[Congressional Record Volume 148, Number 42 (Tuesday, April 16, 2002)]
[House]
[Pages H1299-H1302]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           CLERGY HOUSING ALLOWANCE CLARIFICATION ACT OF 2002

  Mr. RAMSTAD. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4156) to amend the Internal Revenue Code of 1986 to clarify 
that the parsonage allowance exclusion is limited to the fair rental 
value of the property, as amended.
  The Clerk read as follows:

                               H.R. 4156

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Clergy Housing Allowance 
     Clarification Act of 2002''.

     SEC. 2. CLARIFICATION OF PARSONAGE ALLOWANCE EXCLUSION.

       (a) In General.--Section 107 of the Internal Revenue Code 
     of 1986 is amended by inserting before the period at the end 
     of paragraph (2) ``and to the extent such allowance does not 
     exceed the fair rental value of the home, including 
     furnishings and appurtenances such as a garage, plus the cost 
     of utilities''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to taxable years beginning after December 31, 2001.
       (2) Returns positions.--The amendment made by this section 
     also shall apply to any taxable year beginning before January 
     1, 2002, for which the taxpayer--
       (A) on a return filed before April 17, 2002, limited the 
     exclusion under section 107 of the Internal Revenue Code of 
     1986 as provided in such amendment, or
       (B) filed a return after April 16, 2002.
       (3) Other years before 2002.--Except as provided in 
     paragraph (2), notwithstanding any prior regulation, revenue 
     ruling, or other guidance issued by the Internal Revenue 
     Service, no person shall be subject to the limitations added 
     to section 107 of such Code by this Act for any taxable year 
     beginning before January 1, 2002.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Minnesota (Mr. Ramstad) and the gentleman from North Dakota (Mr. 
Pomeroy) each will control 20 minutes.
  The Chair recognizes the gentleman from Minnesota (Mr. Ramstad).
  Mr. RAMSTAD. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, in one of the most obvious cases of judicial overreach 
in recent memory, the Ninth Circuit Court of Appeals in San Francisco 
is poised to inflict a devastating tax increase on America's clergy. 
Unless Congress acts quickly, the 81-year-old housing tax exclusion for 
members of the clergy will be struck down by judicial overreach on the 
part of America's most reversed and most activist circuit court.
  The focus of this court's attack is a long-standing clergy housing 
allowance. Dating back to 1921 and recodified in 1954 in section 107 of 
the Tax Code, this allowance prevents clergy from being taxed on the 
portion of their church income that is used to provide their housing. 
This allowance is similar to other housing provisions in the Tax Code 
offered to workers who locate in a particular area for the convenience 
of their employers, and military personnel who receive a tax exclusion 
for their housing.
  Clergy members of every faith and denomination rely on the housing 
allowance. Without it, America's clergy face a devastating tax increase 
of $2.3 billion over the next 5 years. At a time when our places of 
worship are financially strapped and struggling to serve people in 
need, we cannot allow this important tax provision to fall.
  The case, now in the Ninth Circuit, Mr. Speaker, arose because of a 
dispute over a 1971 IRS ruling that limited the clergy allowance to the 
fair rental value of the parsonage. A taxpayer in turn challenged this 
limit and won in tax court and the IRS appealed. But rather than simply 
considering the issue presented in the case, which was whether the 
Internal Revenue Service had authority to limit the allowance, the 
Ninth Circuit hijacked the case and turned it into a challenge of the 
very constitutionality of the housing allowance. Neither party in the 
case even raised the constitutionality issue or requested the court to 
consider that issue, so the Ninth Circuit, in turn, asked for a 
``friend of the court'' brief from a law professor who happened to 
believe that it was unconstitutional.

[[Page H1300]]

                              {time}  1500

  Mr. Speaker, this is judicial activism at its worst. The legislation 
on the floor today will stop the attack on the housing allowance by 
resolving the underlying issue in the tax court case. H.R. 4156, the 
bill before us today, clarifies that the housing allowance is limited 
to the fair rental value of the home, which has been common practice 
for decades, for 81 years.
  H.R. 4156, as introduced, included a section of congressional 
findings and statement of purpose, I might add. But the amendment 
before us, Mr. Speaker, deletes that section in order to accommodate 
the tradition that the Committee on Ways and Means normally has; that 
is, not to include such language in tax legislation.
  However, the fact that it has been deleted does not, let me repeat 
that, does not, reflect the lack of support within the House or among 
the bill's sponsors.
  The gentleman from North Dakota (Mr. Pomeroy) has been tremendous in 
working with us on this legislation in a bipartisan way, bringing his 
considerable expertise to this important legislation, and I thank the 
gentleman for that. Certainly there is strong support among the bill's 
sponsors on both sides of the aisle for that language.
  We believe Congress clearly has the constitutional authority to enact 
section 107 of the Tax Code and the amendments contained in H.R. 4156 
that are before us today. In addition, we believe the Internal Revenue 
Service should provide guidance on the issue of fair rental valuation 
to avoid unnecessary disputes with taxpayers. I intend to work with my 
colleagues to make sure the guidance is issued.
  Finally, the amendment clarifies that the new fair rental value 
limitation to section 107 applies prospectively to the year 2002 and 
beyond. Both H.R. 4156 and this amendment explicitly provide that for 
tax years before the effective date, the fair rental value limitation 
does not apply. This language is intended to end the current litigation 
and fully resolve the matter.
  Mr. Speaker, again, I appreciate the strong bipartisan support this 
legislation has received from our colleagues, with 37 cosponsors. My 
fellow Committee on Ways and Means member and friend, the distinguished 
gentleman from North Dakota (Mr. Pomeroy), the chief sponsor on the 
other side of the aisle, has been tremendous on working on this 
legislation.
  Mr. Speaker, I urge my colleagues to vote for this bipartisan 
legislation to protect America's clergy from an unwarranted judicial 
attack and to preserve the important housing allowance.
  Mr. Speaker, I also want to thank the gentleman from California 
(Chairman Thomas) and the majority leader, the gentleman from Texas 
(Mr. Armey), for helping expedite this legislation.
  I thank Jim Clark, chief counsel on our Committee on Ways and Means, 
for his work, as well as counsel on the Committee on Ways and Means, 
Lisa Rydland and Bob Winters, for their exemplary work. I thank Siobhan 
Abell, who helped arrange this bill to be expedited from the office of 
the majority leader, the gentleman from Texas (Mr. Armey), who as well 
deserves our gratitude.
  Finally, I thank my own tax counsel, Karen Hope, who has worked night 
and day since this issue arose, and has really done a yeo-person's work 
on this important legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to begin by making it very clear that I strongly 
support this legislation, the Clergy Housing Allowance Clarification 
Act. I want to commend my friend and colleague on the Committee on Ways 
and Means, the gentleman from Minnesota (Mr. Ramstad), for his 
leadership in identifying this very troubling issue and for bringing it 
into legislative response, and for securing the cooperation of the 
majority leadership so we could consider this quickly as a stand-alone 
issue, and send the kind of response that I know both parties in 
Congress will want to send.
  It really has been a wonderful piece of work by the gentleman from 
Minnesota (Mr. Ramstad), and I am really very pleased to have been a 
part of it.
  From the earliest days of the Federal income tax, in the 1920s, the 
Tax Code has allowed the clergy of all religious faiths to exclude 
their housing allowance from taxable income. This provision has always 
been recognized not as an endorsement of any one religion, but as a 
reasonable accommodation of all religions.
  The housing exclusion benefits clergy of all faiths, recognizing that 
a clergy person's home is not just shelter, but an essential meeting 
place for members of the congregation, and also, in light of the unique 
relationship between a pastor or a clergy member and the congregation, 
the distinct housing component of it is a unique feature of that 
relationship.
  Under a longstanding IRS revenue ruling, the housing exclusion is 
limited to the fair market rental value of the home. As the gentleman 
from Minnesota (Mr. Ramstad) outlined, in a recent court case a 
taxpayer successfully challenged the IRS' authority to set such a 
limit.
  This is a case of bad facts making bad law. When the IRS appealed 
that decision, the Ninth Circuit decided not to limit its review to the 
narrow question of whether the IRS exceeded its authority, but instead 
chose to consider whether the exclusion violates the constitutional 
doctrine of separation of church and State, an issue raised by neither 
party nor presented in the litigation before the court.
  If the housing exclusion is struck down, as we can only assume the 
Ninth Circuit appears to be poised to do, the effect would be to 
increase taxes on clergy by $2.3 billion over the next 5 years. 
Churches, which already operate on the thinnest of margins, would be 
unable to offset this tax increase, and as a result, many could 
actually lose the services of their clergy. Rural churches are 
especially vulnerable.
  Although many of us believe in the constitutionality of this 
provision, we cannot tell the court how to rule. But by passing this 
legislation, we can resolve the underlying issue in the case, and 
thereby protect the housing exclusion. H.R. 4156 codifies the prior 
revenue ruling by expressly limiting the housing exclusion to the fair 
market rental value of the home.
  The leaders of our churches face many challenges in ministering to 
their congregations. They must cultivate faith in a world that too 
often seems not to have the time or inclination to accommodate 
spiritual development. They must help us grow healthy families, 
avoiding the harms of alcohol, drug abuse, domestic violence, and other 
perils that can tear apart our families and communities. They must help 
us serve those who lack adequate food, shelter, and other basic 
necessities.
  At a time when their role in all of this I think is appreciated more 
than ever, to have them have to divert precious program dollars to pay 
a new tax bill is just completely unacceptable.
  I had a very interesting roundtable meeting in North Dakota yesterday 
with a number of clergy terribly concerned about the underlying threat 
to the housing allowance. North Dakota has more churches per capita 
than any other State in the country, more than 2,000 churches, 78 
percent of which are located in communities of under 2,500 people. 
These are congregations just struggling to get by. We have already lost 
400 churches over the last several years, and projections are we could 
lose another fifty in this decade.
  I had one of the roundtable participants talk about how, when their 
daughter was born, the trustee who happened to be the city accountant 
said they should go down and apply for food stamps, because they were 
now eligible, but that was all that could be paid. One other minister 
talked about when the pledges did not come in on schedule, they were 
simply not given their full dimension of meager salary. And to think 
about laying upon these congregations and these faithful servants of 
those congregations, the pastors, this new tax bill is really 
completely unacceptable.
  One of the pastors participating gave me the tax return that he was 
about to put in the mail yesterday. It reflects the combined income of 
him and his wife, both pastors serving a church in Fargo, North Dakota. 
Although making a very modest income, the tax hit, if they lost the 
housing exclusion, would be an additional $3,958.
  When he explained that to the chairman of the board of trustees as he

[[Page H1301]]

came out of the church to go to the meeting, the response by the 
chairman was, well, there goes the playground equipment. In other 
words, this was a congregation prepared to hold harmless the tax burden 
to the clergy, but they would literally be forced to divert dollars 
from constructing a Sunday school playground to send it to the IRS.
  This is not a result anybody wants. Therefore, I believe that this 
legislation is so completely important. I again commend the gentleman 
from Minnesota (Mr. Ramstad) for his leadership.
  Mr. Speaker, I reserve the balance of my time.
  Mr. RAMSTAD. Mr. Speaker, I yield 3 minutes to my good friend, the 
gentleman from Texas (Mr. Sam Johnson), a distinguished member of the 
Committee on Ways and Means and an important cosponsor of the bill.
  (Mr. SAM JOHNSON of Texas asked and was given permission to revise 
and extend his remarks.)
  Mr. SAM JOHNSON of Texas. Mr. Speaker, I am glad to be an original 
cosponsor of the Clergy Housing Allowance Clarification Act, and I 
totally agree with what the gentleman from North Dakota (Mr. Pomeroy) 
just elaborated on. I am sorry that the Ninth Circuit Court of Appeals 
has made our actions today necessary. Their motives are unreasonable, 
unconscionable, and unnerving, at best.
  We must act quickly on this bill to preserve the parsonage allowance 
that members of the clergy receive as part of their compensation. For 
thousands of years, churches, temples, mosques, and synagogues have 
provided housing to members of their clergy. It makes complete sense 
that these benefits are not taxed.
  Since 1921, the parsonage allowance has been considered exempt from 
the United States income tax system. The problem is that the Ninth 
Circuit Court of Appeals has taken it upon itself to challenge the very 
constitutionality of the clergy housing being tax-exempt.
  Rather than simply decide the facts in a case that only had to do 
with how much of a minister's salary could be considered exempt, the 
court has gone way out of its way to raise this question. The best I 
can say about this issue is that at least it was not the IRS this time 
that decided to take this strange action.
  If Congress does not act, clergy in this country would be faced with 
a tax increase, as the gentleman from North Dakota (Mr. Pomeroy) said, 
of roughly $2.3 billion in the next few years.
  Reverend Dr. Frederick Schmidt of SMU's Perkins School of Theology, 
who lives in my district, said it best when he wrote me a letter 
stating that not protecting the tax exemption ``will drastically alter 
the financial well-being of many clergy, and present a fiscal hurdle to 
religious communities that are ill-prepared to address that change.'' 
He calls it unconscionable and unnerving, as well.
  I say that our courts must be restrained from undermining American 
values by making law. Americans are the most generous of people. 
However, I doubt they will want to increase their charitable donations 
simply because of a bad decision of a court in California.
  In passing this bill, we are merely providing a legislative capstone 
to an issue that everyone else in America, except for the judges in the 
Ninth Circuit, presume to be current law.
  I look forward to this bill being signed into law very quickly to 
take the case away from these nutty judges and settle the issue for our 
hard-working clergy.
  Mr. RAMSTAD. Mr. Speaker, I reserve the balance of my time.
  Mr. POMEROY. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Illinois (Mr. Davis).
  Mr. DAVIS of Illinois. Mr. Speaker, first of all, I want to thank the 
gentleman from North Dakota (Mr. Pomeroy) for yielding me time. I also 
want to commend the Committee on Ways and Means for bringing this 
legislation to us. I commend the gentleman from Minnesota (Mr. Ramstad) 
for the leadership that he has provided.
  Mr. Speaker, I rise in support of H.R. 4156, the Clergy Housing 
Allowance Clarification Act of 2002. Regarding the U.S. Tax Court 
ruling that occurred in May of 2000 in the Warren versus Commissioner 
case about a well-established Internal Revenue Service decision to 
limit the amount of income that a member of the clergy could exclude 
from taxable income for a housing allowance, the IRS appealed this 
decision to the Ninth U.S. Circuit Court concerning their authority to 
limit the tax allowance for fair market rental value of a home, and to 
allow the court to review the constitutionality of the housing 
allowance tax-exemption for members of the clergy.
  I believe that members of the clergy should continue this long-
standing practice since 1921 to exclude from taxes a portion of their 
church income that is attributable to housing. Many clergy from every 
denomination rely on this tax benefit. If this housing allowance is not 
permitted, our clergy men and women could face a harsh tax increase of 
$2.3 billion over the next 5 years.
  I encourage all of my colleagues to support H.R. 4156. This 
legislation would codify the original IRS ruling. This legislation 
would help thousands of clergy men and women throughout the Nation.
  As one who spends a great deal of my individual time near, close by, 
and in interaction with members of the clergy, I can tell the Members 
that there is no legislation that they are more concerned about than 
this issue. I would encourage all of my colleagues to support it.
  Once again, I commend the Committee on Ways and Means for bringing 
this to us.

                              {time}  1515

  Mr. POMEROY. Mr. Speaker, I yield myself such time as I may consume.
  In conclusion, I would just observe that while this body considers 
many very complex issues, the issue before us is an easy one. It is an 
extraordinarily important issue but an easy one. Bipartisan, no-
brainer. We want to continue existing tax treatment of the housing 
allowance allowed the clergy of this country, and in that regard, I 
urge all of my colleagues to vote for the legislation that the 
gentleman from Minnesota (Mr. Ramstad) has so capably brought before 
us.
  Mr. Speaker, I yield back the balance of my time.
  Mr. RAMSTAD. Mr. Speaker, may I inquire as to how much time remains?
  The SPEAKER pro tempore (Mr. Pence). The gentleman from Minnesota 
(Mr. Ramstad) has 11 minutes remaining.
  Mr. RAMSTAD. Mr. Speaker, I yield myself such time as I may consume.
  I first want to thank again my distinguished colleague and friend the 
gentleman from North Dakota (Mr. Pomeroy) for his excellent work on 
this legislation and strong bipartisan support. I want to thank the 
gentleman from Texas (Mr. Sam Johnson) and the gentleman from Illinois 
(Mr. Davis) for their supportive statements here today and their 
cosponsorship, as well as the 35 other cosponsors.
  I certainly want to again thank the gentleman from California (Mr. 
Thomas) and the gentleman from Texas (Mr. Armey), the majority leader, 
for helping us expedite this legislation to get it to the floor in such 
rapid fashion. I also want to thank the staff of the gentleman from 
California (Mr. Thomas) of our Committee on Ways and Means, as well as 
the gentleman from Texas (Mr. Armey's) staff for working with my chief 
tax counsel, Karin Hope, on this important legislation.
  Mr. Speaker, this legislative effort on behalf of our Nation's clergy 
is a great example of Congress working in a bipartisan, common sense 
way for a noble purpose. That purpose is to preserve the clergy housing 
allowance, to stop a $2.3 billion tax increase on our Nation's clergy. 
Hundreds of thousands of clergy from every faith and every denomination 
urge my colleagues support for this bipartisan legislation.
  This legislation, Mr. Speaker, is important to virtually every 
religious congregation in America, to every church, every temple, every 
synagogue, and every mosque, and I urge a strong bipartisan vote for 
this important legislation to preserve the clergy housing allowance.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Minnesota (Mr. Ramstad) that the House suspend the rules 
and pass the bill, H.R. 4156, as amended.
  The question was taken.

[[Page H1302]]

  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. RAMSTAD. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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