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Some hard questions about the church’s tax-exempt status

Some hard questions about the church’s tax-exempt status

Writing for the Alban Institute, Dan Hotchkiss asks some hard questions about the tax breaks that churches receive from the government.

Public support for congregations endures today in several forms, including exemption from direct taxation and a variety of indirect benefits like the charitable tax deduction and the clergy housing allowance….

One fact needs to be laid on the table frankly: as with most tax benefits, the big beneficiaries of church tax exemption are the big players—large congregations and highly-compensated ministers. A few clergy—those who earn over $100,000 a year—make out very well. Such a minister, married to a surgeon, living in a million-dollar house can save more than $20,000 a year in taxes compared to a non-minister in similar circumstances.

Small, marginal congregations benefit from tax-favored treatment, in the sense that their buildings can sit idle as their numbers dwindle, and sometimes for years afterward. But is this really a benefit to congregations, or to faith? What if failing congregations had to close more quickly, as other non-profits do when they have ceased to serve the public? Might the religious enterprise actually be strengthened?

A sudden loss of the clergy housing allowance as a result of an adverse decision would undoubtedly be harsh and unfair. We should lobby hard for legislation to soften the blow. But if we take the position that tax-free housing is our right, or necessary for the freedom of religion, we risk making ourselves look a bit ridiculous.


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tobias haller

Not to belabor this point, but I’m afraid this article by a supposed “expert” really ticked me off. Is he not aware that most employees who receive housing accommodation as part of their condition of employment (such as a priest who is expected to live in the rectory) are not income-taxed on the value of the residence? This applies to nannies as well as clergy — and as far as I know any worker whose work involves living in provided housing. (The tax law is a bit more complicated, but Hotchkiss’ failure to mention this, and his singling out of clergy and churches is very unhelpful. To say nothing of the cynical suggestion that costing small churches more might kill them off faster! Thank you Alban Institute!)

tobias haller

John, very few Episcopal clergy opt out of SS. For one thing it is only supposed to be for those who hold a conscientious objection to “accepting benefits of any private or public insurance that makes payments in the event of death, disability, old age, or retirement; or makes payments for the

cost of medical care; or provides services for medical care” and based on such religious beliefs “as a follower of the established teachings of” a particular religious group. While there may be a few individual Episcopal clergy who have such scruples, it is not as part of the “established teaching” of TEC, unlike a few other denominations.

Meg Matters is quite right about the SE tax burden, which is the point I’ve been trying to make.

it's margaret

John –yes, the comments are very interesting.

However, I do not know any clergy who have opted out of SSI –although it is possible to do so. Even the planning for retirement programs I have attended do not suggest doing so. However, if certain members of Congress succeed, we may not have any choice!

Meg Matters

John B. Chilton

I may be very wrong, but I thought many clergy, even in our denomination, opted out of social security. I’m not advising it, just wondering.

The comments at Alban are worth looking at if you’re engaged in these comments.

it's margaret

Clergy do have to pay double the SSI on all their income –because they are considered self-employed and have to pay the employer and employee part alike. Some churches give a partial benefit, but it doesn’t cover it all…

As to tax free housing? –we pay “double” SSI taxes on our housing, have no doubt –And, even if housing is provided, we have to pay for the benefit equal to fair rent, and so pay the taxes out of our other income.

I would like to know how paying double SSI makes us tax exempt!

Meg Matters

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