Senate adopts bill protecting clergy housing allowances

By Robert Marus

WASHINGTON (ABP) -- The U.S. Senate passed a bill designed to protect a special tax benefit enjoyed by clergy. The Clergy Housing Allowance Clarification Act now heads to the other end of Pennsylvania Avenue for President Bush to sign, which most observers expect to happen soon.

The bill, originally introduced in the House by U.S. Rep. Jim Ramstad (R-Minn.), was designed to pre-empt a case now before the U.S. 9th Circuit Court of Appeals, based in San Francisco. In reviewing a dispute over the amount claimed as a housing allowance by a Southern Baptist minister, a court panel dropped a bombshell by announcing that it would take on the larger question of whether existence of the tax loophole violates the separation of church and state.

Many churches, synagogues and other houses of worship would be unable to afford to pay the salary of a full-time cleric if the 81-year-old exemption did not exist. Similar tax exemptions exist for the military and U.S. citizens living abroad.

In the case, California megachurch pastor Rick Warren challenged an IRS ruling that he could not claim $79,999 of his salary as a tax-exempt housing allowance. The IRS wanted to allow no more than $59,479. Warren's Saddleback Valley Community Church, located in suburban Los Angeles, is one of the nation's largest congregations and is affiliated with the Southern Baptist Convention.

A California tax court ruled in Warren's favor, but the IRS appealed. When it went before the 9th Circuit, a majority on a three-judge panel of the court took the unusual step of using the case to determine the constitutionality of the ministerial housing allowance tax exemption -- something neither side was contesting.

If all goes as planned, after Bush signs the bill the U.S. Justice Department will ask the 9th Circuit to dismiss the Warren case. Refusals by federal circuit courts to such petitions are rare.

Even if the case is dismissed, however, the bill would not prevent future challenges to the constitutionality of the ministerial tax exemption.

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