STATEMENT OF REP. JIM RAMSTAD (R-MN) BEFORE THE U.S. HOUSE OF REPRESENTATIVES

April 16, 2002

H.R. 4156, the Clergy Housing Allowance Clarification Act of 2002

Mr. Speaker, in one of the most obvious cases of judicial overreach in recent memory, the Ninth Circuit Court of Appeals is poised to inflict a devastating tax increase on America’s clergy.

Unless Congress acts quickly, the 81-year-old housing tax exclusion for members of the clergy will be struck down by judicial overreach on the part of America’s most left-wing activist circuit court.

The focus of the Court’s attack is the long-standing clergy housing allowance.  Dating back to 1921 and re-codified in 1954 in section 107 of the tax code, this allowance prevents clergy from being taxed on the portion of their church income that is used to provide housing.

This allowance is similar to other housing provisions in the tax code offered to workers who locate in a particular area for the convenience of employers.  Military personnel also receive a tax exclusion for their housing.

Clergy members of every faith and denomination rely on the housing allowance.  Without it, America’s clergy face a devastating tax increase of $2.3 billion over the next 5 years.  At a time when our places of worship are financially strained and struggling to serve people in need, we cannot allow this important tax provision to fall.

The case now in the Ninth Circuit arose because of a dispute over a 1971 IRS revenue ruling that limited the clergy allowance to the fair rental value of the home.  A taxpayer challenged this limit and won in Tax Court.  The IRS appealed.

But rather than simply considering the issue presented in the case, which was whether the IRS had the authority to limit the allowance, the Ninth Circuit hijacked the case and turned it into a challenge of the very constitutionality of the housing allowance.  Neither party in the case raised the constitutionality or wanted the Court to consider that issue, so the Ninth Circuit asked for a “friend of the court” brief from a law professor who believes it is unconstitutional.

This is judicial activism at its worst.  The legislation on the floor today will stop the attack on the housing allowance by resolving the issue in the underlying Tax Court case.  H.R. 4156 clarifies that the housing allowance is limited to the fair rental value of the home, which has been the common practice for decades.

H.R. 4156 as introduced included a section of Congressional findings and statement of purpose.  The amendment before us deletes that section in order to accommodate the tradition that the Ways and Means Committee normally does not include such language in tax legislation.  However, the fact that it has been deleted does not reflect the lack of support within the House or among the bill’s sponsors for the language that clearly states that Congress has constitutional purposes for enacting section 107 of the tax code and the amendments contained in HR 4156.  

In addition, we believe the IRS should provide guidance on the issue of fair rental valuation to avoid unnecessary disputes with taxpayers.  I intend to work with my colleagues to make sure the guidance is issued. 

Finally, the amendment clarifies that the new fair rental value limitation to section 107 applies prospectively, to the year 2002 and beyond.  Both H.R. 4156 and this amendment explicitly provide that for tax years before the effective date, the fair rental value limitation does not apply. This language is intended to end the current litigation and fully resolve the matter.

Mr. Speaker, I appreciate the support this important legislation has received from our colleagues on both sides of the aisle, and I urge my colleagues to vote for this bipartisan legislation to protect America’s clergy from an unwarranted judicial attack.

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