Tax benefit at risk for ministers of all faiths

Faith groups such as the Eastern Orthodox Church, Hindus, Muslims, and Protestants together filed an amicus brief last week in support of tax-exempt housing allowances for ministers.

The brief supports the appeal of a November 2013 federal court ruling that the 60-year old tax exemption, called the “parsonage allowance,” was unconstitutional because it served no “secular purpose.”

“The exemption provides a benefit to religious persons and no one else,” wrote U.S. District Judge Barbara B. Crabb, “even though doing so is not necessary to alleviate a special burden on religious exercise.”

The Becket Fund for Religious Liberty, who filed the brief on behalf of the faith groups, argues the tax exemption does serve a secular purpose: It ensures fair tax treatment of employee housing costs.

“Since its inception, the federal income tax system has recognized that some housing costs are incurred primarily for ‘the convenience of the employer’—not for the employee’s personal consumption—and are therefore not income. Many tax provisions embody this doctrine,” the brief said.

In most cases, an employee can choose where to live, but certain jobs require their employees to live in a specific location. Military families who move to new assignments, hotel managers who must live onsite, commercial fishermen who must live on a ship, and Peace Corps volunteers and CIA operatives who live overseas all benefit from tax-exempt housing allowances.

The tax code first established the “convenience of the employer” doctrine in 1914. In 1954, Congress allowed both secular and religious employees to exclude the value of lodging from gross income if three conditions were met: the lodging is furnished on the business premises of the employer or in nearby “satisfactory housing,” the lodging is furnished for the convenience of the employer, and the employee is required to accept such lodging as a condition of his employment.

The Becket Fund brief claims ministers meet those criteria. Typically, ministers are required to live near where they serve. Muslim imams must be available to lead prayers five times a day at the mosque, Orthodox Rabbis must live within walking distance of the synagogue due to Sabbath restrictions, and Protestant ministers serving a particular neighborhood are expected to live there. Numerous ministers, such as Catholic priests who perform the sacrament of anointing those close to death, are required to be available “day and night” to serve their congregations. In hierarchical denominations, ministers face frequent moves and limited housing choices because higher authorities determine their service location. In addition, many ministers use their homes in their duties, including hosting church events like Bible studies, new member meetings, and temporary lodging for visiting missionaries.

“The tax code is littered with exemptions for employer-provided housing benefits,” said Luke Goodrich, Deputy General Counsel of the Becket Fund for Religious Liberty in a statement. “The parsonage allowance simply ensures that ministers receive equal treatment.”