The Tax Scam from Heaven

By Luis Granados

Do you pay too much in taxes? Sure you do. Here’s a terrific way you can save a bundle, that’s perfectly legal.

First, figure out how much you pay in total expenses for housing – rent, mortgage, etc. Say it’s $20,000 a year, to pick a round number. Then, go to your employer and say “Instead of giving me $20,000 in something you call ‘salary,’ give me the same $20,000 in something you call a ‘housing allowance.’ That way, I won’t have to pay any taxes on that $20,000, which will save me many thousands of dollars a year!”

I know what you’re thinking: that’s too easy. The government would never let you get away with a scam like that, because it would say that being paid $20,000 of “housing allowance” is exactly the same as being paid $20,000 of “salary” – which it is. But the law is right there, in Section 107 of the Internal Revenue Code. There’s only one catch: you have to be a “minister of the gospel”:

Internal Revenue Code Section 107. Rental value of parsonages In the case of a minister of the gospel, gross income does not include – (1) the rental value of a home furnished to him as part of his compensation; or (2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home.

Here’s my first question: Why can’t rabbis get this? Or imams? Or Buddhist monks? Last time I checked, none of these guys had anything to do with the “gospel,” which is universally defined as the first four books of the New Testament. I guess this is what the fundamentalists are talking about when say America is a “Christian nation.”

. Here’s my next question: Once I get ordained, can I get this boondoggle for more than one home? That’s an important issue, because these days with government promoting religion at every turn lots of God experts are making lots of money, and have homes all over the place. Recently the Tax Court came down with a definitive ruling: the sky’s the limit, and “ministers of the gospel” can get tax-free housing allowances for as many mansions as they can con their flocks into paying for. After all, reasoned the learned judges, when the tax code talks about exemptions for a “child” it allows the same exemption for multiple children; so when it allows an exemption for a “home,” it must mean multiple “homes.” The millions of Americans whose one and only home was lost through foreclosure in the past few years are free to go to church and be comforted by a God expert who has lots of homes, all provided tax-free.

The case is fascinating because of the taxpayer who was its subject. Phil Driscoll is a gifted trumpeter, who played with artists like Joe Cocker, Leon Russell, and Blood, Sweat & Tears in the 1970s and won a Grammy in 1984. Government taxes the hell out of entertainers, though, as the Beatles so eloquently described. [Do yourself a favor and clink on the link.] So Driscoll gravitated toward God, using his “Mighty Horn Ministries” not only to rake in bucks from believers but to do it in a way that supported a lavish lifestyle, all tax free. When he wasn’t flying his church airplane, he was driving his church Porsche, to and from his church homes at lake resorts. Unfortunately, he got a little carried away with the idea of following God’s law rather than man’s, and wound up getting convicted of conspiracy and tax evasion in 2006, and sentenced to a year in federal prison. (I’m not certain whether he tried to exclude the fair rental value of his cell from his income tax for that year.) When he got out, he still had all those homes, and our divinely inspired Tax Court now says he doesn’t have to pay tax on the “allowance” he receives for any of them.

Here’s my next question: Isn’t there a lot more than rental value involved in maintaining a home? “Minister of the gospel” Rick Warren, President Obama’s favorite pastor, knows there are lots of other costs, too. So a few years back he started excluding from his tax return items like insurance, repairs, utilities, new furniture, even his gardeners – gotta have gardeners, right? Not because he needed the money, mind you, but on behalf of all those other poorer pastors out there who couldn’t keep their heads above water if they had to pay taxes on the value of their own church-provided gardeners.

Rev. Warren won his case in Tax Court, like trumpeter Driscoll just did. Then the IRS appealed to the Ninth Circuit, where a funny thing happened. IRS had no intention of questioning the constitutionality of Section 107, because that would step on way too many toes, and bring down the wrath of organized religion on the administration (at that time, headed by Bill Clinton). But the bad sports at the Ninth Circuit raised the constitutionality question on their own, as they have the power to do, and ordered both parties to write briefs on the issue. What’s more, since they (correctly) expected both parties to write briefs saying there was nothing at all wrong with Section 107, they appointed their own independent expert, a Southern Cal law professor, to prepare his own report on the issue. His conclusion: of course it’s unconstitutional! Slam dunk.

“Aaaack!” This was the official response of the IRS, by this point under control of the Bush administration. It was too late to withdraw the appeal, and they couldn’t stand by and let all those God experts start paying taxes the same way you and I do. So they went to Congress, where there is always tremendous bipartisan support for every penny doled out to politically influential clergy. With lightning speed, a law was enacted in 2002 letting Rev. Warren keep every penny of his prior tax-exempt income while clarifying that in the future only the “fair rental value” of the home (now “homes”) is tax-free. This took the case out of the hands of the court, and everyone (other than the rest of America’s taxpayers) breathed a sigh of relief.

The general counsel of the executive committee of the Southern Baptist Convention tells us that for his 46,000 churches, “the housing allowance is critically important for making ends meet – it is not a luxury.” Besides, God experts provide an important service to their communities, so they deserve preferential treatment. That is a terrific argument. Let’s see: who else provides important services to their communities? Doctors? Yep. Nurses? Check. Teachers? Firefighters? Farmers? My personal vote would be for preferential tax treatment for plumbers, who solve more critical real-world problems every day than any black-robed charlatans ever have.

Rev. Warren still isn’t satisfied, though. Just a month ago he was in high dudgeon again, whining that “HALF of America pays NO taxes. Zero. So they’re happy for tax rates to be raised on the other half that DOES pay taxes.” I’m guessing he counts himself among the half that does pay taxes. I’m also guessing that his accuracy on the facts of what is happening in America today is about the same as his accuracy on the facts of what happened in Palestine 2000 years ago. Half of Americans don’t pay Social Security tax, Medicare tax, telephone tax, or tax on their beer? How can I get into that half?