No ordination, no tax break, says IRS

National Catholic Reporter, Sept 1, 1995 by Arthur Jones

WASHINGTON -- Tom Christoffer and his wife, Anne, have made an apartment out of the top floor of the old rectory -- now called the parish center -- at St. Paul's in Comfrey, Minn., part of the New Ulm diocese.

Telephone the rectory in Amarillo, Texas, when the family's not home and a tape recording of young voice greets the caller. It's Jessica, 13-year-old daughter of deacon Leroy V. Behnke and his wife, Pat.

St. Philip Benivi's rectory is home also to Behnke children, Adam, 20, Rachel, 17, John, 16, and Joseph, 11.

Christoffer and Behnke are pastoral administrators. Nationwide, in settings like these, the church rectory isn't what it used to be. It used to be a nice tax break for the Catholic church. Under Section 107 of the tax code, "the parsonage allowance," as it is known, means the cost of buying, renting or repairing the rector is fully deductible.

But that only applies to ordained ministers, which means that while the Behnke rectory fits the bill -- because a permanent deacon is ordained -- the Christoffer rectory doesn't.

Where the tax law and the rectory are concerned, the growing presence of laypeople in parishes, call them pastoral ministers or administrators or coordinators, falls between the twin stools of the tax code and canon law.

The tax code itself is pretty clear, said Deirdre Halloran in the National Conference of Catholic Bishops' legal counsel's office. The parsonage allowance can work two ways: Either the minister receives an actual allowance, more typical in Protestant denominations, or a house is provided, as in a rectory situation. Both forms are tax-exempt.

"That's the basis on which priests are not required to pay tax on the value of the rectory," Halloran said. "The claim is not the right of the individual -- one that you or I could take," continued Halloran, "it would require the affirmative actions of the appropriate church body. You have to go through the hoops: It has to be done in advance, and has to be approved by a church body."

One Catholic Christian formation minister, who did not want to be identified, saw the issue this way: Protestant teachers of religion share in a "call" to teach the word, and are therefore entitled to an Internal Revenue Code 107 housing allowance. But setting up a "call" in the Catholic church would admit that married laywomen and laymen share in the call of the ordained.

Consequently, Catholic teachers of religion and other Catholic lay ministers lose the option of the 107 allowance, which would be beneficial to the total annual salary package.

Why -- given that Lutheran teachers, for example, fit the exemption because their synod declared them "ministers of the gospel" to the IRS -- could not Catholic lay pastoral ministers be so classified? Canon law provides the answer.

Halloran, who said she could not talk to the Lutheran case for she did not know of it, said "it is not just the job the IRS is looking at, it's the ordained status." The NCCB lawyer said what's lacking in the lay Catholic ministers' situation is the threshold requirement that the individual be an ordained, commissioned or licensed minister under the tenets of the particular religious denomination. "Some religious denominations have provisions under their tenets for the commissioning of ministers or the licensing of ministers," she said. The Catholic church "does not do that."

The tax court has ruled that five factors determine whether somebody is a minister of the gospel: whether they administer sacraments; whether they conduct worship services; whether they perform services in the control, conduct or maintenance of a religious organization; whether they are ordained, commissioned or licensed; and whether they are considered to be a spiritual leader by the religious body.

"The tax court has made clear," she said, "that the one factor essential is that the individual be an ordained, licensed or commissioned minister under rules of a denomination. At this time and place, we ordain, and so the 107 deduction is limited to priests and deacons.

"That being said, if you have a parish administrator who is required to live on premises, as a requirement of the job, to be on call, et cetera, there is a separate provision of the code that will provide not an allowance but an exemption." That is S. 119. But that's another story.

Meanwhile, in Comfrey and Amarillo the parishes pick up the expenses connected with the rectories, and those expenses are considered part of the pastoral administrator's overall compensation package.