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The Grassley staff report and the pastoral housing allowance

The staff report to Senator Charles Grassley written by Pattara and Barnett [PDF] deals primarily with tax status of four items:

  1. Pastoral housing allowances
  2. Love offerings
  3. For-profit integrated auxiliaries
  4. Politicking

Today I want to deal with the history of pastoral housing allowances; in a later post I’ll deal with some of the problematic uses of the pastoral housing allowance.

Congress first excluded from gross income the rental value of parsonages furnished to ministers of the gospel in the Revenue Act of 1921. (page 11)

The authors go on to say that this was intended to treat pastors who received a housing allowance the same as those who got use of a church property (a parsonage) instead. I might gently suggest that in the current climate if we were facing the same inequity the recommendation might go the other way, and the recommendation would be to tax the pastor for his use of the parsonage. I say this on the basis of current discussion of e.g. tax-free insurance premiums [link]. Also, I would note the use of the language “minister of the gospel” here; in this document and elsewhere it serves as the point of entry for discussing revoking this exemption on the basis of Establishment Clause issues. On which more later.

In 1954, Congress adopted section 107(2) [of the Tax Code], thereby allowing a minister of the gospel to designate a portion of compensation as a housing allowance and exclude that amount from income. (page 11)

The authors cite the language used by Congressman Peter Mack [link] to justify the extension:

Certainly, in these times when we are being threatened by a godless and antireligious world movement, we should correct this discrimination against certain ministers of the gospel who are carrying on such a courageous fight against this foe. Certainly, this is not too much to do for these people who are caring for our spiritual welfare. (page 12)

Mack also claimed that preachers made less money than average workers:

Of our clergymen, 55 percent are receiving less than $2,500 per year. This is some $256 less than the $2,668 annual median income for our labor force. (page 12)

So the justification the Grassley staffers cite in Mack’s comments is basically this: preachers are poor and they’re our allies against godless Communism. Remember, this was 1954, early in the Eisenhower Administration. I would be inclined to cite this as an example of a step in the process of the American conservative Church being co-opted into, well, a certain segment of the American political Right, let’s say. In retrospect it’s hard not to see Congressman Mack’s comments as a quid pro quo.

The original intent, that the tax break would benefits “ministers of the gospel” is problematic nowadays, too, since many religious figures would not self-identify this way. I have a hard time believing that this language would pass Constitutional muster today. See discussion here and elsewhere. The alignment between preachers and “godless Communism” is not a going concern in quite the same way it was during the Eisenhower Administration; in fact it might be argued that the alignment between some preachers and some politicians makes the housing allowance more of a political football than it was then.

That brings us to the issue of whether preachers are poor and in need of a tax break. The staff report deals mostly with cases where preachers clearly are not poor and are not using the tax break for its intended purpose.

They don’t attempt to project Mack’s numbers forward; they do mention how many churches there are in the States:

the Yearbook of American and Canadian Churches reports that there are 331,000 church congregations in the United States (page 59)

But they don’t break this down into the useful number: how many people take the housing allowance exemption? How many of these have annual incomes below the median?

I think this is mostly because the Grassley staffers are mostly interested with six particular ministries, none of which are anywhere near the median income line. Or at least wouldn’t be by any reasonable measure of income, we suspect, if we knew what they actually made.

Regardless, the Grassley staffers cite a paper by Kamron Keele [link, link] that calls for “scrapping the exclusion entirely:”

Parts IV and V conclude that, as the parsonage allowance exclusion is not required for genuine clergy to exclude legitimate rental values of furnished parsonages as part of their compensation under section 119, Congress should scrap the exclusion entirely.

So it is important to keep in mind what’s at stake here: that the behavior of what we hope are a few outliers could be used as justification for revoking the exemption altogether.

 

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