The Real Deal New York

“Ministers of the gospel” property tax exclusion draws fire

Under proposal, Code section 117 would exempt clergy from housing cash allowance taxation
March 03, 2014 12:18PM

Clergy would be exempt from a proposed plan to limit the amount of income an employee can generate from an employer-owned property, thanks to a generous exclusion for “ministers of the gospel.”

Under the plan — proposed by Michigan congressman Dave Camp — principal residence indebtedness would be limited to between $500,000 and $1 million, and real estate taxes would no longer be deductible. The amount of income excluded from taxation would also be limited under a provision called Internal Revenue Code section 119. But another Code section 107 would exempt preachers and clergy from the provision, enabling an exclusion for their housing and cash allowances for such abodes.

“That Congress would put limits on tax-free housing allowed under IRC 119 and not under IRC 107 is simply untenable,” Adam Chodrow, an Arizona State University law professor, told Forbes. “There is no justification whatsoever for allowing cash payments to clergy, as opposed to in-kind housing, to go untaxed.”

The proposal is under fire from the Freedom From Religion Foundation, which won a first battle to pull down the measure in District Court. There are also objection within the clergy itself, with one pastor telling Forbes that the potential lack of financial transparency could attract the “wrong type of people” to ministry. [Forbes]Julie Strickland