It began with a $20,000 difference between what the IRS and megachurch pastor Rick Warren thought he could deduct for his parsonage. It could end with clergy and churches around the country spending an extra $500 million a year in taxes. Warren, pastor of the 18,000-member Saddleback Community Church, deducted $79,999 for his actual housing costs in 1995. The IRS challenged the deduction, saying the fair market value of the home was only $59,479.
The dispute continued through the courts until appellate court judge Stephen Reinhardt dropped a bombshell March 5: "It is possible that any tax deduction that Rev. Warren receives [for the parsonage] would constitute an unconstitutional windfall at the public's expense."
When both sides in the dispute insisted that it was constitutional, the court turned to University of Southern California law professor Erwin Chemerinsky, who told the judges that such tax benefits amounted to government endorsement of religion. (Warren and the IRS have until May 24 to file reply briefs.)
The case has already gained the attention of Congress. Rep. Jim Ramstad (R-Minn.) introduced legislation to protect the parsonage exemption, and the House unanimously approved this pre-emptive strike on April 16. On May 2, the Senate also unanimously passed Ramstad's bill, H.R. 4156. "Nearly every clergy member in every denomination relies on this tax benefit," Ramstad said, adding that the court has hijacked the case.
The Clergy Housing Allowance Clarification (H.R. 4156) amends the Internal Revenue Code of 1986 to clarify that the parsonage allowance exclusion is limited to the fair rental value of the property.