The Parsonage Exemption
Arizona State University (ASU) - Sandra Day O'Connor College of Law
January 28, 2017
The parsonage exemption allows “ministers of the gospel” to exclude the value of housing benefits from income, whether received in-kind or as a cash allowance. Critics argue that the provision is unconstitutional, and the dispute is likely to make it to the Supreme Court. This Article fills an important gap in the debate over the parsonage exemption by offering a nuanced explanation of how it and other housing provisions function within the tax code. Placing the parsonage exemption in its proper tax context makes clear that (1) other tax-free housing provisions and exemptions for religious organizations cannot provide the parsonage exemption constitutional cover; (2) the parsonage exemption involves significantly more entanglement than would the generally applicable housing provision; (3) permitting ministers to receive tax-free housing violates the core tax principles of horizontal and vertical equity; and (4) other exemptions for religious organizations cannot justify the parsonage exemption.
Number of Pages in PDF File: 57
Keywords: First Amendment, Free Exercise Clause, Establishment Clause, Taxation, Religion, Separation of Church and State
JEL Classification: H20, H24, H26, K34, Z12
Date posted: January 30, 2017