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Time for clergy tax break to go?

By Kay Bell ·
Tuesday, September 6, 2011
Posted: 4 pm ET

Religion and politics are two of the three things you should never discuss at a polite dinner party. They occasionally come up, however, when you talk about taxes.

There are many popular tax breaks that cost the U.S. Treasury billions of dollars. Expect them to get at least a cursory look by the new special committee created to find ways to reduce the federal deficit.

But another less-common tax benefit also has received some recent attention as folks explore all possible ways to get Uncle Sam any additional dollars. And it involves the convergence of religion and politics.

The U.S. Tax Court recently determined that ordained taxpayers can buy or live in multiple homes tax-free. The decision came in the case of Phil Driscoll, a minister who also happens to be a Grammy Award-winning trumpeter who went to prison for tax evasion.

Under the parsonage allowance section of the Internal Revenue Code, a qualified member of the clergy may live tax-free in a residence owned by his or her religious organization or, if the congregation approves, may receive a tax-free annual payment to buy or rent a home.

Driscoll and the Internal Revenue Service were at odds over $408,638 that he got from his church to buy a second home on a lake near Cleveland, Tenn.

Driscoll argued that the word "home" in the tax law's clergy residence exclusion section is equivalent to "homes," just as "child" is interpreted to mean "children" elsewhere in the tax code. That would mean Driscoll wouldn't owe taxes on the church money he got for his waterfront property.

The Tax Court judges, by a narrow 7-6 margin, agreed with Driscoll. Do you?

Should ministers get tax-free housing? Should it apply to multiple homes?

Or should members of the clergy have to pay for their residences, either by buying them on their own, in which cases they still could deduct mortgage interest like layman homeowners, or by having the value of church-provided housing counted as taxable compensation?

Supporters of the tax break say that Driscoll's multiple home situation is unusual. They note that in most cases ministers aren't paid very much and the housing break helps minimize taxes on these relatively low earners.

Others, however, say that the tax break is unfair and needs to go. The IRS doesn't keep statistics on the parsonage tax benefit, but opponents of the tax break argue that in this time of deficit scrutiny no amount of potential tax money should be excluded, even when it's associated with a higher power.

Among those interested in examining the clergy residence tax issue is Sen. Charles Grassley, R.-Iowa. The ranking member of the Senate Finance Committee has said he wants to ensure that the spirit of the provision isn't violated.

We'll just have to wait and see if Congress takes up this potentially contentious conversation. It could happen. Since our federal legislative body already conducts itself in a pretty impolite manner, it shouldn't be bothered by having a religious tax conversation.

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October 20, 2011 at 8:48 pm

I thought that the government and religon were to be kept seperate.why are they protected by the government by allowing them to not pay taxs. Where are the atheists not doing anything about this? Some of the tellaevangelists are making millions and dont pay any tax.

October 05, 2011 at 3:33 pm

If corporations can get away with not paying taxes, what's wrong with churches doing the same thing?

September 08, 2011 at 9:57 am

Many religious groups require vows of poverty for their spiritual leaders, preachers, pastors, etc. and their income from the organization is exactly at poverty level amount as designated by the local area. Waterfront property! And the congregation is probably having rummage sales and car washes to fix the church roof. This is blatant abuse and needs some kind of review. Not every religious institution is crooked. It would be a shame to tax the good guys to bits too.

September 07, 2011 at 11:49 am

Why just center the church. Why not congress & white house. They should have to pay for retirement & once out of office go back to working hourly like the rest of the working class & pay for health Ins. Their not god. but they have taken god out of the white house.

Peter Reilly
September 07, 2011 at 11:25 am

The most serious abuse in this area could be eliminated by putting a dollar limit on the amount of cash rental allowance that can be exluded.

September 07, 2011 at 8:23 am

It is about time we stopped subsidizing superstition. Religion has led to wars since the beginning of civilization. Gods change over time. Today's god may be tomorrow's myth.

September 07, 2011 at 8:22 am

It is about time we stopped subsidizing superstition. Religion has led to wars since the beginning of civilization. Gods change over time. Today's god may be tomorrow's myth. Wise up America. It is the 21st century. Stop subsidizing those who do not work for a living but who want to control the lives of those who do work.

September 07, 2011 at 7:22 am

Church is just another word for business.

If everyone should be doing their part, why are these places sliding by like this?

Southern AZ reader
September 06, 2011 at 11:23 pm

$408,638 and they say it's for a low earner. I'm considered middle class and I bould barely afford one home for a third of that money, less two homes. Ministers should not be paid period, if they really want to serve and help others they would do it for free like Jesus did.

Gay Pagan
September 06, 2011 at 7:45 pm

I don't think the clergy should receive tax breaks and I think church property should be taxed just like any other business property. I had an uncle who got himself ordained and made his garage and several acres of prime land around it a church to avoid taxes. Then he & his wife got a couple of foster kids because they could make extra money off of them and they could help out around the house. Some preachers are really crooks. Why should they and the churches be getting tax breaks! It's time to get church and government seperate. It seems that the religious right is taking over more and more and that needs to stop. That's not what our founders intended when our country was established.