By SI Filings Dec 31 2021 MegachurchesCelebrity PastorsClergy Taxes"According to an investigative report by the Houston Chronicle, televangelist Kenneth Copeland has avoided paying $150,000 in annual taxes on his $7 million Texas mansion because of a loophole in the state's tax code." - C.Headlines 1306 reads There are 24 Comments The clergy housing allowance provision is legal Craig Toliver - Fri, 12/31/2021 - 12:29pm The clergy housing allowance provision is legal It makes no sense to me, but there are a lot of tax things that befuddle me It makes sense to me. G. N. Barkman - Fri, 12/31/2021 - 5:09pm The concept, as I understand it, is to even the playing field between clergy that live in church owned housing, and those who furnish their own homes. How would you tax the salary value of a Catholic priest living in a monastery? (Or a Baptist living in a parsonage?) If the housing allowance is removed, look for a rush of ministers moving into church owned housing. G. N. Barkman parsonage vs. home ownership Don Johnson - Fri, 12/31/2021 - 10:19pm These provisions developed over time and fraudsters like Copland are taking advantage of it. Most preachers aren't so well compensated. In Canada, we have a housing allowance provision, but it isn't exactly the same as the USA. There is a formula and a cap (which is a bit beyond me, my tax software figures it out). I think it used to be more open-ended but the government tightened it up no doubt due to some extravagances by some. One difference in Canada is that we don't get to deduct mortgage interest like Americans do... (to touch another hot button). However, as Greg notes above, the basic idea of it comes about from the former parsonage concept. Many pastors in the past had housing provided by the church, but built up no assets of their own. A home is one of the biggest assets anyone has in their lifetime. Consequently, the housing allowance became an incentive for home ownership and a provision for retirement that wouldn't be available if a pastor simply lived in a parsonage his whole career. Stories like this one can bring about changes in the tax law, however. There is, I think, a reasonable argument for a housing allowance (vs a parsonage), but Copland's case is a little extreme. Maranatha! Don Johnson Jer 33.3 Churches are automatically Jonathan Charles - Sat, 01/01/2022 - 10:30am Churches are automatically tax-exempt and don't have to become 501c3 organizations or file a 990 tax exempt return. So the only accountability is internal. I don't know what the answer is to deal with corruption like Copeland's. If the government got involved, who is to say that it wouldn't lead to a slippery slope of the government meddling in the affairs of other churches simply because it didn't like it's teaching? Senator Grassley tried to do something and it went nowhere. The answer.... Bert Perry - Sat, 01/01/2022 - 5:50pm ....is for Copeland's congregation to decide that prosperity theology is a pile of horse manure, no? Let's face facts; the annual tax on the home is small potatoes compared to his income fleeced from gullible members and contributors, and that at the cost of the Gospel. If prosperity theology were Biblical, God owes the disciples, prophets, and Christ one big 'ol apology, doesn't He? Side note; it looks impressive from a distance, but in the pictures I've seen, it appears he didn't waste too much money on architects to make it beautiful or functional. Aspiring to be a stick in the mud. There should be a formula and dgszweda - Sun, 01/02/2022 - 11:37am There should be a formula and a cap on what can be included for a parsonage. This just makes sense. It is extremely easy to abuse in America's model. A Closer Look G. N. Barkman - Mon, 01/03/2022 - 8:04am Reading again, I realize the issue here appears to be property taxes, not taxable income. If Copeland owns this home (as the article suggests), I'm baffled as to why he pays no property taxes. If the church owns the home, exemption from property tax is normal. I own my home, helped significantly by the housing allowance provision which makes income used to provide my housing exempt from income taxes. (Both State and Federal) However, I pay the same property tax as every other homeowner in my community. Copeland seems to have found a way to have his cake and eat it too. If I understand the article correctly, he owns his home, but is exempt from property tax. That doesn't make sense to me. G. N. Barkman Jonathan: Better be careful. WallyMorris - Mon, 01/03/2022 - 11:16am Jonathan: Better be careful. Some at SI don't like slippery slope arguments. Wally Morris Charity Baptist Church Huntington, IN amomentofcharity.blogspot.com There should be a formula and Larry - Mon, 01/03/2022 - 1:07pm There should be a formula and a cap on what can be included for a parsonage. This just makes sense. It is extremely easy to abuse in America's model. What kind of formula and who gets to set it? And how do you account for the differences in churches and areas? A church in a highpriced urban area may have had a parsonage for 100 years and be too small to afford taxes given the surrounding market. A church may have living quarters attached to the main building which is used not just for living, but for counseling, for classes, for meetings. Perhaps the current setup is extremely easy to abuse but getting the government involved in church finances is a bad idea and the cost is way higher than whatever small amount might be gained. I don't think the few cases of abuse justify the high price of governmental involvement. Larry wrote: Don Johnson - Mon, 01/03/2022 - 8:35pm Larry wrote: I don't think the few cases of abuse justify the high price of governmental involvement. So a little fraud is OK, then? The question is complicated, to be sure, by factors such as those you mentioned. That doesn't mean that the government should allow the status quo to continue. Maranatha! Don Johnson Jer 33.3 Not a slippery slope Bert Perry - Mon, 01/03/2022 - 9:36pm Per Wally's comment in response to Jonathan, it's not a slippery slope fallacy, but rather a change of principle. Churches, and some employees thereof, are exempt from certain taxes,varying by state, because "the power to tax is the power to destroy". that can be problematic in the context of the first Amendment--you don't want some minor assessor driving unwanted pastors and churches out of town by taxing his home up the wazoo. Hence church buildings are not generally subject to property tax (it's also hard to assess them accurately, which is another reason), and pastors have a couple of tax breaks that others do not. I'm personally ambivalent about exemptions for pastor owned houses--those are generally easier to assess, and easy to note "hey, this is a completely ridiculous assessment that's not consistent with how this was assessed before this pastor was living there." I would call it a "change of principle" if states and the federal government markedly start changing their approaches to how churches and pastors are, or are not, taxed. And again, the big issue here is not whether this pastor is paying property tax on his property, but that he's preaching a fraudulent gospel. Aspiring to be a stick in the mud. I used the term "slippery WallyMorris - Mon, 01/03/2022 - 10:01pm I used the term "slippery slope" because Jonathan used the term "slippery slope". Of course, calling it something else solves the issue. Wally Morris Charity Baptist Church Huntington, IN amomentofcharity.blogspot.com So a little fraud is OK, then Larry - Mon, 01/03/2022 - 10:18pm So a little fraud is OK, then? Seriously, Don? Come on. You are better than that. Of course a little fraud isn't okay. Larry wrote: Don Johnson - Mon, 01/03/2022 - 10:40pm Larry wrote: So a little fraud is OK, then? Seriously, Don? Come on. You are better than that. Of course a little fraud isn't okay. Then why did you say: Larry wrote: I don't think the few cases of abuse justify the high price of governmental involvement. Maranatha! Don Johnson Jer 33.3 I don't think a government dgszweda - Mon, 01/03/2022 - 11:55pm I don't think a government set of controls for excessive abuses is a slippery slope or an intrusion on the church. I think they could easily setup something like a pastor's home/or parsonage is exempt from property taxes if the properties assessed value is less than 3 times the average assessed value within the given zip code. The median house price (I know this is not the same as the assessed value, but assessed value is better legally as it takes into account rising home prices and such from a tax basis), in the zip code where Kenneth Copeland's house is located is about $425K. That would mean that if a parsonage or pastor's home is less than $1.075M, it is free from property tax. I am not sure that would be intrusive and it would eliminate these massive properties that some of these individuals have. Then why did you say: I don't Larry - Tue, 01/04/2022 - 6:52am Then why did you say: I don't think the few cases of abuse justify the high price of governmental involvement. Because sometimes the cure is worse than the disease. It doesn't mean that the disease is not a disease. The fact that I used the word "abuse" clearly indicated that I didn't think it was okay. But I think governmental involvement in stuff like this with respect to churches is a bad idea. It is a relatively small problem with no solution that does not cause greater problems. Not everything that is wrong is solved by more government involvement. And that's before we ever get to the discussion of whether or not property taxes are a good thing. I think they could easily Larry - Tue, 01/04/2022 - 11:51am I think they could easily setup something like a pastor's home/or parsonage is exempt from property taxes if the properties assessed value is less than 3 times the average assessed value within the given zip code. But zip codes can have vastly different home values based on any number of factors. And there is no way to actually determine a value until the home is sold. I bought a home that was assessed at three times what it appraised for, and about six or seven times what I paid for it, and probably ten times more than the average assessed value of the zip code. All because of the housing crash. Then I bought a home that was assessed at about 30% less than I paid for it, all because of the housing boom. Plus, most assessments do not decrease in a market recession or crash or downturn and do not increase in a boom, so a house might be taxed at multiples of its actual valuem either direction. You have to fight for a reduction (which I had to do). And this doesn't account for a multitude of other factors involved in valuation. Property taxes may be the most unjust form of tax in modern society. And more importantly, it still entangles government in religion and particularly in religious finances. Remember the line: "The power to tax is the power to destroy." If a city or county decides they don't like a church, they can increase taxes. Or threaten to increase taxes for holding certain positions. In the not so distant past, government tax policy was called "picking winners and losers." And certain businesses and industries were given preferred tax status (and still are) because of government objectives. Hence, green energy subsidies or high taxes on cigarettes, or luxury taxes on yachts, and the list goes on and on. You don't want the government picking winners and losers in religion by using taxes as a club over them. It's a bad idea. Again, the problem is simply not that big of a problem. It's a small problem and has already been litigated in court. So the city or county or state might get some more money from Copeland. And in the meantime, government gets more entangled in church finances and many churches lose their pastors or even their existence. I think it's a bad idea. Larry wrote: Don Johnson - Tue, 01/04/2022 - 1:28pm Larry wrote: Then why did you say: I don't think the few cases of abuse justify the high price of governmental involvement. Because sometimes the cure is worse than the disease. It doesn't mean that the disease is not a disease. The fact that I used the word "abuse" clearly indicated that I didn't think it was okay. But I think governmental involvement in stuff like this with respect to churches is a bad idea. It is a relatively small problem with no solution that does not cause greater problems. Not everything that is wrong is solved by more government involvement. And that's before we ever get to the discussion of whether or not property taxes are a good thing. So far you haven't proposed any solutions. You only raise objections. How would you propose this "abuse" as you call it ("fraud" as I call it) be solved? How could it be solved without government involvement? I don't see any way that is possible. If you object to government involvement, then you essentially are saying, as I said, "a little fraud is ok, let's just move on." Who else could deal with apparent fraud like this example? Maranatha! Don Johnson Jer 33.3 Don Johnson wrote: dcbii - Tue, 01/04/2022 - 2:01pm Don Johnson wrote: If you object to government involvement, then you essentially are saying, as I said, "a little fraud is ok, let's just move on." That's like saying that I think "crime is OK" because I support the U.S. system of innocent until proven guilty and accept the idea that it is better for one guilty person to go free than it is for one innocent person to be punished unjustly. I don't want the guilty to go free, but if to prevent that we are putting away people who might be innocent, that's a real problem, at least in my view. As an extreme example, we know that overall crime could be reduced by becoming closer to a police state. But at some point, as Larry said, the cure becomes worse than the disease, and the burden to law-abiding people would not be worth the small percentage of crime that is stopped. That's not agreement that crime is OK -- it's just a concession to reality and being able to live a normal life. I frankly don't want airport-level security for everywhere I go and every business I frequent. If you want to think that that means I think a little crime is OK (since crime would be less if I accepted the security intrusions), I can't stop you, but you would be wrong. As a smaller example, I read years ago that pesticide content in fruits and vegetables could be drastically reduced if people would accept a larger ppm number of insect parts in their food. However (who would have thought), people want insect parts reduced (to a point), so they then accept a higher level of pesticide content. It's a balance either way. No one wants food to contain either insect parts or pesticides, but there's no free lunch, and there is no such thing as being completely free of both of them. However, if enough pesticide were used to remove all the insect pieces, the cure would be worse than the disease. If a tax entity is created that monitors extreme abuses of tax-free status, when that entity runs out of cases like Copeland's, it will have to find something to justify its existence, and experience with bureaucracy has shown that such an organization will then change its mission to include more rather than be shut down. Millionaire "pastors" getting away with abusing the tax laws (or even defrauding the government) do indeed give Christianity a bad name. I'd rather have a few of those cases, though, then a bunch of pastors losing their homes because a law "fixing" that problem had unintended consequences. I'm not saying the problem doesn't have any solution, but we should be extremely cautious about crafting a law for that case, and suspicious if it seems to be too easy. David's solution sounds reasonable on the surface, as long as it could be guaranteed to work as he stated, and not have the house's value all of a sudden be considered higher than it is (and therefore subject to the luxury tax) just because more expensive ones were built around it, or because of other legal/societal changes. Frankly, however, I simply don't trust the bureaucracy to be reasonable, and I would expect it to find the harshest way to judge a pastor's home so it could be targeted for extra taxation, and that's doubly true when the yearly normal tax revenues end up being "too small" for the jurisdiction's appetite. Dave Barnhart So far you haven't proposed Larry - Tue, 01/04/2022 - 3:31pm So far you haven't proposed any solutions. You only raise objections. How would you propose this "abuse" as you call it ("fraud" as I call it) be solved? How could it be solved without government involvement? I don't see any way that is possible. I think I said above that it doesn't need to be solved. Dave expressed it well. On the practical side, there are certain things that simply aren't worth the price of fixing in a civic sense. On the philosophical side, there is a negative to fixing this--that of getting government entangled in religion. If you object to government involvement, then you essentially are saying, as I said, "a little fraud is ok, let's just move on." Not true at all. It's not okay. That's not the same as saying the government should get involved. I think a lot of things aren't okay and that the government should not get involved in all those things. I think people living together outside of marriage is worse than this, and it is a lot more prevalent. But I don't think government should get involved in that either. Who else could deal with apparent fraud like this example? Churches could. Or just leave it be. God will ultimately judge and that tax bill will be way higher than this one. Well, I think we are talking Don Johnson - Tue, 01/04/2022 - 11:08pm Well, I think we are talking about two different things. One is property tax on church properties, the other is housing allowances. I think both of these could be, and should be regulated without much trouble. I think the assumption that the solution would be too invasive is ridiculous. So I'll stand by my assertion. You are fine with a little fraud. Maranatha! Don Johnson Jer 33.3 Well, I think we are talking Larry - Wed, 01/05/2022 - 12:03pm Well, I think we are talking about two different things. One is property tax on church properties, the other is housing allowances. These two things are connected, Don. There is a rather long history of it but in a nutshell, the tax-free housing allowance was, at least in part, to prevent favoritism towards established churches who owned a parsonage for their minister. If a pastor lived in a church-owned parsonage, he did not pay incomes taxes on that (or property tax in most cases). The housing allowance was extended to clergy who lived in non-church owned places in order to level the playing field so as not to favor established churches. I think both of these could be, and should be regulated without much trouble. And I think you are wrong practically and, particularly, philosophically. So we disagree. It's fine. I have above detailed the trouble I see in regulating it. But I am fine if you differ with me on that. But for a short read, read particularly section 2 on pp. 3-4 of https://advocacy.ou.org/assets/OU-IPA-JOINS-IN-ADVOCACY-FOR-CLERGY-PARSO.... This particularly mentions dollar caps having "little chance of stopping abuses that might be occurring among the few." In other words, it will hurt a lot of churches and not solve the problem anyway. I think the assumption that the solution would be too invasive is ridiculous. It's not really an assumption. It is the argument of the courts. "Entanglement" or "excessive entanglement" is the phrase often used that the courts have set up as the standard for getting involved in church matters. How exactly it would apply in this case would have to be litigated, but it involves churches' finances and minister's salaries as stipulated by churches. The government here has traditionally been hesitant to get entangled in the matters of religion. I doubt the courts want to get involved in how much churches can pay their pastors, particularly for a living space. I am not sure what is is like in Canada so this may not impact you at all. But I am not in favor of government getting involved in salary decisions, particularly of churches. So I'll stand by my assertion. You are fine with a little fraud. It is hard for me to see how this is anything but dishonest. I have been clear with you that I am not fine with fraud. Perhaps you genuinely misunderstood my earlier post, as hard as that would seem to do. But now I have clarified explicitly. You have no honest basis to stand by your assertion. I have told you I am not fine with a little fraud. Please represent my arguments and statements fairly. What we differ on is not whether fraud is okay, but rather how it should be addressed. You should be honest about that. You don't have to agree with me but don't pretend like I believe something that I have explicitly rejected. When I bought a house years ago, I had a legal way to not pay property taxes on the house with papers drawn up by an attorney. I chose not to do it because while I thought it was legitimate, I was concerned about the appearance of fraud. So not only I am not fine with fraud. I paid a lot of money to avoid even the appearance of fraud. And remember, legal tax avoidance steps are not fraud. Whether my approach is dgszweda - Wed, 01/05/2022 - 12:29pm Whether my approach is perfect or not, we could all agree that many churches are becoming significantly bigger than current law ever attempted. There are government regulations all over the place that churches have to abide by, even when it comes to taxation. My recommendation is not to seek a way to tax the church, but to put up practical barriers against abuse. I don't think that when the founding fathers or even current governments thought through separation of church and state, they were thinking about churches that own fleets of jets, multiple campuses employing hundreds of people, parsonages topping nearly $10M, budgets and benefits that dwarf many companies. My approach was not to peel back any legitimate concerns. I agree there is a slippery slope, but the number of these types of enterprises is growing (https://lifewayresearch.com/2020/12/15/megachurches-continue-to-mostly-g...) It is easy for churches to start acting more like a corporation and less like a church and with that, sometimes comes bad decision making. I am not even saying that we should restrict churches from buying a $10M house for their pastor. Just that if they are going to buy a $10M house they may need to pay taxes on the amount that is significantly beyond reasonable measures. Churches getting too big Bert Perry - Wed, 01/05/2022 - 4:05pm We might be surprised what the Founders would have said about tax exemptions for churches in the founding era, as men like John Quincy Adams and Thomas Jefferson had spent a fair amount of time in Europe, and they would have been very familiar with the palatial churches of that continent, along with the palatial residences of the bishops and Popes. Here's an example from Wurzburg, Bavaria. Hence I would infer that the Founders were well aware of the realities of big churches, as well as of church leaders living like kings, or at least some fairly significant princes, and they were yet OK with the system of reduced/eliminated taxes for church leaders. So my thought, again, is that if you don't like it when pastors live like kings, don't join a church that provides them that kind of resources. Don't buy books and such from those that live like kings, either. It'll stop soon enough. Aspiring to be a stick in the mud.