without a 
decision on the merits. The plaintiff, the Rev. Rick Warren, 
founder and pastor of Saddleback Valley Community Church in 
Saddleback Valley, California, is expected to join in that 
motion.

"Clergy are not the only category of taxpayers who are 
eligible for this kind of benefit. It also applies to military 
personnel and some college/university personnel who share some 
of the same housing issues and problems with clergy," commented 
the Rev. James Wilson, executive director of the Episcopal 
Church's Clergy Deployment Office. "It helps to even the playing 
field with respect to some tax issues where clergy have a 
disadvantage, such as the requirement that clergy pay 
self-employment tax for Social Security. Even where a so-called 
social security allowance is provided, it has to be in the form 
of additional taxable income because of this peculiarity in the 
tax code."

The Church Alliance, an ecumenical coalition of 32 pension 
boards from Protestant, Catholic and Jewish denominations that 
promotes legislation to strengthen church benefit programs, 
worked with members of Congress and federal agencies to clarify 
the statute. The legislation amends the Internal Revenue Code to 
provide that the clergy housing allowance is limited to the fair 
market rental value of a house. 

The clergy housing tax exemption is justified on the basis 
that that clergy are expected to be available to their 
congregants at all hours and their homes are frequently used for 
church functions. Loss of the exemption would have been 
especially hard on small congregations and churches, synagogues, 
mosques and temples in rural areas.

------

--The Rev. Jan Nunley is deputy director of Episcopal News 
Service.