Housing allowance tax benefit in jeopardy

Lutheran, The, May 2002 by Solomonson, Sonia C

Pastors who claim part of their income as housing allowance could lose that tax benefit unless the U.S. Congress acts soon.

A dispute over the amount of housing allowance clergy can exclude for taxes reached the 9th Circuit Court of Appeals in San Francisco and could result in elimination of the longstanding benefit. Before deciding on the specific case, Warren v. Commissioner, the appeals court decided to first address the constitutionality of the exemption. Briefs in the case were due in mid-April, with reply briefs due 21 days later.

At presstime, Rep. Jim Ramstad, R-Minn., planned to introduce legislation in Congress that would head off the constitutional showdown by clarifying that the housing allowance is limited to the fair market rental value. Eliminating the exemption would cost clergy of all faiths an immediate tax increase of $500 million annually.

The ELCA Board of Pensions has followed clergy housing allowance issues and the recent court case closely as a member of Church Alliance, a coalition of 32 pension boards from Protestant, Roman Catholic and Jewish denominations.

"To reverse the housing allowance would adversely affect the entire faith community because somebody would have to make up the difference," said John Kapanke, president of the ELCA board and chair of Church Alliance.

The pension board is encouraging pastors to contact members of Congress and urge support of Ramstad's legislation (see www. elcabop.org).