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View Diary: Judge in WI rules tax exemption for minister's pay unconstitutional... (41 comments)

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  •  Helps to read the decision. That clarifies a few (0+ / 0-)

    things swirling in this discussion. These three paragraphs from the decision itself put two specific things in context (my emphasis).

    In their complaint, plaintiffs challenged both § 107(1) and § 107(2), but in response to defendants’ motion for summary judgment, plaintiffs narrowed their claim to § 107(2), which excludes from gross income a minister’s “rental allowance paid to him as part of his compensation.” (Section 107(1) excludes “the rental value of a home furnished to [the minister] as part of his compensation.”) Because plaintiffs have not opposed defendants’ argument that plaintiffs lack standing to challenge § 107(1), I will grant defendants’ motion as to that aspect of plaintiffs’ claim.
    So, those living in a church owned residence are not involved in this decision. Only those getting the cash instead—with the potential of what one story called "double dipping" in claiming mortgage interest and property tax deductions—are facing a tax.
    According to defendants, in 1921 the Treasury Department refused to apply the convenience of the employer doctrine to ministers who lived in church-provided housing. (Plaintiffs dispute that view, but I need not resolve that dispute for the purpose of this opinion.) Defendants say that, in response, Congress passed § 213(b)(11) of the Revenue Act of 1921, which allowed ministers of the gospel to exclude from their gross income the rental value of housing they received as part of their compensation. (That exemption later became § 107(1).) Finally, defendants say that the purpose of § 107(2) when it was enacted in 1954 was to eliminate discrimination against ministers who could not claim the already existing exemption for ministers who lived in parsonages. In particular, defendants say that § 107(2) was needed to help “less-established and less wealthy religions [that] were not able to provide housing for their spiritual leaders.” Dfts.’ Br., dkt. #44, at 33.
    The start came in 1921 when Treasury refused to grant "convenience of the employer" benefits available to non religious activities to ministers and Congressional action on that resulting in today's § 107(1) exemption on fair market value of housing occupied.
    Because the validity of § 107(1) is not before the court, I must assume for the purpose of this case that Congress did not violate the establishment clause by granting a tax exemption on the rental value of a home provided to a minister as part of his compensation. However, by defendants’ own assertion, the purpose of § 107(1) was to eliminate discrimination between secular and religious employees by giving ministers a similar exemption to the one now codified in 26 U.S.C. § 119 for housing provided to an employee for the convenience of the employer. Assuming this is correct, it does little to help justify the later enactment of § 107(2), which expanded the exemption to include not just the value of any housing provided but also the portion of the minister’s salary designated for housing expenses.
    So, what is being decided here is the fairly modern practice of including in salary the means to buy housing on the open market with all the equity and tax deduction opportunities there. It does not have an effect on that little church that built a house in a "corner of a field" or adjacent to a city church. It is useful to realize 26 U.S.C. § 119 allows other entities to provide tax free housing, even meals, "for the convenience of the employer."

    The only foes that threaten America are the enemies at home, and those are ignorance, superstition, and incompetence. [Elbert Hubbard]

    by pelagicray on Sun Nov 24, 2013 at 08:28:57 PM PST

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    •  I was aware (0+ / 0-)

      of some of your points, but I didn't realize secular employees could ever exclude housing from income. I guess I've never known anybody in that position, nor seen it in training.

      The whole thing is a bit of a mess, because there's no obvious solution that doesn't require treating somebody unfairly, compared to a similar somebody.

      The present decision, for example, allows the house to be tax-free, but only if the minister pays neither rent nor mortgage. If the same community charged even $1 rent, suddenly the whole FMV becomes taxable.

      Early to rise and early to bed Makes a man healthy, wealthy, and dead. --Not Benjamin Franklin

      by Boundegar on Tue Nov 26, 2013 at 07:20:46 AM PST

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