Group Challenges Tax-Free Housing For Clergy

| by Nik Bonopartis
Megachurch Pastor Joel Osteen and his wife in their $10.5 million mansion.Megachurch Pastor Joel Osteen and his wife in their $10.5 million mansion.

An antitheist group wants U.S. courts to strike down a tax exemption unique to clergy members.

The Wisconsin-based Freedom From Religion Foundation initially won a lawsuit challenging the "parsonage exemption," which exempts clergy from paying taxes on their housing allowances.

The exemption was codified into law by congress in 1954. It was meant to help newer churches with more modest financial resources, according to the Beckett Fund for Religious Liberty. Established churches with extensive property and revenue could provide on-site housing for priests and pastors. That kind of housing on church property, such as Catholic rectories, enjoys tax-free status because it's part of church holdings.

But churches with fewer resources don't necessarily have the real estate to house pastors,so they include housing allowances in salaries paid to those pastors.

At the time, members of congress decided that it was unfair to tax clergy living in off-site housing while pastors and priests living in church-owned homes enjoyed tax exemptions.

According to the FFRF, the parsonage exemption is abused by megachurch pastors and other wealthy clergy, because their exemptions can be worth "up to the fair market rental value of their home." The exemptions also apply to maintenance, home improvements, home offices, appliances, and even cable TV and computers.

Thus, megachurch pastors worth millions are able to take advantage of the parsonage exemption, using it to cover the costs of luxuries like pools and tennis courts. For example, Joel Osteen, the senior pastor of Lakewood Church in Houston and one of the country's most well-known televangelists, lives in a $10.5 million mansion in River Oaks, Texas, according to WND. Real estate records show Peter Popoff, a self-described faith healer whose ministry preaches prosperity, lives in a $4.5 million home in Bradbury, California, Virtual Globetrotting notes.

"The manner in which our housing allowance has been used borders on clergy malpractice," William Thornton, a Georgia pastor and blogger, told Forbes magazine in 2013. "A growing subset of ministers who are very highly paid and who live in multimillion dollar mansions are able to exclude hundreds of thousands of dollars from income taxation."

Some churches further take advantage of the exemption by "ordaining ministry associates in administrative or peripheral church jobs solely so that they can be qualified for the housing allowance," Thornton said.

In 2013, U.S. District Judge Barbara Crabb ruled in favor of the FFRF and declared the parsonage exemption unconstitutional. But the next year the 7th U.S. Circuit Court of Appeals reversed Crabb's decision.

Now, the FFRF said it's renewing its challenge to the housing exemption. That pits the group against a coalition of religious groups from all three major faiths.

"We call this our David vs. Goliath challenge," FFRF co-president Annie Laurie Gaylor said in the group's April 6 press release.

Sources: Freedom From Religion Foundation, Forbes, Virtual Globetrotting, WNDThe Beckett Fund For Religious Liberty / Photo credit: Upstart Business Journal, Free Republic

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