Finance agency responds to clergy housing decision

Editor’s Note: The General Council on Finance and Administration — The United Methodist Church’s finance agency — responded Nov. 26 to  a U.S. district court ruling that found the tax-free housing benefits for clergy to be unconstitutional.  GCFA’s full statement is below.

NASHVILLE, Tenn. — On Nov.  21, 2013, a federal district court judge in Madison, Wis.,  held that a portion of Section 107 of the tax code is unconstitutional.  Section 107 is the provision dealing with tax-favored housing benefits for clergy.  Specifically, the court held that Section 107(2), which permits clergy to receive a tax-free cash “housing allowance,” is unconstitutional because it violates the Establishment Clause of the First Amendment of the U.S. Constitution (“Congress shall make no law respecting an establishment of religion…”).  Section 107(1), which allows clergy to reside tax-free in a church-provided parsonage, was not affected by the court’s decision.

In the case, Freedom From Religion Foundation, et al. v. Lew, et al., the United States government was the party which defended the constitutionality of Section 107, a federal law enacted by Congress many decades ago.  As the losing party, the government must now decide whether it wants to appeal this decision to the next level of the federal court system, the Seventh Circuit Court of Appeals in Chicago.  GCFA believes an appeal is likely.

The court in Wisconsin delayed the implementation of its decision until any appeals which may be filed by the government are concluded or until the deadline for filing an appeal has passed, whichever is later.  GCFA understands that the government will have 60 days to file an appeal, and so the district court’s decision will have no effect until sometime in 2014 at the earliest.  If an appeal is filed, it is certainly conceivable that this case could take several more years to be finally decided.

GCFA is tasked by the Book of Discipline (the denomination’s law book) with the responsibility to protect the legal rights and interests of the United Methodist denomination. However, it is too early to fully understand the impact of this case, or to predict the chances for this decision to be reversed.  GCFA will continue to actively monitor the case as it develops, and will take the appropriate actions at the appropriate times to represent the interests of the denomination.

If you have any questions, please email them to legal@gcfa.org.



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  1. Rick Edwards

    This could be financially devastating to congregations, to active pastors, and especially to retirees.

  2. Walt Pryor

    Methodist are all about money. Yes, they do some good. But who has ever audited where all the appropriations go? Pastors are well paid for serving God, over paid I believe. Even is small poor communities. Most the time the Pastors are among highest paid people in that Church. Several years ago I protested at a meeting with the District Superintendent. He told me; ” Having a Pastor is very expensive.” I think it is another abomination Methodist will be judged for. Not the poor giving out of there poverty, but Pastors serving because the pay and benefits are really good! Enjoy!

    1. Paul Stuckey

      Walt, every General Board & Agency, every Conference &District, every local United Methodist Church is required to have an audit of every expenditure every year!

    2. Joe harrington

      “most of the time Pastors are among the highest paid people in that church”

      I make about half of what I was making 20 years ago before I left the business world (not even considering inflation). I’m nowhere close to most in the congregation, even many of the the retirees.

    3. Jan Howe

      Walt, my friend, you can’t honestly believe what you are saying – that pastors serve because “the pay and benefits are really good.” Certainly no one enters the ministry for the pay! In his 3rd year as a public school teacher, my husband was already earning as much per yr. as his father, who by that point had been a UM pastor for over 30 years! (And, by the way, my husband had a bachelor’s degree; his father a master’s.)

      1. Jeffrey Olah

        Jan…just found out that out new pastor just coming out of school is due to make $34,000 + $2,000 expense + housing…that’s pretty good to start

        1. uth

          Compared to other professions it is not. United Methodist Elders are required to have masters’ degree which equates to 7 plus years of schooling. A person in the business sector could be making 50,000 + with more generous raises. That also does not take into account whether the spouse could find employment due to the nature of moving clergy from place to place. Pastors also have to pay an additional 7.5 percent tax for medicare and social security on their salary because they are considered self-employed. Not every Pastor can get a “full-time” salary because there church is unable to provide it.

  3. Mark

    Does the GCFA actually have an opinion about this (as opposed to the above equivocation)? This ruling could be especially harmful to smaller congregations that cannot afford a parsonage.

  4. David Russell

    What other profession calls for an undergraduate degree and a master’s degree (that takes three years at a minimum) for basic credentials and then compensates you with an average salary of less than $40,000 a year? Ministry is not a profession, it is a calling and so many clergy give up higher paying secular professions to answer God’s calling. I guess you figure clergy only work one day a week, too!

  5. Charles Swadley

    Responding to an earlier post, this decision could have a crippling effect on clergy. Most clergy do not have their own home. The appointment of a clergy from a rural to a city church is a big change, usually with a salary increase which could be offset quite negatively by a much higher exposure to taxes resulting from the differential of housing prices. We were on food stamps in my first appointment. Add to that an increased exposure to more taxes without the exemption, how many clergy would survive the system which is already tilted to a pyramid on income with relatively high income in a few churches and steady decreases and minimal positive salary changes as the pyramid widens negatively toward the base? Is the church to reflect a poor treatment of employees like that of the world?

  6. Robert L Kuyper

    I understand military people who choose not to live on the base, have the same deal. I’m wondering if this ruling affects them, or are they singling out religion for this treatment?
    If it only affects housing allowances, not parsonages, I’m finding now that I’m retired that living in parsonages was a good deal as opposed to buying a house and taking a housing allowance. Real estate has proved to be very unstable. Maybe this is a good thing.

  7. Stuart R. Shaw, 2559 Ojai Ct. NW, Salem, Oregon 97304-4212

    I certainly hope this decision is appealed. The Wisconsin judge’s understanding of the Establishment clause of the First Amendment is unacceptably narrow. The second part of that clause says concerning religion: “or abridging the free exercise thereof.” Years ago when the state of Oregon proposed to tax church property it was pointed out in a brief submitted by the then Portland Council of Churches, quoting a former Supreme Court Justice, that “The power to tax is the power to embarrass and destroy.” (Evans vs. Gore, 1920). The Oregon Legislature dropped their tax proposal, recognizing that many churches would no longer be able to function if required to pay taxes on their church building. A tax free housing allowance for clergy is provided by some churches in lieu of a parsonage. Both parsonage and housing allowance are considered part of pastoral compensation: one equals the other. Providing housing for pastors–the religious leader of the church community– (who generally do not own a house) is a necessary part of the free exercise of that church’s religious program. It should be noted that if a pastor purchases a house, he or she must pay property taxes on that house, and Social Security taxes on its rental value, just as the church in most states pays property taxes on a parsonage. Requiring income tax on pastoral housing allowances infringes on a church’s ability to provide reasonable compensation for their pastors–the vast majority of whom receive modest pay.

    1. steve

      Then you surely must support ALL non profit organizations being allowed to provide tax exempt housing allowances to ALL EMPLOYEES no matter what?

      The issue here is that as the law currently stands, the ONLY individuals or corporations receiving tax exemptions for housing allowances are religious in nature. This is clearly unconstitutional and im a little confused as to how you cant see this simple fact.

      If i am a social worker employed by a non profit organization with no religious affiliation, then i can NOT recieve this same tax exemption even though i presumably provide similar services to society.

      1. uth

        A first social worker does not provide similar services as a clergy. The establishment clause was meant to prevent a state church and not endorse one religion over another . Any clergy in Muslim, Buddhist, Jewish, Christian, or other religions can claim the housing allowance. Just as we allow the poor and adoptive parents to claim exemptions, we allow the Clergy. If you feel that social workers deserve one, you need to urge Congress to pass a law granting the exemption.

  8. John

    Regarding the UMC pastors pay, using the figure above, $34,000. You need to add, housing allowance, which runs, $28,000 per year here in CA, and car allowance(minimum mandated by UMC), $ 3,600, plus utilities(phone, gas, internet etc), $1,000 per year, so without any other benefits, first year pastors are making in UMC, aboaut $66,600 which is above most of private sector even for here in CA.

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