ABSTRACT
The tax treatment of clergy housing allowances continues to be at the forefront of criticism and debate, on the premise it results in taxpayer inequity. IRC §107 allows clergy to exclude a parsonage allowance from gross income. A historical context and modern-day application of the law, based on clergy (spouse) interviews, is provided. The current legal tenor suggests the housing allowance is unconstitutional because it violates the Establishment Clause. Entanglement (based on the three-prong Lemon Test) is analyzed. The analysis results in a double-edged sword. It appears the exclusion fails the Establishment Clause, but abolishment of the exclusion would create additional taxpayer inequities. We propose both abolishing IRC §107 and amending IRC §119.
