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Freedom from Religion Foundation files suit to end tax break for ministers
By Bob Smietana
February 16, 2010
A nationwide atheist group is asking religious leaders to take Jesus' advice and render unto Caesar what is Caesar's especially when it comes to taking the federal tax break on their housing.
The Wisconsin-based Freedom from Religion Foundation says the housing exemption gives churches an unfair advantage because they can compensate their leaders with tax-free housing. Other nonprofits, such as the foundation, can't do that. So it's suing the federal government to outlaw the housing allowance.
"We think the law is rotten at the core," said co-president Annie Laurie Gaylor. "It is not constitutional, it is not fair, and it is not necessary."
But the exemption's supporters point to a similar court dispute in 2002 that went nowhere after Congress almost unanimously rushed to save the housing break.
Dan Busby, who runs the watchdog group Evangelical Council for Financial Accountability, thinks Congress would do the same today.
"I don't think this lawsuit is going anywhere," he said. "Both houses of Congress don't want to touch this."
Busby says that losing the housing allowance would cause significant harm to churches and ministers particularly those with small congregations. A minister who gets a $20,000 housing allowance, for example, saves about $6,000 a year in taxes, he said.
"For a minister, I don't know if that would make or break things," he said. "But it might."
The Justice Department is expected to file its first response to the Freedom from Religion lawsuit by the end of the month.
Since the 1920s, the Internal Revenue Service has given ministers a tax break on their housing. Ministers who live in church-owned parsonages get that benefit tax-free. And since the 1950s, clergy of all faiths can write off all their housing costs, even if they own their own homes.
To take the tax break, ministers must be endorsed by a religious group and perform typical duties of the position such as performing sacraments and leading worship services. Giving special tax breaks to ministers is unconstitutional, said Erwin Chemerinsky, dean of the University of California, Irvine School of Law.
"The purpose is clearly to help religion," he said. "Ministers of the gospel get a tax break that no one else can get."
J. Brent Walker, executive director of the Baptist Joint Committee for Religious Liberty, disagrees. Walker's group opposes direct government funding of religion. Not collecting income tax is a different matter, he said.
"There's a difference between making an accommodation for religion and endorsing religion," he said. "The housing allowance is an accommodation."
Ken Behr, a pastor at LifeChurch.tv in Hendersonville, takes the housing allowance, which he says offsets penalties he gets for being a minister.
Behr, like most ministers, is not an employee of his church. He is considered self-employed, so he pays twice as much for Social Security as most workers, and he pays the self-employment tax.
Behr admits the housing allowance can be abused. Before coming to Hendersonville, Behr was president of the Evangelical Council for Financial Accountability and saw abuses of the housing allowance.
He said the IRS is reluctant to audit ministers or meddle in the finances of churches, so some ministers illegally overstate their housing expenses in order to claim a bigger allowance.
"If someone gets a $40,000 housing allowance, they have to be able to show $40,000 of expenses," Behr said.
Thaddeus Schwartz, head of Secular Life, a Nashville-based group for nonbelievers, wants to see the housing allowance outlawed. He thinks ministers should read the Bible a little more carefully. Especially Matthew 22:21 the "Caesar unto Caesar" passage.
The housing allowance doesn't apply only to church pastors. Clergy who work at religious universities also can receive the benefit.
About 15 employees at Lipscomb University take housing tax exemptions as ministers, said Kim Chaudoin, a university spokeswoman. That's because the IRS considers Lipscomb an integral agency of the Churches of Christ.
Ministers who taught at Belmont University in Nashville used to be able to take the housing allowance as well, when the school was part of the Tennessee Baptist Convention. When the school split from the convention in 2007, that changed, said Jason Rogers, vice president for institutional advancement at Belmont.
Before the split, about a dozen ministers on staff took the housing allowance. Now that Belmont is no longer a denominational school, only ministers who preach or minister on campus can take it.
The Belmont cases shows another flaw with the housing allowance, said Ron Flowers, emeritus professor of religion at Texas Christian University.
Flowers, an expert on church-state issues, used to support the housing allowance. Now he thinks the allowance is illegal because the IRS decides who is a real minister and who is not.
"The IRS has to determine whether is a person is an ordained clergyperson or not," he said. "And that's unconstitutional."