[Congressional Record Volume 148, Number 44 (Thursday, April 18, 2002)]
[Senate]
[Page S2957]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself and Mr. Grassley):
  S. 2200. A bill 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; to the Committee on Finance.
  Mr. BAUCUS. Madam President, today I introduce legislation, along 
with Senator Grassley, to clarify the tax treatment of the clergy 
housing allowance. It is a very simple bill that confirms established 
Internal Revenue Service policy that has lacked the force of law. 
Without this clarification, we risk losing a long-standing benefit that 
is terribly important to hundreds of thousands of ministers, priests, 
rabbis and other clergy all across America.
  Since 1921, the Tax Code has allowed clergy to exclude from their 
taxable income the value of housing provided to them, and since the 
1950's they have also been able to exclude a housing allowance provided 
for the same purpose. This section of the Code is similar to one for 
employer-provided housing for other taxpayers. The one for clergy is 
much simpler, in order to minimize the involvement of the Government in 
the affairs of churches, that is, to keep the separation between Church 
and State.
  The IRS has always interpreted this exclusion to be limited to the 
fair market rental value of the housing. They clearly stated that 
position in 1971, but their statement lacked the force of law. Their 
position has been challenged in Court, and the Court has said that it 
was not clear that Congress meant to impose this limit. That is why we 
must act.
  The vast majority of clergy across America work very hard for very 
modest pay. Especially in rural areas like we have in Montana, many 
congregations are small, pay is low, and ministers are very dependent 
upon their churches providing or paying for their housing. A dispute 
over this issue has led to a controversial attempt by a panel of court 
of appeals judges to call into question the constitutionality of the 
exclusion. If the exclusion is lost, it will cost America's clergy $500 
million each year. That may seem like a small amount of money compared 
to many of our tax bills that add up to billions, but it is a lot of 
money to those who are directly affected, and to the millions of 
Americans in the congregations that they serve.
  The House has passed similar legislation by a vote of 408 to 0. 
Senator Grassley and I will try to expedite passage of the legislation 
here in the Senate.
  It is good tax policy to keep a reasonable limit on the amount of 
this deduction, as the IRS has done for decades. And it is good policy 
to make our intent crystal clear so that government involvement with 
religious affairs is kept to a minimum. This bill will do both.
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