The Board of Pensions of the Presbyterian Church (U.S.A.) has not been hearing much feedback regarding a recent federal court ruling involving the tax-exempt housing allowances for ministers, even thought there could be significant financial implications for both currently-serving ministers and retirees if the housing allowances were determined to be unconstitutional.
On Nov. 22, Judge Barbara Crabb, of the Western District of Wisconsin, issued a ruling in a lawsuit declaring the Internal Revenue Service regulation that grants the exemption to be unconstitutional. That ruling currently has limited impact – it applies only to that geographic district; is likely to be appealed; and its enforcement has been stayed until all appeals are exhausted.
Despite those caveats, however, the ruling has provoked a frisson of online conversations among some Presbyterians who are concerned about what the potential financial impact could be on ministers if the housing allowances were to be found unconstitutional nationwide. Others seem less concerned – perhaps they haven’t heard of the ruling or are taking a wait-and-see approach.
John McFayden, the Board of Pensions’ vice-president for church relations, said in an interview, “at this point we have not gotten a lot of questions from our constituency, from our plan members. We’re certainly watching it and are interested.”
The Board of Pensions is a member of the Church Benefits Association, an alliance of denominations that have church benefits plans, and also of Church Alliance, a group that monitors legislative and regulatory issues that potentially could affect church benefits plans. Both groups will be tracking any appeals of the recent court decision, McFayden said.
“We recognize that a change in the housing allowance and the laws around housing allowances and the tax treatment of those housing allowances would clearly have implications for both our active plan members [and] currently-serving clergy, but also our retirees,” he said.
Any change in the tax code “would have an impact on congregations too,” McFayden said, if ministers try to negotiate higher salaries to offset the increased taxes they would have to pay if the clergy housing allowance no longer existed.
As the case moves forward, “we’ll be watching and we’ll be in communication with the Church Alliance to get input from them about what they see going on.”