Parsonage and Tax Policy: Rethinking the Exclusion

16 Pages Posted: 23 Aug 2002 Last revised: 25 Jun 2010

Date Written: June 25, 2010


This report urges changes to the parsonage exclusion of section 107 beyond the recent amendment intended to resolve the dispute between the parties in the pending Warren litigation and thus prevent the Ninth Circuit from considering he constitutionality of section 107. For both furnished housing and the paid housing allowance, the proposed revision of section 107 would broaden the reach of the provision beyond ministers of the gospel to employees of any public charity. Such broadening would avoid possible Establishment Clause problems by including religious organizations in a larger group. It would also reflect our longstanding decision to favor and encourage organizations exempt under section 501(c)(3). For revenue, as well as policy reasons, however, the benefits of revised section 107 would be limited to those employees who must be available for emergency call at all times to meet with members, clients, or patients. As so revised, section 107 would be likely to benefit employees of social service and health care organizations as well as ministers.

The report proposes additional changes to the paid housing allowance. Under the suggested revision, qualified employees who rent or own their own homes would have an exclusion limited to a maximum of $15,000, a change that would transform the paid housing allowance into a special home office deduction. The paid housing allowance would also be subject to a phaseout as the total economic benefits paid to the employee increase above the level used to identify highly compensated employees under the pension laws, which is $90,000 for 2002. Section 107 revised along these lines would enable Congress, in our post-September 11 world, to encourage emergency provision of pastoral care, broadly defined, to a variety of charitable recipients.

Suggested Citation

Aprill, Ellen P., Parsonage and Tax Policy: Rethinking the Exclusion (June 25, 2010). TAX NOTES, p. 1243, August 26, 2002; Loyola-LA Legal Studies Paper No. 2002-18. Available at SSRN:

Ellen P. Aprill (Contact Author)

Loyola Law School Los Angeles ( email )

919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1157 (Phone)
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