Clergy Housing Tax Break Seen As Unconstitutional

Peter J Reilly

Professor Ed Zelinsky

February 10, 2017 Forbes - Professor Adam Chodorow has produced a very timely article (pdf downoland) on the constitutionality of the parsonage exemption.  The parsonage exemption (Code Section 107) allows "ministers of the gospel" to exclude the value of church provided in-kind housing and cash allowances in lieu thereof.  The only limitations are that the excludible allowance cannot exceed the fair rental value of he housing and that the exclusion can only apply to one home at a time.  There is no dollar limitation.  Televangelists and mega-church ministers receive tax free housing allowances in the hundreds of thousands.  To the extent the allowances are used to pay deductible interest and real estate taxes, much of the rest of their income can be sheltered.

Read more in Forbes. 

"I see no easy metric for determining whether the church-state entanglement inherent in Section 107 is greater than or less than the entanglement flowing from the application of Section 119 to church-furnished housing."