Argument For The Constitutionality Of The Parsonage Exclusion

One of the issues that I have been following since the beginning of my blogging days is the Freedom From Religion Foundation's quixotic seeming quest to have the parsonage exclusion (Code Section 107) declared unconstitutional.  My devotion to this issue has reaped a huge dividend as it now provides a distinguished guest post. 

Edward Zelinsky is the Morris and Annie Trachman Professor of Law at the Cardozo School of Law at Yeshiva University.

I asked Professor Zelinsky to comment on The Parsonage Exemption by Adam Chodorow, which I am covering on forbes.com. His comments were a little too extensive to incorporate in the post, so I am reproducing them here.
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Prof. Chodorow’s article helpfully highlights the areas of disagreement between those who conclude that Internal Revenue Code Section 107 is unconstitutional and those of us who conclude otherwise. Speaking for myself, I see in this area debatable trade-offs and plausible choices where others tend to see absolutist decisions.

     Consider, for example, the relationship between Section 107, limited to “ministers of the gospel,” and Code Section 119 which provides a general income tax exclusion for employer-provided housing. I have argued that striking Section 107 will not eliminate the church-state entanglement about which critics of Section 107 complain. If Section 107 is stricken, much of the controversy will migrate to Section 119 as churches shift from providing cash parsonage allowances to furnishing in-kind housing.

      Section 119 raises “similarly entangling questions” as does Section 107. Among these entangling inquiries under Section 119 are determining whether a minister is an “employee” eligible for Section 119's housing-based exclusion, whether housing is provided to the clerical employee for the church’s “convenience,” what is the church’s “business” for purposes of Section 119 and what constitutes the church’s “premises.” Since both Sections 107 and 119 raise “similarly entangling questions,” it is plausible (though not compelled) for Congress to prefer the church-state entanglement inherent in Section 107 over the similar church-state entanglement flowing from the application of Section 119 to clergy and church-provided housing.

     Prof. Chodorow now writes that I have gotten this subject “exactly backward,” that Section 119 is “far less” entangling than is Section 107.

     In contrast, I see no easy metric for determining whether the church-state entanglement inherent in Section 107 is greater than or less than the entanglement flowing from the application of Section 119 to church-furnished housing. The entanglement is similar which is why the ultimate decisionmakers in this area should be democratically-elected legislators, balancing the offsetting concerns.

     I likewise have noted that the argument that Section 107 unconstitutionally entangles implies that other provisions of the Code also unconstitutionally entangle church and state. In particular, the regulatory standards for determining who is a clergywoman are the same under Section 107, FICA and the ACA. If those standards entangle unconstitutionally in the context of Section 107, they similarly entangle in the context of FICA and the ACA.

     Prof Chodorow seeks to distinguish ACA and FICA from Section 107 on the grounds that the FICA and ACA religious exemptions “are purportedly necessary to ensure that government does not force people to take actions that violate their religious beliefs.” But this characterization of the FICA and ACA exemptions does not address the issue of entanglement: If it is too entangling to define a “minister of the gospel” under Section 107, it is also unacceptably entangling to undertake the same inquiry under FICA and ACA.

     One of the pleasures of being a law professor is that I spend my days debating important issues with my colleagues. Prof. Chodorow’s paper helps to clarify the issues involved in the constitutional status of Section 107. At the end of the day, I respectfully conclude that Section 107 is a constitutionally-permitted, though not constitutionally-compelled, means of managing the church-state tensions which are inevitable when the modern government meets the modern church.

     As a matter of tax policy, I conclude that cash parsonage allowances should be taxed. However, as Chief Justice Burger noted in Walz, under the First Amendment, there is “room for play in the joints” to manage the relationship between contemporary tax systems and the contemporary church. Within that room, Congress can constitutionally adopt Section 107 and its income tax exclusion for church-provided housing and housing allowances.

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I actually think that not too many people really care all that much about things being constitutional.  Activists and advocates use the Constitution like a drunk uses a lamppost - more for support than illumination.  You can tell Professor Zelinsky cares, because of his nuanced view.  He believes that excluding cash housing allowances is both a bad idea, as a matter of tax policy, and constitutionally permissible.

Peter J Reilly loves guest posts.  Why don't you send one in?

    

            

Senator Tom Coburn v. IRC 107

Here is an other guest post from Robert Baty.  Bob is a retired IRS Appeals Officer.  He has something of an obsession with an obscure Revenue Ruling from 1970.  Revenue Ruling 70-549 allows colleges affiliated with the Church of Christ to provide faculty and administration with Section 107 cash housing allowances as "ministers of the gospel" regardless of what their position is. When I think of Bob Baty and Revenue Ruling 70-549, I'm reminded of Ahab and Moby Dick

Ahab's a little more easy going.  You can call me Ishmael.

Did you see it?

Tax Decoder
By Senator Tom Coburn (R-OK)
December 2014 - Page 192

(excerpt)

"The parsonage allowance (IRC 107) should be eliminated."

I appreciate the fact that Senator Coburn included the issue in his report, but I am quite disappointed in him, personally, for the way he handled the matter.

Senator Coburn has been in the Senate for many years and I am not aware that he has done anything to actually repeal IRC 107, cure its constitutional defects, or otherwise reign in what most might consider its abuses.

I wonder whether or not Senator Coburn is actually familiar with IRC 107 and the disputes over its constitutionality and abuses.  His report appears to simply copy much of what it has to say from Senator Grassley's earlier report which was a consequence of his investigation into some million dollar ministries.

In the case of Senator Grassley, he farmed out thinking about what to do about IRC 107 to his religious friends and, to no surprise, his religious friends told him, and by implication Congress and the President, to keep hands off of IRC 107.  They did.  They did nothing about IRC 107.

Annie Gaylor and Dan Barker have been litigating the constitutionality of IRC 107 for a number of years.  Last year they were successful in getting Federal District Judge Barbara Crabb to declare IRC 107(2) UNconstitutional, a violation of the Establishment Clause of the 1st Amendment to the United States Constitution.  

What did Senator Coburn have to say about that?
Nothing!
Why wasn't he publicly supporting Annie's and Dan's efforts?

This year, the 7th Circuit was asked to review Annie's and Dan's case and without judging the merits of Judge Crabb's ruling as to IRC 107 simply had the case dismissed because, in the opinion of the 3 judge panel (which gave no indication they actually read and understood Annie's and Dan's position), they did not have "standing" to ask Judge Crabb to decide the IRC 107 issue.

The 7th Circuit panel noted that the U.S. Supreme Court has never considered a "standing" issue such as is presented in Annie's and Dan's case.  The appeal period continues to run.  It is not yet known, at least not by me, whether or not Annie and Dan will ask the U.S. Supreme Court to review the 7th Circuit ruling.  I hope that they do.

Having lived in Oklahoma for the first 55 years of my life, I have a special interest in Senator Coburn and his antics regarding the IRC 107 issue.   Senator Coburn's report names names at times and at other times leaves the names out in rather conspicuous fashion.

For instance, Senator Coburn's report states, in part:

"A prominent California church designated the whole salary of its senior pastor as a housing allowance, prompting an investigation from the IRS. In the midst of that lawsuit, Congress limited the allowance to the fair rental value of the home plus certain expenses – the only time Congress has modified the tax break."

You can form your own opinions as to why Senator Coburn, after naming other names in his report, did not mention that that church was the Saddleback Church and that senior pastor was Rick Warren.  Congress and the President (Bush) was wrong-headed in dealing with that matter and their action was NOT because they were concerned about a problem with IRC 107 but rather they were concerned about helping their religious constituents who wanted to block the 9th Circuit Court of Appeals from taking up, on the Court's own initiative, the constitutional issue regarding IRC 107 (i.e., should Rick Warren get any tax exempt housing allowance simply because he was a "minister"?)

Cute, Senator Coburn, cute.

Another name Senator Coburn doesn't mention is that of one of his constituents, a basketball coach named Jerry Jobe.

Why didn't Senator Coburn mention the case of Jerry Jobe as an example of how successful so-called "ministers" have been in exploiting IRC 107 and the manner in which the politicians have allowed the IRS to administer IRC 107?

Jerry Jobe's case is responsible, in large part, in my opinion, for all of the current, popular, public debate and litigation over IRC 107; even though it was decided 30 years ago.

Never heard of it?
Not surprising, but I would that it was otherwise.

Jerry Jobe had been a coach in public schools for some time when he was hired on by a private school in Oklahoma, what is now Oklahoma Christian University (OC).  In consequence of being hired by OC, Jerry got a letter from his church leaders saying he was ordained and registered it at the courthouse so that he could claim part of his salary for coaching basketball was payment for services of a minister.

The local IRS office in Oklahoma challenged Jobe's housing allowance claim on the basis that OC was NOT an "integral agency of the church".  Apart from the fact the majority of folks who owned and operated OC were church-going folks, there wasn't much going for the proposition that Jobe should get his tax free benefit.  The issue was to be resolved around the question as to whether or not OC was an "integral agency of the church".

Founders of OC are on record of unanimously passing what has been reported to be a "landmark resolution" which included "we believe that such an institution should be kept separate and apart from the church".  For those familiar with what is commonly referred to as the "Church of Christ", that statement will harken back to the historical, theological "college question" controversy.

Historically, OC and similar schools such as Abilene Christian University and Pepperdine University have been owned and operated as private enterprises, though enjoying tax-exempt status as educational institutions, independent of the church while church members owned and operated them consistent with their respective religious beliefs.

As a matter of fact, law, and theology, OC, Abilene, Pepperdine, et al, are NOT "integral agencies of the church".

How then, did Jerry Jobe win his case, and he did win his case?

Jerry Jobe simply waived Revenue Ruling 70-549 in the face of the local IRS litigators who, at the behest of the National Office, were forced to back down.

As it turned out, Revenue Ruling 70-549 was a political plum awarded to the constituents of George H.W. Bush and Omar Burleson who put the squeeze on the IRS in order to bail Abilene Christian University (ACU) out of mess over the housing allowance for ministers where the school had been paying some of its employees in tax free housing.

The IRS tried to hold the line, apply the law, and deny the benefits to the ACU employees, and they were doing OK for awhile.  Then George and Omar showed up to put the squeeze on the IRS at the highest levels and the IRS eventually capitulated and issued Revenue Ruling 70-549.

About that same time, Texas Christian University (TCU), involving the Christian Church, Disciples of Christ, went to court over the "integral agency" issue and lost.  Ronald Flowers was the individual used as the test case for TCU.  The experience changed Ronald Flowers who subsequently indicated he had come to believe IRC 107 is UNconstitutional.  

While TCU went to court and lost, ACU went behind closed doors and got an administrative ruling that allowed them to win.  For those familiar with the historic disputes between the "Church of Christ" and "Christian Church", that outcome may strike you, and properly so, as somewhat backwards.

For those looking for a bonafide IRS scandal, the real story behind Revenue Ruling 70-549 involving George H.W. Bush, Omar Burleson, and the Nixon administration is the one that should be being pursued.  The consequences are burdening us yet and Congress and the President, Senator Coburn, et al, do not appear to be willing to do their job to resolve it, and it could be resolved quite easily for such reasons as Senator Coburn noted in his report.

IRC 107 appears to enjoy considerable special interest support for all the wrong reasons.

I would that it were otherwise.
I hope it will be; sooner rather than later.

Suit Against Parsonage Exclusion Dropped

Originally Published on forbes.com on July 5th,2011

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Most of my posts are based on my own review of original source material, rather than what I read in other blogs.  Since I often spend some time on the developments before I post, I’m usually not the guy to go to for breaking news.  I make exceptions, though, when, well, when I feel like making exceptions.  In this case it is because the parsonage exclusion is something I have been following pretty closely.  My most comprehensive post on the subject was titled “Work, Fight or Pray – Vestige of the Medieval in Our Tax Code” (Pretty catchy eh ?).  So I feel compelled to report this post by Reverend William Thornton.  He pointed me to this story, which indicates that a suit by The Freedom From Religion Foundation has been dropped.  They were maintaining that the parsonage exclusion violates the Establishment Clause of the First Amendment. It appears that the abandonment of the suit is based on the Supreme Court decision on the Arizona tuition tax credit, that holds that for purposes of standing to sue under the Establishment Clause, a tax credit is not equivalent to an expenditure.

The “parsonage exclusion” (Section 107 of the Internal Revenue Code) is one of the shorter sections :

In the case of a minister of the gospel, gross income does not include—

(1) the rental value of a home furnished to him as part of his compensation; or

(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities

You would infer correctly from the non-inclusive language, that the section goes back to the early days of the Code. 

The exclusion of a cash “rental allowance” has been an area of abuse.  I believe the IRS will be appealing the decision that allowed Phil Driscoll to exclude $195,000 in parsonage payments from his music ministry that were attributable to his second home.

Looks Like a Duck -Walks Like a Duck - Talks Like a Duck - Not a Duck

Originally published on Passive Activities and Other Oxymorons on June 9th, 2011.
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Thomas F. Chambers, et ux. v. Commissioner, TC Memo 2011-114
U.S. v. MAGGERT, Cite as 107 AFTR 2d 2011-XXXX

“For we are taking pains to do what is right,not only in the eyes of the Lord but also in the eyes of men.”2 Corinthians 8:21 From the Evangelical Center for Financial Accountability Seven Standards of Responsible Stewardship

He said he talked to Jesus all the time. Even when he was driving his car. That killed me. I just see the big phony bastard shifting into first gear and asking Jesus to send him a few more stiffs. From The Catcher in the Rye.

The First Amendment tells us that the government should not establish religion.  On the other hand, it also tells us that government is not supposed to interfere with the free exercise of religion.  People with a very secular perspective like the Freedom from Religion Foundation focus on the first aspect.  Deeply religious people might focus more on the second.  The tension shows up in the relationship that IRS has with churches. It is very hands off not requiring the level of reporting that other not for profits are subject to.  On the other hand it is put in the awkward position of having to decide what is and is not a church.  Although this seems to contradict the establishment clause it is necessary so that the sphere of religion where government is hands off does not become a gaping hole that tax cheats drive trucks through. The favorable tax treatment of churches, that in my view is mandated by the free exercise clause, is, quite predictably, a magnet for "phony bastards".  Two recent cases illustrate this problem.

U.S. v Maggert is an extreme case:

Maggert, a dentist, worked for several dental offices as an independent contractor. In 1998, Maggert and his wife attended a seminar by American Rights Litigators (“ARL”) and Eddie Kahn at which they were told they did not have to pay federal income tax. Maggert relayed this information to his accountant, who counseled Maggert against ARL's advice and ended their professional relationship when Maggert persisted. Maggert dissolved his professional association, Mark S. Maggert, D.D.S., P.A., and, from 1998 to 2005, did not file a federal tax return or pay federal income tax.

Eddie Kahn, by the way, was Wesley Snipes "tax adviser". I might have missed that if I wasn't following Joe Kristan's blog.  Joe frequently gets to the same cases I do, usually before I do.

Beginning in 2002, Maggert instructed the accountants for the dental offices where he worked to make his paychecks payable to Total Business Systems, LLC, a Florida corporation, or to Mark's Word of Faith International, a Nevada corporation. The accountants complied and issued Form 1099s, using the corporate identification numbers for these organizations rather than Maggert's social security number. Maggert deposited the paychecks into accounts he opened in these organization's names and withdrew money from the accounts on a regular basis (over $40,000 in 2002, over $52,000 in 2003, $178,000 in 2004 and $128,000 in 2005, for a total of $398,600).

The articles of organization for Total Business Systems, LLC identified the managing member as Geneva Holdings, Inc., in Australia and the registered agent as Ronald Saltzer. The articles of organization were signed by Saltzer and Alan R. Horne, the “Director” of Geneva Holdings, Inc. Saltzer admitted that he knew nothing about Total Business Systems, LLC or Geneva Holdings, Inc., and had never met Maggert or Horne. Saltzer had agreed to act as the registered agent and sign the articles of incorporation in exchange for a meal provided by Eddie Kahn.

Panhandlers are facing a generational problem right now.  I sometimes want to shake the guys to explain to them that they can't be Vietnam veterans if they are more than a couple of years younger than I am.  Offering to be registered agents could open up a whole new field.  Somebody once explained to me that one of the ways to get an individual to take on unlimited liability so you could have a partnership was to trade a bottle of Thunderbird for the signature.  I wonder if cheap wine sales went down when they put in the check the box regulations.  At any rate on to the religious patina of the plan.

The articles of incorporation for Mark's Word of Faith International listed Maggert as the “Presiding Patriarch (Overseer).” Maggert's wife signed the articles of incorporation as a witness and “Scribe.”

It can be the little things that screw up a plan.  If Dr. Maggert wanted to be Patriarch, why couldn't he have made his spouse "Chief Priestess" rather than something that sounds like the medieval version of secretary and reminds you of Pharisees ? Maybe she would have been more enthusiastic.

Maggert's wife admitted there was no such religious organization and that Maggert was not a spiritual leader or priest

We really don't want the IRS inquiring as to who is really a spiritual leader or a priest, but it is these type of shenanigans that makes it necessary.  Sadly, I think that the IRS agents who are tasked with dealing with this nonsense get a little jaded, which may have been part of the problem in the Chambers case.

The case of Thomas Chambers is much more troubling.  It was not being proposed that he be deprived of his liberty but the IRS was asserting a 75% fraud penalty, which is about as bad as it gets short of doing time.  It is pretty clear that Reverend Chambers (and I'm not being ironic with the Reverend) was not running a tax scam:

Mr. Chambers is an ordained minister who, during the years in issue, was the sole pastor of Biblical Church Ministries (sometimes also referred to as Biblical Church or Biblical Church and Global Ministries). Before he founded Biblical Church during 2003, Mr. Chambers had been the senior pastor of Pilgrim Bible Church since 1991. He resigned from his position at Pilgrim Bible Church because he wanted to concentrate more on global evangelism and planned to be out of the country for many weeks during the year. However, about a dozen of his former congregants at Pilgrim Bible Church asked him to continue leading them in studying the Bible on Sunday mornings. Mr. Chambers agreed to continue leading them in Sunday worship with the understanding that he would be ministering abroad a number of weeks during the year and that someone else would lead worship when he was absent.

On the other hand, if he had been endeavoring to make himself look like he was running a tax scam, he would have been hard pressed to find more effective means than what he stumbled on. It is fairly clear that in his choice of organizational structure Reverend Chambers made a mistake.

During 2003 Mr. Chambers organized Biblical Church as a “corporation sole” under Utah law. He designated himself as “overseer” of Biblical Church. As overseer, he had full control over the corporation sole, including the authority to amend its articles of corporation sole and appoint his successor. During 2006 petitioners transferred the ownership of their home from themselves as individuals to Mr. Chambers as overseer of Biblical Church, a corporation sole.

A corporation sole is a way to associate ownership of property with the holder of an office.  Who owns all those church buildings and schools that make up a Catholic diocese?  The bishop does as a corporation sole.  This can come as something of a shock to parishioners as a lengthy drama in Worcester Mass several years ago illustrates.  On the other hand you don't have to worry about your parish becoming affiliated with another denomination, which can happen with a congregational polity.  I suspect that Reverend Chambers chose corporation sole because it fit a "strong pastor" model of church governance that was consistent with his theology.  Then again, you can't rule out bad advice.

Unfortunately it is also a property ownership device that is part of one of the IRS's dirty dozen.  Unless the office holder is subject to removal by some higher authority (other than the highest authority that we are all ultimately subject to) corporation sole is an excellent scamming structure.  Too excellent.  I think that when he chose corporation sole Reverend Chambers painted a target on his back.



Here is a portion of Revenue Ruling 2004-27:

The Service is aware that some taxpayers are attempting to reduce their federal tax liability by taking the position that the taxpayer’s income belongs to a “corporation sole” created by the taxpayer for the purpose of avoiding taxes on the taxpayer’s income. The Service also is aware that promoters, including return preparers, are advising or recommending that taxpayers take frivolous positions based on this argument. Some promoters may be marketing a package, kit, or other materials that claim to show taxpayers how they can avoid paying income taxes based on this and other meritless arguments.

By choosing "corporation sole" Reverend Chambers made himself look like a duck.

Mr. Chambers followed through on his plans to participate in many overseas evangelism trips. In addition to his job as a pastor at Biblical Church, he is on the staff of e 3 Partners, 3 an organization that is exempt from tax pursuant to section 501(c)(3). Mr. Chambers' role with e 3 Partners is “church planter”, and his primary responsibility is to lead short-term mission trips to other countries, where he trains local pastors and other volunteers in evangelism.

e3 Partners Ministry is a substantial organization.  According to their most recent 990 they grossed over 18,000,000.  They have many hallmarks of legitimacy.  Not the least of which is having an accounting firm with a blogging partner.  I think the IRS phony church hit squad should have backed off when they saw that Reverend Thomas was affiliated with them.  When I looked at the board I saw a substantial business person I happen to know who is honest as the day is long and sharp as tack.

The team members were responsible for raising their own funds for each trip, but e 3 Partners coordinated fundraising by receiving donations on behalf of individual team members and using those donations to pay trip expenses for those team members. Portions of the funds raised by all of the team members were directed to the team leaders, like Mr. Chambers, who were responsible for handling all of the day-to-day expenses the team would encounter on the trip. Before each trip, e 3 Partners deposited funds into a bank account provided by the team leader, who then withdrew the cash needed for the trip. All expenses incurred during the trip had to be documented by receipts, and the team leader was responsible for returning any unused funds to e 3 Partners at the end of the trip. During the years in issue Mr. Chambers received into his personal bank account numerous deposits to cover trip expenses from e 3 Partners, and the parties agree that such funds were properly excluded from petitioners' income.

So apparently if the Reverend Chambers had followed his first impulse and devoted all his time to foreign missions under the supervision of e3 Partners, he wouldn't have had any tax problems or at least not ones of the magnitude that he encountered.

During both 2005 and 2006 petitioners maintained a personal checking account at M and T Bank (M and T account). Petitioners also maintained checking accounts for Biblical Church at National Penn Bank (National Penn account) and the Bank of Lancaster County (Lancaster account) (collectively, the Biblical Church bank accounts or the church bank accounts). Petitioners were the only authorized signatories for the Biblical Church bank accounts. The name listed on the church bank accounts was “Biblical Church and Global Ministries”, but petitioners usually deposited checks made payable to “Biblical Church” into the National Penn account and checks made payable to “Global Ministries” into the Lancaster account. Biblical Church had two bank accounts because Mr. Chambers was trying to separate funds for the church itself from funds that were intended to support its overseas mission trips. He had originally planned to save some of the church funds to purchase a building; but because he was very passionate about the mission work, he put most of the money toward missions.


Petitioners opened the Lancaster account before they had obtained an employment identification number (EIN) from the Internal Revenue Service (IRS). They told the bank representative that they had applied for an EIN but had not yet received it. The bank representative nonetheless allowed them to open a bank account, and she typed all of the information required on the new deposit account coversheet but left blank the space for the EIN. She then printed out the new deposit account coversheet, had petitioners sign it, and instructed them to inform the bank as soon as they received the EIN from the IRS. The bank representative's actions in setting up the account, printing out the new account coversheet, and leaving blank the space for the EIN were consistent with protocol established by the Bank of Lancaster County at that time.

We have a saying that it is better to be lucky than good.  A corollary of that might be that it is worse to be unlucky than bad.  I suspect Reverend Chambers piece of bad luck with the EIN  might have been what really got the IRS swat team that was working him over excited.

At some point, a nine-digit number was handwritten in the space for the tax identification number on the new account coversheet. The nine-digit number written on the new account coversheet and subsequently associated with the Lancaster account is the Social Security number of a minor child unrelated to petitioners, not the EIN assigned to Biblical Church. The minor child who was assigned the Social Security number was not an account holder at the Bank of Lancaster County when petitioners created the Lancaster account.

His next misstep would appear to many of us to be the act of a godly man, who is also humble.

During the years in issue petitioners performed part-time janitorial work for Superior Walls of America, Ltd. (Superior Walls). Petitioners were paid $13 per hour for performing cleaning services about 15 hours each week. Mr. Chambers intended the compensation from Superior Walls as a fundraiser for his mission trips and for Biblical Church. He spoke with the financial controller at Superior Walls and explained his desire to perform janitorial services as a fundraiser for Biblical Church. Pursuant to an agreement with Superior Walls, instead of paying petitioners themselves for the work, Superior Walls paid Biblical Church directly. Mr. Chambers executed a Form W-9, Request for Taxpayer Identification Number and Certification, on behalf of Biblical Church, which he submitted to Superior Walls, claiming to be exempt from Federal tax withholding.

Unfortunately one of the things that scamsters do with phony churches is assign their income to them.  This would probably be the first instance of somebody doing it with the $13 per hour he was getting for mopping floors.  And lets not forget that Reverend Chambers actually did spread the Gospel in foreign places.  On the other hand by assigning his income, modest as it was, to the "corporation sole", Reverend Chambers was walking like a duck.

Petitioners later learned that the law required them to report the compensation from Superior Walls as taxable income, and they began to report the compensation as income during 2006.  Petitioners reported their income from Superior Walls during 2006 on a Schedule C attached to their Form 1040, U.S. Individual Income Tax Return.

That was a bit of unducklike behaviour that the Tax Court noted with approval.

Then there is the matter of the language in the governing document that to the IRS indicated  a “tax-hostile” entity

This Corporation Sole is a full-time Ministry and Spiritual Order which *** is mandatorily excepted by an “unrestricted” right, as referenced in United States law Title 26, §§ 6033(a)(2)(A)(i) and (iii), § 1341(a)(1) and § 508(c)(1)(A), from any form of taxation and from filing any returns or reports/documents ***

Although the Tax Court noted that the objectionable language was "largely a recitation of the tax law applicable to all churches", that is part of the style of tax protester rhetoric which frequently includes quotations from valid authority, ofter wildly out of context.  So Reverend Chambers with that governing document was talking like a duck.  (Although there is nothing to indicate that Reverend Chambers was constantly seen in the company of ducks, there is a chance that he purchased his paper work from one).  It is interesting to note that in the entire body of tax authority the term "tax-hostile" entity only appears in this case.  I wonder if it is a coinage by the agents who have to deal with this stuff. I used to have a third shift job in a hotel where a lot of cops would stop by to take their breaks.  They often referred to a crime that was not in the statute books called B and A, which stood for "being an asshole"

During the years in issue, the deposits into the Biblical Church bank accounts primarily consisted of numerous small checks written by individuals. Members and regular attendees of Biblical Church wrote checks that accounted for the largest number of deposits. Many of those individuals contributed a regular tithe or offering. Other checks were written by individuals who made only a few donations during the years in issue. Some checks were written by other churches. In total, about 50 individuals and three churches wrote at least one check to Biblical Church during the years in issue

The Tax Court was able to get Reverend Chambers out of a significant part of the trouble he had gotten into, primarily it appears from naivete.  First of all they determined that the Biblical Church was a church.

Biblical Church satisfies many of the criteria. Mr. Chambers is an ordained minister, the church has a distinct legal existence as a corporation sole, the church has been meeting regularly on Sundays since 2003, its worship services include a core group of 15 to 25 attendees who exclusively attend Biblical Church, its worship services are consistently held at the same place, and Mr. Chambers teaches recognized Christian doctrine. On the basis of the foregoing, we conclude that Biblical Church is a church.

That did not solve the problems entirely. Reverend Thomas had unfettered control of the various accounts.  Some of the expenditures went for personal purposes


The IRS reconstructed petitioners' income for the years in issue by examining the deposits to the M and T account, the Lancaster account, and the National Penn account. The IRS did not include deposits into the Northwest account when it reconstructed petitioners' income. However, the parties have included bank statements and canceled checks from the Northwest account among the stipulated exhibits before the Court. Those records show that petitioners used the debit card from the Northwest account to pay for numerous purchases at Wal-Mart, K-Mart, Staples, Dollar General, and a variety of other retailers, as well as many purchases at gas stations and restaurants. Petitioners wrote checks on the Northwest account to pay for many household expenses, including their gas bills, cable bills, and sewer bills. They also wrote checks to a tile company, a chimney sweep, a mattress store, a dentist, a newspaper, a mechanic, and a cement company.


Petitioners contend that even if some of the expenses paid from the Northwest account were personal, those amounts are not includable in petitioners' income because they were for the purpose of providing a home for Mr. Chambers, a minister of the gospel, and therefore are exempt from taxation under section 107. However, in order for a minister's housing allowance to be exempt from taxation under section 107, it must be designated as a housing allowance by an official action of the church in accordance with section 1.107-1(b), Income Tax Regs.

I think the Tax Court may have missed a chance to cut Reverend Chambers a break here.  They had recognized that the church was a church and he had transferred ownership of the house to the entity so this was arguably not a rental allowance situation.  They did prevent the IRS from piling it on to some extent.

The deposited checks in 2005 include federal income tax refund checks. In light of the circumstances and facts of this case, respondent is unwilling to concede that those refunds were correctly and properly made to petitioners. Therefore, respondent does not concede that those refunds are non-taxable in 2005. It appears that respondent is contending that petitioners are liable for deficiencies in income taxes from prior years and is attempting to recover some of those deficiencies by including petitioners' tax refunds from 2004 in their income for 2005. Respondent cites no authority that would permit such a determination, and we find none. Accordingly, we conclude that petitioners' Federal tax refunds should not be included in their income for 2005.

But there was only so much they could do.  The Chambers had sold gold coins inherited from Mrs. Chambers father to help with church expenses.  In their reconstruction of income the IRS treated these amounts as income and the Chambers did not have sufficient evidence to refute the presumption of correctness.


Respondent's contention is based on the premise that Mr. Chambers stated that Mrs. Chambers inherited the gold coins directly from her parents, which would contradict Mrs. Chambers' testimony that petitioners used cash they inherited from Mrs. Chambers' parents to purchase the coins. However, Mr. Chambers never clearly explained where the gold coins originated. In addition, he separately testified that petitioners had received cash from the inheritance. Although petitioners' testimony regarding the gold coins was somewhat difficult to follow, we do not find it contradictory. Nonetheless, because petitioners have the burden of proving that the $30,281 should not be included in their income and because petitioners failed to provide any evidence to corroborate their testimony, we conclude that petitioners have failed to carry their burden of proof that the income from the Surgical Resources Business Trust checks should be excluded from petitioners' gross income.

The big thing that the Tax Court did do for Reverend Chambers was making the 75% fraud penalty go away.  Acknowledging all the various things that Reverend Chambers had done to make himself appear like a duck, they could clearly see that he wasn't one.  Most important was the determination that there was an actual church there.

There are some other interesting aspects of the case that I have glossed over.  I recommend it as a good read.  I think it is worth commenting on how Reverend Chambers might have avoided these problems short of just working for organizations like e3 Partners, that have good infrastructure in place.  He might have looked at the ECFA Standards and Best Practices for Churches.  In the interest of full disclosure, I should probably say that the churches I have attended would not qualify for ECFA membership. Most Unitarian Universalists have a different theological perspecitve than that required by Standard 1.  Our principles do encourage us to heed "Wisdom from the world's religions which inspires us in our ethical and spiritual life" ECFA's standards and best practices clearly fall in that caterogy.  One excerpt from the standards might have been particularly apt for Reverend Chambers Biblical Church:

Every member shall be governed by a responsible board of not less than five individuals, a majority of whom shall be independent, which shall meet at least semiannually to establish policy and review its accomplishments.


If the group of people that asked Reverend Chambers to stay on as their preacher even while working on his evangelical missions did not include five people capable of seeing that mundane matters like setting a salary for him, most if not all of which could have been excluded as parsonage, then he really should have passed.

I have been sparing in my criticism of the IRS in this case.  I have often commented on how ill qualified I am to work for them.  If I was in charge of the team that was working on this I would have said "This guy is a real minister.  Let's leave him alone and go fight crime someplace else."  ignoring the laundry list of duck like characteristics that he was exhibiting.  What would be very sad is if this case ends up being viewed as an instance of the Satanic IRS persecuting the godly.  If you are of the mindset to look at it that way, I'd point you to ECFA who will teach you how to avoid even the appearance of impropriety.


I haven't seen a lot of commentary on this case.  At least one blogger has observed that it was quite a harsh result.  I've seen the identical commentary in more than one place, so I am not sure of the original source.

Work Fight or Pray - Vestige of the Medieval in Our Tax Code

Originally published on Passive Activities and Other Oxymorons on December 29, 2010.
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§ 119 Meals or lodging furnished for the convenience of the employer.
§ 134 Certain military benefits.
§ 107 Rental value of parsonages

One of the reasons I don't mind long drives is the Teaching Company.  They allow me to take courses I never got to in college, with no papers to do.  I'm a little torn about this, but I would say that Teofilio L. Ruiz is about the best that they have, which is saying a lot.  He lectures about Medieval Europe.  The thing that sticks in my mind from several of his lectures is the tripartite division of Medieval society.  Those who work, those who fight and those who pray.  The merchants and artisans in the cities were a fringe element irrelevant to the overwhelming majority who worked growing food, of which there was rarely enough.  The fighters and prayers owned just about everything and paid no taxes.

It's odd to see that division in our tax code, but the sections above lay it out pretty clearly.  When it comes to housing, it would seem that Section 119 is sufficient.  If your employer provides you with a place to live, so that you will be near at hand, the value of that place to live is excludible from your gross income.  If that place happens to be a room in a hotel for the manager, a rectory or fifteen square feet on a nuclear submarine, the principle is the same.  That's not the way it is, though.  The military and the clergy are special.  Since at least historically, housing tended to go with their jobs, monetary allowances paid in lieu of actual housing are exempt from tax.  Since the military is paid by the same entity that collects the taxes, ultimately it seems to me that it is a matter of six of one, half a dozen of the other.  Military housing allowances strike me as fairly modest.  Presumably they could be grossed up and made taxable with negligible net effect on either the deficit or military compensation.  Also there is nothing at all troubling about the federal government determining who is entitled to military housing allowances.

Parsonage is another matter entirely.  It involves the government in determining who is or is not "a minister of the gospel".  More significantly, and perhaps surprisingly to many, it is an area of abuse.  Generally speaking, ministry is not viewed as lucrative occupation.  In some cases it is, though.  There is no dollar limitation on the parsonage exclusion.  The last big flap over the parsonage exclusion was in 2002.  There were two clear requirements to the exclusion.  The first is that the entity making the payment designate the amount as a housing allowance.  The second is that the minister spend the money on housing.  The IRS inferred a third requirement namely that the exclusion be no greater than the fair rental value of the home provided.   The Warren case was supposed to be an argument about that requirement.  The Ninth Circuit, much to the chagrin of both parties, asked them to start briefing on the constitutionality of the exemption.  The Court appointed Erwin Chemerinsky as amicus or we might say, in this case, devil's advocate.

Since Reverend Warren and the IRS came to an accommodation, the Ninth Circuit decided to let the hornets nest they had stirred up calm down (WARREN v. COMM., Cite as 90 AFTR 2d 2002-6058) and freed Professor Chemerinsky to pursue other interests. ( I contacted Professor Chemerinsky and he indicated that although still interested in the issue he is no longer involved).  Congress amended 107 to include the fair rental limitation that the IRS thought was already there.

There was not a lot of activity in the parsonage area in 2010.  Just three things that I've been able to find.  The first is not of any great note, but I include it for the sake of completeness.  Rev. Proc 2010-03 was what I call the IRS "Don't even bother to ask" list.  It lists the specific items on which the IRS will not rule and includes:

(11) Section 107.—Rental Value of Parsonages.— Whether amounts distributed to a retired minister from a pension or annuity plan should be excludible from the minister's gross income as a parsonage allowance under § 107.

(12) Section 107.—Rental Value of Parsonages.—Whether an individual is a “minister of the gospel” for Federal tax purposes.

I don't think there is anything new about the IRS reticence in these areas.  Personally, I have significant resentment for item 12.  The IRS refusal to rule in this area substantially reduces the entertainment value of the corpus of private letter rulings.  Their ability to rule on whether an organization is exempt gives us a comic masterpiece like Free Fertility .  Rulings on who is and is not a "minister of the gospel"  would be immensely entertaining.

More significantly there were two court decisions on the parsonage exclusion. The first was courtesy of the Freedom From Religion Foundation.  They are challenging the constitutionality of the parsonage exclusion. I have to say that regardless of the merits of the argument, I find FRF a little disturbing.  Their distaste for religion borders on, well, the religious.  According to their website:


The history of Western civilization shows us that most social and moral progress has been brought about by persons free from religion. In modern times the first to speak out for prison reform, for humane treatment of the mentally ill, for abolition of capital punishment, for women's right to vote, for death with dignity for the terminally ill, and for the right to choose contraception, sterilization and abortion have been freethinkers, just as they were the first to call for an end to slavery.

I think they are pulling a little bit of a rhetorical fast one there in combining "free thinking" and being free from religion.  The abolition of slavery in the United States had a very strong religious impulse behind it, although many of the radical abolitionists became alienated from the denominations that they were born into.  We even have an American religion that is more or less based on free thinking in Unitarian Universalism.  I've met UU ministers who don't believe in God, but I've never known one to turn down a parsonage exclusion.

At any rate little as I am drawn to FRF, they do seem to have the stronger argument.  Personally, it doesn't bother me at all for the state to tilt the playing field a little in the favor of religion in general.  The FRF types seem to think that you have prayers at the inauguration and next thing you know it's the Spanish Inquisition.  I mean really nobody expects the Spanish Inquisition.  Apparently, though current First Amendment jurisprudence is not as easygoing as I am.  Here is part of the government's argument in its motion to dismiss:

Sections 107 and 265(a)(6)constitute constitutional accommodations of religious practice by eliminating discrimination between ministers and similarly situated taxpayers. Sections 107 and 265(a)(6) are part of a governmental policy of neutrality toward religion, and government neither advances nor inhibits religious practice through these provisions.

The government argument goes that lots of taxpayers get the convenience of the employer exclusion.  In order for clergy to get the exclusion, the IRS might have to go poking around in the rectory, which could be intrusive.  So to make all ministers equal Congress added the housing allowance.  I get the argument but I don't think it is really strong.

Then came the Driscoll case.  From everything I've read Phil Driscoll is a really nice guy.  As I write this I'm listening to him on pandora.  Nice sound.  But a parsonage exclusion of $195,000 for his second home! Ministers who are half of two income households can have 100% of, admittedly often low, compensation excluded.  Consider Terry and Robin, the couple of indeterminate gender and marital status I introduced several months ago. (Their role is to help me avoid awkward pronoun problems) In this example Terry is a UU minister and Robin is an attorney.  Terry makes $40,000 and Robin makes $200,000.  If they stretched on the house that they bought,  Terry would negotiate for the entire $40,000 to be excludible.  If I was on the congregation's ministerial compensation committee, it would be my idea. The portion of it that was interest and real estate taxes would still be deductible against Robin's income.  Thanks to Driscoll, now when Terry gets a better job they can exclude a $100,000 compensation package so they can buy a house on the Cape.  I really don't think that this type of tax gaming is good for the morale of the clergy. The tax free nature of housing allowances gives an extra twist to church financial debacles as in this story about the Crystal Cathedral.. People like me will encourage the tax gaming because that's our job.  We don't expect the tax system to be fair or make sense.  I think, though, that the cause of religion, in the broadest sense of the word, would be well served if members of the clergy would come out against their special tax status.  I'm not holding my breath.

The tax blogosphere still hasn't heated up on this issue.  I noted posts by two attorneys in a bonus post earlier this month. They focus on statutory construction, which is the key to the Driscoll case. The Driscoll case loses much of its drama if you leave out the numbers.  Robert Flach has taken note of the discussion in his What's the buzz post and has promised to weigh in on it.  That should generate some more interest.

Blowing My Own Horn

Originally published on Passive Activities and Other Oxymorons on January 4th, 2011.
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Philip A. Driscoll, et ux. v. Commissioner, 135 T.C. No. 27

I seem to have taken the lead in the tax blogosphere in noticing this case.  It concerns the parsonage exclusion for a second home.  My post on it may be hindered by one of my meandering lead ins, but other than that it is the only post I've seen so far that explores the story behind the story. (For example, nobody else connects this case to 
Reverend Phil's visit to a federal facility in 2007).  John F. Rogers of TaxTales notes the importance of statutory construction and going to other Code sections for support (The key to the case was that "home" also means "homes").  He is of the opinion that this is a "big win" for pastors.  I'll have to agree to disagree with him on that one.  I don't think many pastors have second homes and even some who do might hesitate to ask their congregation to include them as part of the housing package.  The other parsonage decision of 2010 holds that various and sundry members of the Freedom From Religion Foundation have standing to challenge the constitutionality of the parsonage exclusion.  Maybe one case doesn't have anything to do with the other, but something as egregious as this can't help the pro-parsonage side of the argument.

James Edward Maule's post on the case also focuses on the statutory language analysis.  His view of the big picture is more similar to mine :

What’s left are several questions for the future. First, will the IRS appeal, and if so, will it prevail? Second, will the IRS continue to issue notices of deficiency in these sorts of cases, knowing that it would lose in the Tax Court but hoping that it would prevail on appeal to a different Court of Appeals? Third, might the Supreme Court end up dealing with this issue? Fourth, will the Congress amend section 107 to respond to the Tax Court’s decision, and, if so, what will it do? Fifth, might the Congress repeal section 107, the existence of which is difficult to justify under any sort of tax policy analysis? 

My fellow bloggers, being attorneys, probably enjoy words more than numbers.  So they don't mention that for 1999, the portion of Reverend Driscoll's parsonage exclusion attributable to his second home was $195,778.72.  The ministry is not a church.  The website makes it seem more like a record label.  In 2009, Reverend Driscoll drew a salary of just $77,440 as president and $283,082 as parsonage.  The 2009 data is from the 990.  We don't have any way of telling whether Reverend Driscoll excluded it all.  Since 2002 the exclusion is limited to rental value plus utilities.

My own tax policy analysis is that a case can be made for the exclusion on a free exercise theory.  Clergy who are required to live in a residence should be able to exclude its value under 119 (Lodging provided for the convenience of the employer).  Denominations with a strong congregational polity but significant diversity in belief, like Unitarian Universalists might want their clergy to have a significant sphere of privacy. They would be put at a disadvantage to other denominations.  The other thing is that the exclusion has been around a long time and it might really foul up some small congregations to eliminate it.    The answer to the abuses of the exclusion is to put a dollar limit on it.  We already have a table in place for the military.  It seems to top out below $4,000 per month.

I'm working on a more comprehensive post, but I am putting this one out now in a cynical attempt to build traffic.

Parsonage Exclusion - Shouldn't Enough be Enough?

Originally published on Passive Activities And Other Oxymorons on December 19,2010, this post commences my fascination with the parsonage exclusion - Code Section 107, which provides for an unlimited exemption from income tax of the housing allowances, in-kind or cash , of "ministers of the gospel".  When I did a recap of my coverage on the issue in November 2013, there were over twenty posts and there have been more since.  IRS won on appeal to the Eleventh Circuit in the Driscoll case, but of much greater interest has been Freedom From Religion Foundation's constitutional challenge.  As of this point, FFRF has won in District Court and government has appealed to the Seventh Circuit.

Covering the parsonage issue has made me some of my best blogging buddies including Robert Baty and Reverend William Thornton.
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Philip A. Driscoll, et ux. v. Commissioner, 135 T.C. No. 27

Foxes have holes, and birds of the air nests; but the Son of man hath not where to lay his head.

Robert Harris's book 101 Things Not to Do Before You Die is a fantastic blend of humor and wisdom.  One particular piece of advice which actually caused me to change my regular behavior was:

Don't accumulate nonfunctional pens.

Following the form of most of his advice he describes a person who reaches into a jar of ballpoint pens, tests the pen to see if it works, finds it doesn't  and then puts it back.  What do you say about such a person ? Don't be one of them !

Check your pens and let go of the ones that no longer serve you - even if it is painful.  Keep only the ones that you can reach for with confidence.  This way when you feel the urge to write or draw or doodle, you can get started without needless delay and frustration.

There is another piece of advice, one  that I generally don't follow.  Although he is referring to sports on TV, I think it has broader implications.  That advice is :

                                           Don't be a passive spectator

When you're watching two teams, always pick one to pull for.  Cheer and boo.  Laugh and cry.  Eat and drink.  And experience not just the game, but the competition.

In my blog, I have adopted an attitude of - It is what it is.  Before long it will be something different.  Deal with it.  Other tax bloggers seem to enjoy advocating for one side or the other.  The Tax Court's decision in Phillip A. Driscoll has motivated me to finally do some serious booing.  The issue is the parsonage exclusion.  I have previously written about an effort to have the exclusion declared unconstitutional.  I think my post on the constitutionality of the parsonage exclusion took a pretty balanced view.

The case of Phillip Driscoll is another matter.  Reverend Driscoll heads Mighty Horn Ministries.  The ministry is not apparently classified as a church since it files Form 990.  If you look at the website, it strikes one more as being a record label, albeit one that specializes in religious music.  Since 2007, perhaps coincidental with the Reverend's visit to a federal facility because of a misunderstanding about taxes, the organization has been officially known as Phil Driscoll Ministries. Their 990 is available on guidestar.org (registration is free). In 2009, it had gross receipts in excess of $3,000,000.  Officers salaries were fairly modest $77,440 to President Phillip Driscoll, $5,700 to Jamie Driscoll the VP and $31,700 to Lynn Driscoll.  The Reverend Phil, however, had expense accounts and "other allowances" totalling $283,032.  This nicely ties with the item in other expenses labelled parsonage.  If you know anything about airplanes, take a look at the depreciation schedule on page 21 of the adobe file and you can let me know if I should get cranked up about that.  The mission of Phil Driscoll Ministries (a/k/a) Mighty Horn is:

Spreading the gospel of Jesus Christ to approximately 500,000 people annually through concerts and other ministry opportunities.

As occasionally happens to me further research has shown that a case I have found of interest is actually a late act in old news.  Reverend Driscoll did time in 2007 for tax evasion.  At least one commentator believes the real villain in that case was the IRS.  In his post Welcome Home Phil, James Paris speculated that Phil was being persecuted for his Christianity.  You can find similar comments in the Christian music realm of the blogosphere.  Apparently Reverend Driscoll is quite a celebrity with even Bill Clinton trying to help him avoid prison time.  It will be interesting to see if this tax court decision is seen as something of a vindication of him.

At issue were parsonage exclusions covering the years 1996 to 1999 totalling just over $400,000.  The largest being $195,778.72 in 1999.  This was not Reverend Driscoll's entire parsonage allowance.  This was the portion attributable to his second home (for parts of 1998  it was "second homes").  Just a little bit of tax history here.  The parsonage exclusion goes back to the Revenue Act of 1921.  It excludes from income the rental value of a residence provided to a "minister of the gospel".  This exclusion might have been rendered redundant by the subsequent creation of an exclusion from income for lodging provided to employees for the convenience of the employer.  In the classic "parsonage" or, if you are Catholic, "rectory", situation, presumably the convenience of the employer standard would be met.  It's convenient for the congregation to have the minister living next to the church in a house maintained by the church.  Maybe not so convenient for the minister's spouse or the minister's kids.

Here is where we get into the tension between the establishment clause and the free exercise clause.  Some denominations and congregations might think, perhaps with some encouragement from the clergy, that it is not such a good idea to have the minister live in a house owned by the church.  Since you wouldn't want to treat them differently than other denominations or congregations the parsonage exclusion was expanded to include "rental allowances".  There is no dollar limitation on such rental allowances and no limit on the relationship that they can bear to taxable compensation.  The money just has to be spent on providing housing.  If the housing allowance is used to pay deductible expenses they are still deductible.

The question the tax court had to decide in this case was whether a parsonage allowance should be allowed with respect to a second home.  In 2002, the Code was amended to limit the exclusion to the fair rental value of a home.  Prior to that it would presumably have been legitimate to have a $500,000 parsonage exclusion that was used to be buy a house.  Since the parson would have basis in the house it could be subsequently sold for $500,000 with no taxable income.  The case which prompted the Code change was not nearly that extreme.

Interestingly the question of whether the parsonage allowance can apply to a second home has never been addressed before.  The court was left to try to figure out what Congress was up to when it first enacted this thing in 1921.  They didn't get very far:

One commentator has suggested that the in-kind exclusion grew out of “the general respect held by Congress and the public for churches,”

What they came down to was statutory construction.  The language in Section 107 says "provide a home", but when you go to the definition section of the Code you find :

In determining the meaning of any Act of Congress, unless the context indicates otherwise— words importing the singular include and apply to several persons, parties, or things;

So providing a home includes providing two or, in this case for part of the time, three places to live.  And of course Reverend Driscoll in 2007 had free housing provided by the federal government, although that was just for himself.

I really don't think this type of thing does the cause of religion much good.  I doubt that it is good for the clergy to have their own special tax gimmick that while appearing modest can be gamed to exclude from income tax as much as 100% of above average incomes in some cases.  If 107 were simply repealed it would not cause the taxation of clergy who are provided a place to live by their congregations.  They would be covered by the convenience of the employer exception even if the residence had a theoretically high rental value (conceivably a bishop's residence or the like).

There is another option, which as far as I know is original with me, although whenever I think that it turns out that I am wrong.  Code Section 134 excludes from income a number of military benefits including a housing allowance. A rationale similar to that for the parsonage exclusion can be made here.  Members of the military are frequently and perhaps more so traditionally provided with housing at a place convenient to the employer, think Fort Apache. It is reasonable that a cash allowance in lieu of that benefit would be exempt.  From a policy viewpoint the military housing exclusion is less troubling, since there is nothing disturbing about the federal government deciding who is entitled to it (Unless you are a far out militia type).  Perhaps more significantly, since it is paid by the federal government, it is limited.  The allowance varies by whether the service member has dependents, by region and as you might expect rank.  If you look at the table, though, you will see that the variation by region is the most dramatic with junior enlisted ranks in Alaska having housing allowances greater than a general in Alabama.  My recommendation is that the parsonage allowance be limited to no more than the highest military allowance anywhere.  You could come up with something more complicated than that.  The important thing is that there be some dollar limit.

Dropping back to my normal persona as amoral tax advisor congregations and ministers might consider whether there is an opportunity here to further pump up housing allowances.  I don't know how many clergy members own multiple homes, but I will predict that as word of this decision gets out, the number will increase.  A cautionary note.  The Tax Court was divided on this opinion.