WASHINGTON (BP)–Legislation has been introduced in the U.S. Senate to preserve a longstanding housing tax exemption for ordained ministers and other clergy.
Sen. Max Baucus, D.-Mont., introduced the Senate version, S. 2200, April 18, only two days after the House of Representatives approved the Clergy Housing Allowance Clarification Act with a 408-0 vote. The Senate and House bills are designed to protect the exemption by amending the Internal Revenue Code to make clear the allowance should not exceed the “fair rental value” of a house, including furnishings, accessories and utilities.
“It is a very simple bill that confirms established Internal Revenue Service policy that has lacked the force of law,” Baucus said on the Senate floor while introducing the legislation. “Without this clarification, we risk losing a longstanding benefit that is terribly important to hundreds of thousands of ministers, priests, rabbis and other clergy all across America.”
The legislation has been on a fast track since Rep. Jim Ramstad, D.-Minn., introduced it in the House April 10. The speed with which Congress has moved so far came in reaction to a threat by a federal appeals court to strike down the allowance as unconstitutional. A panel of the Ninth Circuit Court of Appeals announced in March it is reviewing the constitutionality of the allowance.
“The court could invalidate the clergy housing allowance any day, and that’s why today’s speedy consideration of my legislation by the House was so crucial,” Ramstad said after the House vote. “The House has done its job in a bipartisan way, and now the Senate needs to step up to the plate, pass this bill and prevent a disastrous tax increase on America’s clergy.”
Richard Land, president of the Southern Baptist Ethics & Religious Liberty Commission, has said it is “important to get this in the black-letter law and thereby put the full force of Congress behind the clergy housing allowance.”
Lawyers from the SBC’s Executive Committee, Annuity Board and ERLC, as well as other religious organizations, have worked to see the exemption is preserved.
While the legislation would not settle the issue of constitutionality, its supporters hope it will end the Ninth Circuit’s threat to the allowance by codifying the “fair rental value” language formerly used by the Internal Revenue Service. The legislation’s backers believe it could provide a way for both sides in the case to resolve the dispute.
Since 1921, pastors and other religious leaders have been able to deduct from federal taxes a portion of their income for housing. This allowance has been especially helpful in enabling small churches to have a fulltime pastor. It has been estimated loss of the allowance would result in members of the clergy paying an additional $2.3 billion in taxes during the next five years.
The question of the allowance’s constitutionality came when the Ninth Circuit received the case, Warren vs. Commissioner of Internal Revenue. A divided three-judge panel from the San Francisco-based court announced it would consider whether it should weigh the exemption’s constitutionality and, if so, whether the allowance would pass the test under the First Amendment’s ban on government establishment of religion. Neither party in the case, however, has challenged the exemption’s constitutionality. Friend-of-the-court briefs are due in May.
In May 2000, a U.S. Tax Court in California ruled against the IRS in a 14-3 vote. The court ruled the exemption in the code is limited “to the amount used to provide a home, not the fair market rental value of the home.” The IRS appealed the ruling.
Those interested in contacting their senators about the legislation may do so by accessing www.erlc.com/capitolhill.
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