Re: ECFA Report to Senator Grassley!
- --- In Maury_and_Baty@yahoogroups.com,
"rlbaty50" <rlbaty@...> wrote:
> You can access this file at the URL:Here's how the housing allowance chapter looks (not all references and footnotes were copied):
A Report to Senator Charles Grassley
with Recommendations for
Religious and Charitable Organizations,
The Giving Public,
The Internal Revenue Service and
Treasury Department, and
Clery Housing Exclusion
Introduction and Background
The income tax exclusion for clergy housing was established
by Congress in 1921.
Originally, it excluded from a minister's taxable income
the rental value of a home provided by a religious organization.
In 1954, Congress amended the law to exclude from a minister's taxable income a housing allowance paid to the minister to the
extent that he or she uses the allowance to provide his or her
With the passage of the Clergy Housing Allowance Clarification
Act of 2002, Congress clarified its intent by amending the law
to provide that the exclusion is also limited to the fair rental value of the minister's housing.
The 2002 legislation was approved by a vote of 408 to 0 in the
U.S. House of Representatives and was approved in the U.S.
Senate by unanimous consent.
In other words, no member of Congress voted against the
President George W. Bush signed the legislation shortly
after passage by Congress.
In support of this legislation, Senator Max Baucus of Montana observed that:
> This section of the Code is similar to oneThe Grassley Staff Report expresses concern that a small
> for employer-provided housing for other
> taxpayers. The one for clergy is much simpler,
> in order to minimize the involvement of the
> Government in the affairs of churches, that
> is, to keep the separation between Church and
number of ministers live in employer-provided homes with
high values or receive allowances to live in high-value
On another front, the validity of the clergy housing exclusion
is being challenged in federal court by parties who claim it
violates constitutional provisions.
Additionally, observations have been made that some religious organizations consider significant portions of their workforce
to be ministers. Accordingly, they treat them as ministers for
income tax purposes, which may include providing housing or a
Observers have expressed concerns that practices in this area
by some organizations may be abusive.
Relevant Portion of Grassley Staff Report: Pages 1016
28 148 Cong. Rec. S2957 (daily ed. Apr. 18, 2002) (statement
of Sen. Max Baucus).
Should the clergy housing exclusion be
limited to a specific dollar amount?29
To withstand further constitutional scrutiny,
should the law related to the clergy housing
exclusion be amended to broaden its applicability?
Should the clergy housing exclusion be limited
to a more select group of individuals?
Religious and Charitable Organizations
For the good of our country's moral fabric,
religious organizations and their leaders
must represent the best examples of faith
and good moral conduct in all areas of
financial activity. The vast majority of
them do. Religious organizations and their
leaders most certainly should not attempt
to skirt the law for financial gain. Operating
on the high road of integrity includes making
reasonable and appropriate determinations as
to who is a minister consistent with the polity
of each religious organization and making
appropriate decisions regarding clergy housing
or related allowances. For a religious
organization or its leaders to intentionally
abuse the law is shameful and damaging to
its mission and to the religious community as
a whole. On the other hand, when individual
organizations and leaders set their bar
highand even raise the barit inspires others
to do the same. We encourage all religious
organizations and their leaders to help raise
the bar of reasonable and ethical conduct in
Given the dual tax status of many members
of the clergy (e.g., the common circumstance
in which a minister is an employee for income
tax purposes but subject to the self-employment
tax for Social Security purposes), and the fact
that the clergy housing exclusion applies to
income tax but not to Social Security tax,
much confusion exists among members of the
clergy regarding the applicability of the
exclusion under current tax law. Accordingly,
the IRS should improve the tax forms, worksheets,
and educational guidance for members of the
clergy in connection with the clergy housing
The Grassley Staff Report also raised a question, in light of
a Tax Court decision for which appeals had not been exhausted
at the time, as to whether the exclusion for a clergy housing allowance should be limited to a single home.
Subsequent to the issuance of the Grassley Staff Report, an
appeals court decision and denial of certiorari by the U.S.
Supreme Court rendered the issue moot, having effectively
clarified that the exclusion is limited to a single home.
Comm'r v. Driscoll, 669 F.3d 1309 (11th Cir. 2012), cert.
denied, 81 U.S.L.W. 3167 (U.S. Oct. 1, 2012) (No. 12-153).
Accordingly, the Commission has not addressed that question
in this Report.
We recommend the following specific improvements:
Clergy housing allowances paid pursuant to
Section 107(2) should be required to be
reported by paying organizations on Form W-2
or Form 1099, whichever is applicable. The
amount should be reported for information
purposes in a manner so as not to imply that
it is subject to income tax.
A good-faith estimate of the value of an
organization-provided parsonage pursuant
to Section 107(1) should be required to be
reported by larger religious organizations
on Form W-2 or Form 1099 (whichever is
applicable) by the organization providing
the housing. The amount should be reported
for information purposes in a manner so as
not to imply that it is subject to income tax.
The IRS should develop helpful, understandable
forms or worksheets for use by clergy to
address issues uniquely related to the housing
exclusion in preparing Form 1040, including
determining the portion, if any, of a housing
allowance that is not exempt under Section
107(2) (for example, if the amount designated
as a housing allowance by a religious
organization exceeds the amount spent by the
minister in providing a home, the minister is
required to report the excess as taxable
income, even though it is not reported by the
payer as such on Form W-2 or Form 1099);
determining the portion, if any, of a minister's
unreimbursed business expenses that are not
deductible pursuant to Section 265, as applied
in Deason, Dalan, and McFarland;31 and
determining the gross amount (before applicable
expenses) of the housing allowance or the rental
value of an organization-provided parsonage, if
any, that is subject to self-employment tax and
reportable on Schedule SE.
In recognition of the recent unanimous Supreme Court
ruling in Hosanna-Tabor,32 great deference should be
given by the IRS to determinations made by religious
organizations, pursuant to their sincerely-held religious
beliefs, as to who is a minister for their organizations.
The Commission recommends that religious organizations that
are required to file fewer than 25 Forms W-2 and fewer than
25 Forms 1099 in a particular tax year be excepted from the requirement to report the estimated rental value of
parsonages on Forms W-2 and 1099.
We encourage smaller organizations, as a best practice, to
report that information if they have the practical means to
determine the estimated fair rental value. See Deason v.
Comm'r, 41 T.C. 465 (1964); Dalan v. Comm'r, 55 T.C.M. (CCH)
370 (1988); McFarland v. Comm'r, 64 T.C.M. (CCH) 374 (1992).
These cases address the fact that business expenses are not
deductible to the extent that they are allocable to income that
is tax-exempt due to the clergy housing exclusion. Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, 132 S. Ct. 694
Congress should not apply a dollar limit to the clergy
housing exclusion under Section 107 of the Internal Revenue
Code because, as described further below, attempting to do
so would create more challenges than it would solve.
In recognition of the recent unanimous Supreme Court
ruling in Hosanna-Tabor, great deference should be
given by Congress to determinations made by religious
organizations, pursuant to their sincerely-held religious
beliefs, as to who is a minister for their organizations.
Congress should not attempt to limit the clergy
housing exclusion to a more select group of individuals.
Congress should not expand the clergy housing
exclusion in an attempt to protect its
Basis for Recommendations
Two substantive limitations on the amount of the clergy
housing exclusion already exist in federal law that limit
the exclusion's value.
First, federal tax law prohibits excessive compensation for
leaders of tax-exempt organizations described in Section
501(c)(3), including religious organizations.
For this purpose, "compensation" includes benefits such as
housing, whether taxable or not.
Accordingly, the clergy housing exclusion is already limited
by law in that total compensation is limited to that which is reasonable.
Reasonable compensation is "the amount that would ordinarily
be paid for like services by like enterprises (whether taxable
or tax exempt) under like circumstances."
The second limitation on the clergy housing exclusion that
exists under current federal tax law is narrower because the
law provides that the exclusion may not exceed the lower
of the fair rental value of the housing provided (including furnishings and utilities) or the actual amount spent providing
In his 2002 Senate testimony supporting the addition of the
fair rental value limitation to the clergy housing exclusion,
Senator Max Baucus observed that these limitations impose reasonableness:
> It is good tax policy to keep a reasonableAfter careful analysis, the Commission determined that
> limit on the amount of [the clergy housing
> exclusion], as the IRS has done for decades.
> And it is good policy to make our intent
> crystal clear so that government involvement
> with religious affairs is kept to a minimum.
> This bill will do both.
imposing yet another limitation on the clergy housing
exclusion in the form of a dollar-based cap would create
more challenges than it would solve.
In other words, the cure would likely be worse than the
presumed disease. We identified the following significant
challenges associated with imposing a dollar-based cap:
The amount of a cap or limit would be arbitrary.
There is no "one-size-fits-all" limit.
A single cap or limit would be inequitable to
ministers who live in higher-cost areas of the
A geographically-variable cap would be complex
and difficult for taxpayers to apply and for
the IRS to administer.
Some clergy members are required, due to the
location of their houses of worship (and, in
some cases, due to the requirements of their
religion), to live in high-cost locales.
For example, in certain faith groups, clergy
are required to live within a specific distance
of the house of worship and are required to walk
to the house of worship for services.
In circumstances where such houses of worship
happen to be based in high-cost locales, the
members of the clergy, by virtue of their
religious doctrine, are required to live within
the same locale. Furthermore, regardless of
whether a member of the clergy is required by
doctrine to live within a specific distance of
the house of worship, the mere fact that a house
of worship exists in a high-cost locale limits
the practical ability of a member of the clergy
to choose lower cost housing in proximity to the
house of worship.
Some houses of worship own clergy residences that
were purchased long ago or were donated and have
high values today even though they did not have
a high cost to the organization.
We do not believe that a religious organization's
good stewardship (buying a parsonage at what was
a reasonable price in prior years) or its wise use
of a donated parsonage should result in extra
taxes on its clergy.
Imposing a cap at a level high enough to accommodate
the various real-life scenarios described above
(wherein the housing value or cost may be high for
appropriate reasons) would likely result in the
unintended and incorrect perception that any clergy
housing value or allowance within the cap is permissible
In other words, it would likely cause houses of worship
and clergy to gravitate upward toward the cap.
Additionally, the Commission noted that another similar
housing exclusion in the Internal Revenue Code, the
employer-provided housing exclusion under Section 119,
does not have a dollar-based cap.
We see no valid federal policy reason that a tax benefit
for clergy housing should have a dollar-based cap when
the exclusion in Section 119 for employee housing
typically associated with taxable corporations and
business operates without such a limit.
In its recent ruling in Hosanna-Tabor, the U.S. Supreme
Court unanimously reaffirmed its clear support for the
authority and freedom of a religious organization to
determine who qualifies as a minister, free from
interference from the federal government.
Appropriate respect must be given to such a decision,
and we note especially that the Court's ruling was
Based on the principles espoused by the Court and enumerated
in the First Amendment, we believe great deference should be
given by Congress and the IRS to the sincerely-held religious
beliefs of religious organizations as to who is a minister
for their organizations.
Congress should not attempt to limit the clergy housing
exclusion to "a more select group of individuals" - the term
used in the Grassley Staff Report.
We believe that any effort to amend the law to restrict
the clergy housing exclusion to a more select group of
individuals is likely to be insufficiently sensitive to
the variety of religious practices in America and will
result in a rule that infringes upon the constitutional
rights of religious organizations to select their ministers
and to govern themselves free from government interference.
An effort by Congress to expand the clergy housing exclusion
in an attempt to protect its constitutionality could be counterproductive. Legal experts advised the Commission
that there is good reason to believe the clergy housing
exclusion can withstand a legal challenge to its
Further, we are concerned that expanding the exclusion to
include one or more additional categories of taxpayers,
in addition to being costly, could actually enhance the
risk to the law's constitutionality.
The stated motivation for such an expansion would presumably
be concern that the law in its present form is unconstitutional-
rather than a genuine desire to add a new category of taxpayers
to receive the exclusion.
As stated above, the dual tax status of many members of the
clergy results in much confusion regarding the applicability
of the exclusion under current tax law.
For example, even though a minister may be an employee of a
religious organization for income tax purposes, members of
the clergy are subject to self-employment tax for Social
Further, even though the value of using a parsonage provided
to a minister by a house of worship is exempt from the
minister's income tax, it is subject to self-employment tax.
The same is true for a clergy housing allowance.
Additionally, a minister may not be entitled to exclude from
taxable income the entire amount of a housing allowance paid
to him or her due to the limitations on the exclusion described
Further complicating the tax compliance requirements for
ministers is the fact that unreimbursed business expenses
are not fully deductible for income tax purposes if the
minister is entitled to the clergy housing exclusion.
However, the limitation on business expense deductibility
that applies for income tax purposes does not apply in
determining net income from self-employment. Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, 132 S. Ct. 694,
This is true unless they have elected out of self-employment
coverage with respect to earnings as a minister by filing
For the reasons cited above and more, tax compliance for
members of the clergy is no simple task.
While the IRS has published some helpful guidance addressing
these issues (particularly Publication 517, Social Security
and Other Information for Members of the Clergy and Religious Workers), we believe members of the clergy would benefit
substantially from new, very well-written, well-designed,
separate, practical guidance related to the tax issues
uniquely involving the clergy housing exclusion.
Such additional guidance should be directly integrated into
the forms, worksheets, and instructions of Form 1040.
Additionally, we believe that consistency in the practice
of reporting clergy housing amounts on Form W-2 or Form
1099 will significantly enhance compliance with the law by
It is generally essential for ministers to know the amount
of a housing allowance and/or the fair rental value of
organization-provided housing to properly report both their
income and Social Security tax obligations:
Income tax. In the case of a housing allowance,
a minister must compare the amount of the allowance
to both the fair rental value of his or her home
(with furnishings and utilities) and the amount
spent providing the home in order to determine if
the full amount of the allowance may be excluded
for income tax purposes.
Self-employment tax. The minister must know the
amount of a housing allowance in order to properly
report it as income for self-employment tax purposes,
unless he or she has elected out of Social Security
coverage with respect to his or her ministerial
income by filing Form 4361.
Additionally, for organization-provided housing,
clergy must know the estimated fair rental value
of the home in order to properly report it as income
for self-employment tax purposes, unless he or she
has elected out of Social Security coverage as stated
Further, reporting the amount of allowances or housing
provided to a minister helps the minister and the
employing organization alike by providing information
about the minister's total compensation, which is
subject to the reasonableness standard under federal
tax law. See I.R.C. § 4958(c)(1)(A) and related Regulations.
I didn't have any problem when I cut and pasted the link into my browser and then clicked on the file icon.
However, maybe this will be an easier fix.
I have a clickable link at the top of this article.
Try it and see if it works for you.
From: Maury_and_Baty@yahoogroups.com <Maury_and_Baty@yahoogroups.com> on behalf of PIASAN@... [Maury_and_Baty] <Maury_and_Baty@yahoogroups.com>
Sent: Sunday, April 2, 2017 12:47 AM
Subject: Re: [M & B] Brady Byrum's No-Longer-Secret 25-Page Baby Holm LetterFYI...I couldn't load either link.-----Original Message-----
From: Robert Baty rlbaty@... [Maury_and_Baty] <Maury_and_Baty@yahoogroups.com>
To: Maury_and_Baty <Maury_and_Baty@yahoogroups.com>
Sent: Sat, Apr 1, 2017 10:24 pm
Subject: [M & B] Brady Byrum's No-Longer-Secret 25-Page Baby Holm Letter
This email message is a notification to let you know thata file has been uploaded to the Files area of the Maury_and_Baty
File : /Brady Byrum Baby Holm Letter.pdf
Uploaded by : rlbaty50 <rlbaty@...>
Description : The no-longer-secret 25-page letter Brady Byrum, Kent Hovind's legal dream team leader, created for use by C. Clarke Holm in his custody dispute with the State of Alabama
You can access this file at the URL: