[House Report 118-288]
[From the U.S. Government Publishing Office]


118th Congress }                                          { Report 
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 118-288

======================================================================
 
                               CLERGY ACT

                                _______
                                

December 1, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 6068]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 6068) to allow a period in which members of the 
clergy may revoke their exemption from Social Security 
coverage, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     3
          C. Legislative History.................................     3
 II. EXPLANATION OF THE BILL..........................................4
III. VOTE OF THE COMMITTEE............................................4
 IV. BUDGET EFFECTS OF THE BILL.......................................5
          A. Committee Estimate of Budgetary Effects.............     5
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     5
  V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE........5
 VI. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......7
          A. Committee Oversight Findings and Recommendations....     7
          B. Statement of General Performance Goals and 
              Objectives.........................................     7
          C. Information Relating to Unfunded Mandates...........     7
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................     8
          E. Tax Complexity Analysis.............................     8
          F. Duplication of Federal Programs.....................     8

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Clergy Act''.

SEC. 2. REVOCATION BY MEMBERS OF THE CLERGY OF EXEMPTION FROM SOCIAL 
                    SECURITY COVERAGE.

  (a) In General.--Notwithstanding section 1402(e)(4) of the Internal 
Revenue Code of 1986, any exemption which has been received under 
section 1402(e)(1) of such Code by a duly ordained, commissioned, or 
licensed minister of a church, a member of a religious order, or a 
Christian Science practitioner, and which is effective for the taxable 
year in which this Act is enacted, may be revoked by filing an 
application therefor (in such form and manner, and with such official, 
as may be prescribed by the Commissioner of Internal Revenue), if such 
application is filed no later than the due date of the Federal income 
tax return (including any extension thereof) for the applicant's second 
taxable year beginning after December 31, 2025. Any such revocation 
shall be effective (for purposes of chapter 2 of the Internal Revenue 
Code of 1986 and title II of the Social Security Act (42 U.S.C. 401 et 
seq.)), as specified in the application, either with respect to the 
applicant's first taxable year beginning after December 31, 2025, or 
with respect to the applicant's second taxable year beginning after 
such date, and for all succeeding taxable years; and the applicant for 
any such revocation may not thereafter again file an application for an 
exemption under such section 1402(e)(1). If the application is filed 
after the due date of the applicant's Federal income tax return for a 
taxable year and is effective with respect to that taxable year, it 
shall include or be accompanied by payment in full of an amount equal 
to the total of the taxes that would have been imposed by section 1401 
of the Internal Revenue Code of 1986 with respect to all of the 
applicant's income derived in that taxable year which would have 
constituted net earnings from self-employment for purposes of chapter 2 
of such Code (notwithstanding paragraphs (4) and (5) of section 
1402(c)) except for the exemption under section 1402(e)(1) of such 
Code.
  (b) Effective Date.--Subsection (a) shall apply with respect to 
service performed (to the extent specified in such subsection) in 
taxable years beginning after December 31, 2025, and with respect to 
monthly insurance benefits payable under title II of the Social 
Security Act on the basis of the wages and self-employment income of 
any individual for months in or after the calendar year in which such 
individual's application for revocation (as described in such 
subsection) is effective (and lump-sum death payments payable under 
such title on the basis of such wages and self-employment income in the 
case of deaths occurring in or after such calendar year).

SEC. 3. REPORT TO CONGRESS.

  Not later than 90 days after the date of enactment of this Act, the 
Commissioner of Internal Revenue, in consultation with the Commissioner 
of Social Security, shall develop and submit to the Committee on Ways 
and Means of the House of Representatives and the Committee on Finance 
of the Senate a plan to inform duly ordained, commissioned, or licensed 
ministers of a church, members of a religious order, and Christian 
Science practitioners of their eligibility to revoke any prior election 
of exemption from Social Security participation.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 6068, the ``Clergy Act'', as ordered 
reported by the Committee on Ways and Means on November 2, 
2023, allows for the permanent revocation of an exemption from 
payment of Self-Employment Contributions Act (SECA) taxes on 
income associated with ministerial services performed by 
certain church ministers and members of a religious order 
(other than a member of a religious order who has taken a vow 
of poverty as a member of such order), and Christian Science 
practitioners (hereinafter collectively referred to as 
``clergy'' for the purposes of this report).

                 B. Background and Need for Legislation

    Under current law, services performed by members of the 
clergy are considered ``self-employment'' for purposes of 
Social Security coverage.\1\ By statute, members of the clergy 
may apply for a permanent exemption from paying SECA taxes on 
income associated with their performance of ministerial 
services.\2\ Every year, roughly 2,000 members of the clergy 
apply and receive an exemption.\3\ As a result, these members 
of the clergy do not contribute to, or receive benefits from, 
the Social Security retirement or disability programs or 
Medicare based on their own ministerial work histories.
---------------------------------------------------------------------------
    \1\Social Security Act Sec. 211(c); Internal Revenue Code 
Sec. 1402(c).
    \2\Internal Revenue Code Sec. 1402(e).
    \3\Letter from Stephen C. Goss, Chief Actuary, Soc. Sec. Admin. to 
Rep. Kevin McCarthy (Mar. 31, 2020), https://www.ssa.gov/OACT/solvency/
KMcCarthy_20200331.pdf.
---------------------------------------------------------------------------
    By law, this exemption must generally be sought early in a 
clergy member's ministerial career and, after being granted, is 
irrevocable. As a result, some members of the clergy who 
received an exemption at the start of their career struggle to 
prepare for retirement in later years. The Social Security 
Amendments of 1977,\4\ the Tax Reform Act of 1986,\5\ and the 
Ticket to Work and Work Incentives Improvement Act of 1999\6\ 
provided members of the clergy with temporary, time-limited 
opportunities to revoke their exemption from Social Security 
coverage. However, it has been nearly 24 years since members of 
the clergy were provided with this option.
---------------------------------------------------------------------------
    \4\Pub. L. 95-216, Sec. 316 (1977).
    \5\Pub. L. 99-514, Sec. 1704(b) (1986).
    \6\Pub. L. 106-170, Sec. 403 (1999).
---------------------------------------------------------------------------

                         C. Legislative History


Background

    H.R. 6068 was introduced on October 26, 2023, and was 
referred to the Committee on Ways and Means.

Committee Hearings

    On September 14, 2023, the Ways and Means Committee held a 
``Member Day'' hearing. The hearing received a submission for 
the record from the bill sponsors detailing how some members of 
the clergy struggle to plan for retirement because they lack 
Social Security coverage and they cannot opt into the program.

Committee Action

    The Committee on Ways and Means marked up H.R. 6068, the 
``Clergy Act'', on November 2, 2023, and ordered the bill, as 
amended, favorably reported (with a quorum being present).

                         D. Designated Hearing

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearing was used to develop and consider H.R. 6068:
    The Committee on Ways and Means ``Member Day'' hearing 
which took place on September 14, 2023.

                      II. EXPLANATION OF THE BILL


                              PRESENT LAW

    Members of the clergy are automatically covered by Social 
Security as self-employed workers. Members of the clergy may 
apply for an exemption from paying Social Security SECA taxes 
on income associated with their performance of ministerial 
services. To do so, they must certify that they are 
conscientiously, or because of religious principles, opposed to 
the acceptance of public insurance that makes payments in the 
event of death, disability, old age, or retirement, or that 
makes payments toward the cost of, or provides services for, 
medical care. The application must be filed within a period 
ending with the due date of the tax return for the second 
taxable year in which he or she earns wages for their 
ministerial services. Current law does not allow members of the 
clergy to revoke their exemption from Social Security coverage.

                           REASONS FOR CHANGE

    Members of the clergy who receive an exemption from SECA 
taxation with respect to self-employment income in connection 
with ministerial services do not contribute to or receive 
Social Security benefits or Medicare coverage based on those 
services. Absent Congressional action, these exemptions are 
irreversible.
    Congress has periodically provided members of the clergy 
with temporary windows to revoke these exemptions. Most 
recently, the Ticket to Work and Work Incentives Improvement 
Act of 1999 established an approximately two-year window during 
which members of the clergy could revoke their exemptions.\7\
---------------------------------------------------------------------------
    \7\Pub. L. No. 106-170, Sec. 403 (1999).
---------------------------------------------------------------------------

                       EXPLANATION OF PROVISIONS

    Section 1 designates the short title of the bill as the 
``Clergy Act''.
    Section 2 allows members of the clergy who previously 
exempted themselves from Social Security and Medicare coverage 
to apply for a permanent revocation of this exemption by no 
later than the due date (including any extension thereof) of 
the individual's federal income tax return for the applicant's 
second taxable year beginning after December 31, 2025.
    Section 3 requires the Commissioner of Internal Revenue, in 
consultation with the Commissioner of Social Security, to 
develop and submit a plan to Congress to inform members of the 
clergy of their eligibility to apply for the revocation 
permitted by Section 2.

                             EFFECTIVE DATE

    The bill would become effective upon enactment.

                       III. VOTE OF THE COMMITTEE

    In compliance with the Rules of the House of 
Representatives, the following statement is made concerning the 
vote of the Committee on Ways and Means during the markup 
consideration of H.R. 6068, the ``Clergy Act'' on November 2, 
2023.
    H.R. 6068 was ordered favorably reported to the House of 
Representatives as amended by a roll call vote of 41 yeas to 0 
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
           Representative              Yea     Nay    Present       Representative       Yea     Nay    Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).....................      X   ......  .........  Mr. Neal.............      X   ......  .........
Mr. Buchanan.......................      X   ......  .........  Mr. Doggett..........      X   ......  .........
Mr. Smith (NE).....................      X   ......  .........  Mr. Thompson.........      X   ......  .........
Mr. Kelly..........................      X   ......  .........  Mr. Larson...........      X   ......  .........
Mr. Schweikert.....................      X   ......  .........  Mr. Blumenauer.......      X   ......  .........
Mr. LaHood.........................      X   ......  .........  Mr. Pascrell.........  ......  ......  .........
Dr. Wenstrup.......................      X   ......  .........  Mr. Davis............      X   ......  .........
Mr. Arrington......................      X   ......  .........  Ms. Sanchez..........      X   ......  .........
Dr. Ferguson.......................      X   ......  .........  Mr. Higgins..........      X   ......  .........
Mr. Estes..........................      X   ......  .........  Ms. Sewell...........      X   ......  .........
Mr. Smucker........................      X   ......  .........  Ms. DelBene..........      X   ......  .........
Mr. Hern...........................      X   ......  .........  Ms. Chu..............      X   ......  .........
Ms. Miller.........................      X   ......  .........  Ms. Moore............      X   ......  .........
Dr. Murphy.........................      X   ......  .........  Mr. Kildee...........      X   ......  .........
Mr. Kustoff........................      X   ......  .........  Mr. Beyer............      X   ......  .........
Mr. Fitzpatrick....................      X   ......  .........  Mr. Evans............      X   ......  .........
Mr. Steube.........................      X   ......  .........  Mr. Schneider........  ......  ......  .........
Ms. Tenney.........................      X   ......  .........  Mr. Panetta..........      X   ......  .........
Mrs. Fischbach.....................      X   ......  .........
Mr. Moore..........................      X   ......  .........
Mrs. Steel.........................      X   ......  .........
Ms. Van Duyne......................      X   ......  .........
Mr. Feenstra.......................      X   ......  .........
Ms. Malliotakis....................      X   ......  .........
Mr. Carey..........................      X   ......  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 6068, as 
reported. The estimate prepared by the Congressional Budget 
Office (CBO) is included below.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.




    H.R. 6068 would allow clergy to make a one-time decision 
during calendar years 2026 or 2027 to reverse a previous 
decision to exempt their ministerial earnings from self-
employment taxes. Under current law, certain members of the 
clergy may make a one-time, irrevocable decision to exempt 
their ministerial earnings from self-employment taxes. If they 
elect to do so, they do not receive Social Security and 
Medicare benefits based on that income.
    A similar provision was included in the Ticket to Work and 
Work Incentives Improvement Act of 1999. Based on the number of 
members of the clergy who elected coverage under that law, CBO 
and the staff of the Joint Committee on Taxation estimate that 
roughly 4,000 clergy members would reverse their decision, 
resulting in an increase of $77 million in revenue over the 
2024-2033 period. Of that, $62 million is from additional 
Social Security payroll tax revenues, which are classified as 
off-budget, and $15 million is from additional Medicare payroll 
taxes, which are on-budget.
    Most of the additional benefits that would result from 
those decisions would be paid after 2033, but CBO estimates 
that Social Security and Medicare outlays would each increase 
by $1 million over the 2024-2033 period. Social Security 
outlays are off-budget, and Medicare outlays are on-budget. CBO 
estimates that implementing the legislation would increase 
administrative costs for the Internal Revenue Service by an 
insignificant amount. That spending would be subject to the 
availability of appropriated funds.
    The costs of the legislation, detailed in Table 1, fall 
within budget functions 570 (Medicare) and 650 (Social 
Security).

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 6068
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2024    2025    2026    2027    2028    2029    2030    2031    2032    2033   2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Increases in Direct Spending
 
Estimated Budget Authority........................       0       0       *       *       *       *       *       *       *       2         *          2
Estimated Outlays.................................       0       0       *       *       *       *       *       *       *       2         *          2
    On-budget.....................................       0       0       *       *       *       *       *       *       *       1         *          1
    Off-budget....................................       0       0       *       *       *       *       *       *       *       1         *          1
                                                                  Increases in Revenues
 
Estimated Revenues................................       0       0       4      11      11      11      11      10      10       9        26         77
    On-budget.....................................       0       0       1       2       2       2       2       2       2       2         5         15
    Off-budget....................................       0       0       3       9       9       9       9       8       8       7        21         62
                                      Net Decrease (-) in the Deficit From Changes in Direct Spending and Revenues
 
Effect on the Deficit.............................       0       0      -4     -11     -11     -11     -11     -10     -10      -7       -26        -75
    On-budget.....................................       0       0      -1      -2      -2      -2      -2      -2      -2      -1        -5        -14
    Off-budget....................................       0       0      -3      -9      -9      -9      -9      -8      -8      -6       -21        -61
--------------------------------------------------------------------------------------------------------------------------------------------------------
Implementing the bill would increase costs for the Internal Revenue Service by less than $500,000 over the 2024-2028 period. That spending would be
  subject to the availability of appropriated funds. * = between zero and $500,000.

    CBO has not reviewed H.R. 6068 for intergovernmental or 
private-sector mandates. Section 4 of the Unfunded Mandates 
Reform Act excludes from the application of that act 
legislative provisions related to the Old-Age, Survivors, and 
Disability Insurance (OASDI) program under title II of the 
Social Security Act (including taxes imposed by sections 
3101(a) and 311(a) of the Internal Revenue Code of 1986). CBO 
has determined that H.R. 6068 falls within that exclusion 
because it concerns OASDI payments made to members of the 
clergy.
    The CBO staff contacts for this estimate are Noah Meyerson 
(for Social Security) and Sarah Sajewski and Noah Zwiefel (for 
Medicare). The estimate was reviewed by H. Samuel Papenfuss, 
Deputy Director of Budget Analysis.
                                         Phillip L. Swagel,
                             Director, Congressional Budget Office.

     VI. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee made findings and 
recommendations that are reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill does not authorize funding, so no statement of general 
performance goals and objectives is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                       E. Tax Complexity Analysis

    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

                   F. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

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