Should Jeremy Lin's College Coach Get a Tax Break for Being a Congregationalist ?

Originally Published on forbes.com on February 22nd,2012

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Is that title a stupid question or what ?  It seems though that if there is no Jeremy Lin connection to your story nowadays nobody is interested.  To go directly to the question,  I could not discern from his biography whatTommy Amaker’s religion is.  Also Harvard, despite its roots as a seminary for Congregational ministers,is no longer an integral part of any church, so the taxability ofCoach Amaker’s compensation in no way hinges on his religion.  If he were ever to decide that the heart of the Commonwealth (Worcester)is more attractive than Cambridge and went to work for Holy Cross, the taxability of his compensation would not hinge on whether he was a Catholic.  On the third hand, though, if Malibu seemed attractive and he got hired by Pepperdine University, then he might be able to exempt a significant portion of his compensation, the amount designated as a “housing allowance”, provided he is of the right religion.  He would have to be a member in good standing of one of the Churches of Christ.

I have Robert Baty, a retried IRS appeals officer, to thank for pointing me to the existence of “basketball ministers”.  He recently did a guest post, here, in the wake of Phil Driscoll being denied a parsonage exclusion for his second home.  In Mr. Baty’s narrative the “original sin” that creates the travesty of basketball ministers is Revenue Ruling 70-549.

  A “minister of the gospel” (Despite the Christian language, other clergy such as rabbis and imams are covered) gets to exclude the amount of compensation designated as a housing allowance.  A minister, who goes from preaching at a local church to teaching at a seminary that is an integral part of his or her church is entitled to the same treatment.  How does that lead to “basketball ministers” ?

The Churches of Christ recognize no central authority of any type at all, except Jesus and the New Testament.  The extent of  their “hierarchy” is the elders of each autonomous congregation. So it would be difficult to see how a college could be an integral part of the Church.  The work around in the Revenue Ruling is for the board of trustees to have  the trustees be members in good standing of a local congregation, thereby making them subject to the elders.  Great, so a Churches of Christ minister teaching theology at one of these colleges gets the housing allowance.  Unless you think nobody should get the allowance, that is not that big  deal, but there is something else about the Churches of Christ, explained in this article:

Working as a fellowship of autonomous congregations with no central headquarters, the Churches of Christ have often differed in many ways both from each other and from many other Christian denominations. One way the Churches of Christ differ is in their definition of a minister.

“Martin Luther argued from Scripture that there was a ‘priesthood of all believers,’ and not a priesthood of individuals which has been set aside through a special rite or ordination and who rather than laymen could access God’s ear,” said Dr. David Baird, dean of Seaver College and church elder.

“Every believer, and the Churches of Christ would emphasize baptized believer, is a minister,” Baird explained.

So an administrator or faculty member, including the basketball coach, at Pepperdine who has a letter from the elders of a congregation is a minster entitled to a housing exclusion.

Mr. Baty thought this was a bad decision when he was active in the IRS and has carried the fight on.  As he explained to me in a recent e-mail, he believes that the original decsion was the result of political pressure on the IRS:

In 1952 and again in 1964 the Internal Revenue Service issued private letter rulings indicating that employees at such private schools as Pepperdine Universitywere not entitled to exclude their income as ministerial housing allowances because the schools were not “integral agencies” of the church.  The schoolmen involved in those rulings acknowledged that if “integral agency” was the requirement that they did not qualify. 

But that did not end the matter.  The employees wanted the exclusion and continued to work to that end.

Nixon was elected President.  George Bush and Omar Burleson became influential Texas politicians.  Employees at Abilene Christian University got caught improperly claiming the exemption.

Ultimately, George Bush and Omar Burleson were able to compel the Internal Revenue Service to reverse their previous rulings and grant the benefit to the employees at Abilene and other similar institutions based on the Federal Government recognizing such institutions as “integral agencies” of the Churches of Christ.

Revenue Rulings are supposed to reflect the application of the law to specific circumstances.  In this case, it does not.  There is no legal basis for concluding that such private schools as Pepperdine University and Abilene Christian University are “integral agencies” of the Church of Christ.

Internal Revenue Service administrators tried to hold the line, noting in the file that there was nothing administratively they could do under the law.  The Bush-Burleson influence changed that.  Rather than try to seek legislative relief, that may or may not have been successful, Bush and Burleson put the squeeze on the Internal Revenue Service and the Internal Revenue Service administrators were not up to standing their ground; though they tried for a time.

As a result, we have an example where:

> The law has been compromised.
> The Internal Revenue Service has been compromised.
> The Church of Christ has been compromised.
> The private institutions have been compromised.
> The principle of separation of church and state has been compromised.

All so the “basketball minister” and similarly situated employees at Pepperdine University and similar institutions can have their income tax free as ministerial housing.

This should not be, and is just one example of what might be evidence in support of the Freedom From Religion Foundation challenge to the constitutionality of Internal Revenue Code Section 107 (tax free housing for “ministers”).

I hate to throw the baby out with the bath water.  I think the parsonage exclusion could stand constitutional muster, if only barely and its loss would be a hardship on small congregations such as those served by Reverend William Thronton.  There is a compelling logic to the Revenue Ruling 70-549 argument about the Churches of Christ, though, and if that reductio ad absurdum is valid, Section 107 is unconstitutional, since it hinges a tax benefit on membership in a particular type of church.

You can follow me on twitter @peterreillycpa.