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Dan Busby, president of the Evangelical Council for Financial Accountability and a Your Church Today editorial advisor, recently shared eight legislative and legal cases he is tracking because of their direct relevance to churches. Church leaders should note them for the remainder of 2010 and into 2011:

1) The challenge to housing allowances. Although clergy have enjoyed the benefit of a housing allowance for decades, a case in California questions the constitutionality of this exclusion. The Freedom from Religion case specifically challenges Section 107 and Section 265(a)6 of the tax code. According to Busby, some believe the California judge is eager to rule the housing allowance unconstitutional. "We'll be hearing about this case for several years," says Busby. "We need to get background on this so we understand the facts versus false information that may be spread."

Section 119 of the tax code allows the exclusion of the value of employer-owned housing. In Section 119, housing must be provided for the convenience of the employer, it must be on the employer's property, and the employee must accept housing as a term of employment. Section 119 correlates to Section 107(1), which applies primarily to the military, and to Section 107(2), which is the minister-provided housing.

"Section 107(2) could be viewed as an indirect subsidy," says Busby. "The question may come down on whether it's constitutionally valid for the government to give an indirect subsidy to ministers." Proponents of the housing allowance for ministers will lean on the "reliance theory"—that ministers have relied on this allowance for decades, so a change now would present a significant hardship to ministers.

"If 107(2) were deemed to be unconstitutional," says Busby, "I would not be worried about this. It would be a lightening strike to the church to step up and pick up the responsibility for additional ministerial compensation."

Busby says there are abuses of housing allowances that go unreported, such as trying to apply a housing allowance retroactively, not accurately reporting excess housing allowance as other income, and applying housing allowances to individuals who do not qualify to receive it.

Busby suggests that churches identify the consequences of losing the minister's housing allowance benefit and develop a contingency plan.

2) Church compliance with health care reform. Because of the many complex details included in the new Patient Protection and Affordable Care Act (PPACA), which President Obama signed into law March 23, 2010, churches should note some of the key dates when specific aspects of the legislation will take effect. Here's a quick look at what's required year-by-year (the ECFA also provides a full timeline outlining key dates of the reform):

2010—Before the end of this year, churches need to add health insurance policies that provide coverage for dependents up to age 26.

2011—Employers must report health care coverage costs on W-2s. This requirement has created confusion for many who wonder if this is merely for informational purposes or if the government plans to make these costs taxable. According to Busby, reporting of health care coverage costs is for information only; it does not trigger taxable income. However, he adds, a senator on Capitol Hill recently suggested taxing health insurance benefits. "We can see where this is heading," Busby says. "Congress is looking for revenue under every rock."

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