Tom Coburn Tax Decoder Takes On Clergy Tax Abuse

Forbes/December 16, 2014

By Peter J Reilly

Senator Tom Coburn has served as a deacon in a Southern Baptist church but that has not prevented him from taking a blast at a tax break that benefits the Southern Baptist Convention mightily.   In his Tax Decoder, he takes on many of the sacred cows of the Internal Revenue Code.

"Tax Decoder attempts to provide a detailed and comprehensive overview of the code for all taxpayers. It includes the background, cost, and primary beneficiaries of each provision along with specific examples of some of the recipients of certain tax breaks. It covers well known tax provisions as well as others that are more obscure."

One that would have required quite a bit of political courage if he were running again was the “parsonage housing allowance”.  Under Code Section 107, “ministers of the gospel can exclude from income the fair market value of housing provided to them or a cash housing allowance provided in lieu of in-kind housing.  Unlike similar provisions, benefiting for example the military, there are no dollar limits on the parsonage exclusion and the mega pastors of mega churches  often have mega allowances to support their mega houses. Tax Decoder makes note of some of the abuse

"Trinity Broadcasting Network (TBN), for example, has ordained station managers and department heads to qualify part of their compensation for the tax break. Its employees are not like 'managers at a commercial station,' a TBN representative said of the situation.'[They have] gone through a religious procedure before ordination.'”

"One Christian recording artist and pastor used the parsonage allowance to pay for his $1.4 million home in a gated Florida community. His church paid the home’s $7,000 monthly mortgage.107 Another pastor in North Carolina reportedly lives in a $1.7 million mansion, complete with a $5,000 air-condition dog house.108 The church refused to release financial information about its housing allowance."

The bottom line policy recommendation is to eliminate the cash housing allowance benefit, but continue the in-kind benefit as long as it applies to people in other professions.

  • The parsonage allowance should be eliminated. Pastors, rabbis, and other clergy are vital to our nation’s social composition. Their work in ministering to the poor and downtrodden is invaluable. However, they do not deserve special treatment from the tax code that others are unable to utilize even if they are in the same income category.
  • Additionally, the parsonage allowance clearly has a history of abuse by pastors who do not even need help for their daily expenses.   
  • To reduce fraud and special benefits for a small population of the country, the parsonage allowance should be eliminated, except for housing provided on church campuses (the traditional “parsonage”), as long as other employers are able to provide tax-free housing to their employees.

Senator Coburn’s attack on parsonage has not elicited much clergy response.  Reverend William Thornton, who blogs on Southern Baptist issue as the SBC Plodder is it as far as I can tell.  Reverend Thornton, who has benefited from the allowance, asks his fellow clergy to consider whether they should be doing something about the abuse.

"….if clergy are receiving attention on this and are being grouped with Lady Gaga and Kanye West maybe it’s time we at least spoke up against the abuses of it. Why should a fabulously compensated minister living in a Gatsbyesque mansion be rewarded with tax free income? Why, indeed. Like it or not, fair or not, we are all being grouped with people and classes of consumers that most of us find offensive. What about “seek first the kingdom of God”? What about 'blessed are the poor'?   What bothers me personally is that, invariably, when the matter is discussed I find hard-working, meagerly-paid, obscure and humble SBC clergy spending energy defending their colleagues who are in the millionaire mansion crowd and assailing any, like me, who dare criticize our Sacred Clergy Tax Break. Why? Are we lovable dupes?"

What really concerns Reverend Thornton is that none of the leadership of his denomination ever speaks out about the abuse of the housing allowance.  I’ve notice the same thing.  In the wake of Judge Barbara Crabb’s decision that exclusion of cash housing allowances was unconstitutional, I interviewed Russell Moore, President of the Ethics and Religious Liberty Commission of the Southern Baptist Convention.

"What was really interesting in my conversation with Reverend Moore is that, regardless of the constitutionality issue, he was unwilling to concede that there might be anything at all wrong with any aspect of the clergy housing allowance.   I asked him if maybe there should be some limit on the six figure mega housing allowances drawn by the mega pastors of the mega churches. Rev. Moore indicated that it would not even be appropriate for the SBC to suggest to the mega pastors, that as Herb Cohan used to say, 'Don’t be such chazzers.'  Each congregation is accountable to God for how it compensates its ministers."

Judge Crabb’s decision was overturned by the Seventh Circuit on grounds of standing

The only other commentary on Senator Coburn’s specific to the housing allowance is by my most constant commenter, Robert Baty, retired IRS appeals officer and bane of the basketball ministers. I cannot say that I found this piece.  Actually I instigated it.

In discussing the abuse of the parsonage allowance, Senator Coburn did not bring up Revenue Ruling 70-549 which allows colleges affiliated with the Church of Christ to pay tax free housing allowances to faculty and administrators, who are members of the Church of Christ.  The most well known beneficiary of this ruling is probably Pepperdine University. The Church of Christ has a priesthood of all believers theology making all members “ministers of the gospel”.  Constitutional scholar Edward Zelinsky, who defends the constitutionality of the cash housing allowance, but believes it is bad tax policy told me that he finds the ruling “unpersuasive” under the existing regulations and case law.

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