Visiblity of housing allowance issue is increasing, or bad cases make bad law

A tax case way out in the outer limits, one that makes regulators irritated, is getting more attention.

Article in the Money & Investing section of the Wall Street Journal discussed the Phil Driscoll tax case:  Tax Break for Clergy Questioned

Some background:  Christian artist Phil Driscoll won a battle with the IRS.  On one hand, the details don’t seem too outlandish.

He claimed that the tax code covering clergy income which allows exclusion of income for a pastor’s “home” actually applied to pastor’s homes (see the plural?). The IRS disagreed. Off to the tax court, who agreed with Mr. Driscoll’s position.

Case resolved.

On the other hand…What puts this out at the extreme fringe of everyday life is that he received $408,638 from his ministry for buying a second home. That amount was declared as housing allowance, which means he did not pay tax on it.

Spending $400K to buy a primary house is out of the question for what would you say, over 90% of the pastors in America? Doing so for cash is out of the question for around 99.999% of clergy. 

Yet this case is now the argument for revisiting the clergy allowance.

Is this typical for churches?

As was mentioned by a speaker at the CLA conference this year (a guy who is attuned to such things) the underlying emerging attitude amongst people who work inside the beltway is that this is representative of the way that pastors live. The thinking goes that it is unreasonable to avoid paying taxes on 400K by buying a second home, therefore the clergy housing allowance itself is unreasonable since that is the avenue to avoid paying tax on that money.

The reality is that the average church in America has about 100 people. That means that most pastors are living on a very low salary. My guess is many of those pastors are bi-vocational.  That is a fancy word meaning they work a first job to have enough money to buy food for their family so they can preach as a second job.  That is closer to the norm for clergy than Mr. Driscoll’s case.

My objective comment?  The Driscoll case is getting more attention.

My grumpy comment? (I don’t usually get grumpy, but will do so today.)  Mr. Driscoll’s musical skills are so high that the financial rewards of his situation have no comparison to the lives of at least 99.9% of the pastors in the US.  It is just plain silly to discuss this case as if it has anything to do with all the other pastors, priests, rabbis, and imams in the country.

(I’m serious about this case being unrepresentative of 99.999% of clergy.  Figure around 300,000 churches in the US.  I’m guessing maybe 600,000 clergy in total.  Thus a guess of 99.999% means maybe 6 clergy in the entire country could swing that pricey of a house in any one year.  Yeah, I’ll go with 99.999%.)

Update: A humorous illustration of the financial lives of pastors at the opposite end of the economic spectrum can be found at What the average clergy housing allowance looks like.

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