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Commentary: Time to End Clergy Tax Breaks?

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In this week’s Acton News & Commentary, Rev. Gregory Jensen observes that religious communities on both the left and the right can agree that government budgets are “moral documents.” He then offers a novel suggestion for closing budget gaps while offering clergy an opportunity to show solidarity with the poor. Subscribe to the free weekly ANC and other Acton publications here.

Time to End Clergy Tax Breaks?

By Rev. Gregory Jensen

Unless you are a member of the clergy or involved with the finances of a church or temple, you probably don’t know that since 1921 the federal government has subsidized a congregation’s remuneration of its pastor. This happens through the extension of a housing or “parsonage allowance” that makes it possible for an ordained member of the clergy to live “tax-free in a home owned by his or her religious organization or receive a tax-free annual payment to buy or rent a home if the congregation approves.” Originally, this was meant as a way of helping “minimize taxes on clergy members, whose compensation was often meager.”

Recent court cases have extended “the parsonage allowance to an unlimited number of homes, which may be owned either by the religious organization or the clergy member. However unintentionally, in doing this the courts may have opened “the door for the allowance to be applied to multiple homes used by leaders of wealthier ministries.” Among those concerned about the possibility that this will lead to abuse or an unjust situation is Senate Finance Committee member Sen. Charles Grassley (R., Iowa). “It’s fair to question,” he says “why a clergy member needs a tax-free allowance for more than one home, and whether tax-exempt churches should subsidize millionaire ministers” (Tax Break for Clergy Questioned).

Yes, there will no doubt be those who abuse the system but when is this not the case? Religion plays a key role in maintaining a free and virtuous society, and an argument can be made that subsidies, such as the housing allowance or non-profit status for religious ministries, are a good thing for society lowering as they do the cost of maintaining a diverse range of religious communities which, in the aggregate, have a positive social effect.

The recently issued document “A Circle of Protection” rightly points out that “Budgets are moral documents, and how we reduce future deficits are historic and defining moral choices.” Christians from both the political left and right can, and should, agree with this. Likewise, I think it would be difficult for me, or any Christian, to deny that “It is the vocation and obligation of the church to speak and act on behalf of those Jesus called ‘the least of these.’” Nor would I, or any thoughtful Christian, deny that such a witness is essential part of “our calling” and that we must “strive to be faithful in carrying out this mission.”

Where some Christians might disagree is with their contention that the federal budget must give a “moral priority to programs that protect the life and dignity of poor and vulnerable people in these difficult times, our broken economy, and our wounded world.” Others, like those involved with Christians for a Sustainable Economy, have done a very good job of criticizing the document’s equating support for government programs with support for people so I won’t repeat those criticisms here. I would however like to make a more general point.

A number of the signatories of “A Circle of Protection” are ordained clergy and/or representatives of various Christian denominations or ministries. Many, and I dare say most, probably benefit personally from the federal housing allowance for clergy. Because they work for religious denominations that are also non-profit corporations, they benefit institutionally from what, in a slightly different context, might be called corporate welfare.

Don’t misunderstand me. I’m not suggesting that there is anything necessarily wrong with either the clergy housing allowance or a ministry having non-profit status. As I said above, religious institutions play an important and essential role in fostering a free and virtuous society.

Nor am I calling into question the sincerity of anyone’s faith. But I am mindful of the admonition that we “do no injustice in judgment” by being “partial to the poor” or holding in “honor the person of the mighty.” We are instead to be “righteousness” in our judgments (Lev 19:15, NKJV). I wonder whether or not under such a standard a Christian community can “be faithful in carrying out” its “mission” to speak for those in material need while at the same time accepting for themselves preferential treatment under the tax code. In light of these considerations, perhaps those clergy who are advocating for more government spending would do their share for this cause by voluntarily—and very publicly—returning to the U.S. Treasury an amount equal to their parsonage allowance. Annually.

The Rev. Gregory Jensen is a priest of the Archdiocese of Washington, D.C. (Orthodox Church in America). He blogs at Koinonia and is a contributor to the Acton PowerBlog and the American Orthodox Institute’s Observer.

John Couretas John Couretas is Director of Communications, responsible for print and online communications at the Acton Institute. He has more than 20 years of experience in news and publishing fields. He has worked as a staff writer on newspapers and magazines, covering business and government. John holds a Bachelor of Arts degree in the Humanities from Michigan State University and a Master of Science Degree in Journalism from Northwestern University.


  • Duane Schmidt

    “Unless you are a member of the clergy or involved with the finances of a church or temple, you probably don’t know that since 1921 the federal government has subsidized a congregation’s remuneration of its pastor.” 
    This assumes the government already owns everything. I would not expect such assumptions from an Acton Institute blog post. The absence of forcible seizure  through taxation is NOT the same as subsidization unless you are in a system like China.

    The post also assumes that the federal government is better at distributing wealth through force unlike private charities and individuals that do so through love.

    • Duane Schmidt

      I apologize.  I scanned the post too quickly before commenting.  The writer is obviously playing devil’s advocate with left leaning pastors. And, I would expect such a post at Acton!  Keep up the good work! Thanks.

    • Duane,

      Thank you for your comment.

      I am not assuming that the government owns everything. Merely pointing out the housing allowance and non-profit status of religious institutions are of relative  financial benefit to the pastor and to the congregation. 

      For example, assume for the sake of illustration a pastor makes the same annual salary as a social worker or high school teacher. The fact that the pastor’s housing cost–and this is not only the total cost of mortgage/rent and utilities, but also cable tv and computer subscriptions and (I believe) general upkeep and maintenance–can give the pastor a significant financial advantage relative to other professions.

      This advantage, I would argue, also benefits the congregation.  At the risk of over simplifying, their pastor’s tax advantage means that their remuneration of the pastor goes just that much further.

      Add to this the fact that religious congregations typically don’t pay property taxes and we see even more  relative  benefit for the community.

      Again, none of this assumes the government owns everything. Only that the tax code benefits both the pastor and the congregation  relative  to other professionals or social institutions (e.g., a small business)

      I agree with you that private individuals and charities are better than the at distributing wealth. I’m not arguing otherwise here but am simply responding to the particular policy recommendations in the Circle of Protection that government funding for anti-poverty not be cut since to do so is harmful to the poor. Assuming that this is correct, an assumption that I do not share, then I would argue that those who signed the CoP might want to shift their own personal and denominational savings from the housing allowance and their non-profit status to support those programs.  I don’t know, maybe they know something I don’t about the effectiveness of these programs.  If so, then they free to support them from their own resources.  

      Finally, I am making here a moral argument as well. In a nutshell, clergy and religious  institutions need to lead by example. While I don’t think housing allowances or the non-profit status of religious institutions is immoral, it is a privilege–but again relative to others.

      Make sense?


      Fr Gregory

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  • In light of my post here I thought there might be some interest in this from the Madison, WI based Freedom From Religion Foundation:

    FFRF v. Geithner Parish Exemption (US District Court Western District of Wisconsin)
    The Freedom From Religion Foundation, with plaintiffs Annie Laurie Gaylor, Anne Nicol Gaylor and Dan Barker, filed a nationally significant federal lawsuit in Madison, Wis., on Sept. 13, 2011, challenging tax benefits for “ministers of the gospel,” commonly known as “the parsonage exemption.” FFRF seeks a declaration that the federal statute creating the parish exemption, as administered by the IRS and the Treasury Department, violates the Establishment Clause of the First Amendment by providing preferential tax benefits to ministers of the gospel. FFRF requests the court to enjoin the allowance or grant of tax benefits exclusively for ministers of the gospel under the litigated act. The individually named plaintiffs, either currently directors or retired directors of FFRF, currently receive a housing allowance designated by FFRF’s governing body, yet do not qualify for the housing allowance as they are promoting non-belief, rather than religion. In fact, Dan Barker is an ordained minister who previously was able to utilize the housing allowance and exclude such payments from his taxable income. Ministers, who are paid in tax-free dollars, also may deduct their mortgage interest and property tax payments. Under federal law, allowances paid to “ministers of the gospel” are not treated as taxable income. “Ministers of the gospel” may uniquely claim these benefits, so the statutes convey a governmental message of endorsement, unconstitutionally favoring religious employees and institutions over all others. The exemptions permit clergy to deduct from their taxable income housing allowances furnished as part of compensation. The unique benefits to clergy date to 1954, when Congress amended the tax code to permit all clergy to exempt their housing costs from their incomes taxes. U.S. Rep. Peter Mack, author of the amendment, declared:
    “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.”
    “The income taxation of ministers of the gospel under the general rules that apply to other individuals would not interfere with the religious mission of churches or other organizations or the ministers themselves,” the legal complaint maintains. The statutes are not an accommodation of religion, therefore, but a subsidy.
    Defendants are Timothy Geithner, U.S. Treasury secretary; Douglas Shulman, Internal Revenue Service commissioner; who are all providing tax benefits only to “ministers of the gospel,” rather than to a broad class of taxpayers. FFRF withdrew its previous case, filed in October 2009 in federal court in Sacramento with 21 federal taxpaying FFRF-dues paying plaintiffs, following the Supreme Court’s 2011 decision on taxpayer standing in the Winn Arizona tax credit case. FFRF has refiled with plaintiffs who have been directly injured by the preferential law.
     Legal Complaint (Sept. 13, 2011)