The Rev. Rick Warren, who fought for tax breaks for clergy members, conducts an afternoon service at Saddleback Church in Lake Forest, Calif.
For tens of millions of Americans, the Rev. Rick Warren is best known for his blockbuster spiritual guide, “The Purpose Driven Life,” which has sold more than 25 million copies; his success as the founder of the 22,000-member Saddleback Church in Lake Forest, Calif.; and his efforts on behalf of some of the world’s neediest people.
But for tens of thousands of ministers — and their financial advisers — Pastor Warren will also be remembered as their champion in a fight over the most valuable tax break available to ordained clergy members of all faiths: an exemption from federal taxes for most of the money they spend on housing, which typically represents roughly a third of their compensation. Pastor Warren argued that the tax break is essential to poorly paid clergy members who serve society.
The tax break is not available to the staff at secular nonprofit organizations whose scale and charitable aims compare to those of religious ministries like Pastor Warren’s church, or to poorly paid inner-city teachers and day care workers who also serve their communities.
The housing deduction is one of several tax breaks that leave extra money in the pockets of clergy members and their religious employers. Ministers of every faith are also exempt from income tax withholding and can opt out of Social Security. And every state but one exempts religious employers from paying state unemployment taxes — reducing the employers’ payroll expenses but also leaving their workers without unemployment benefits if they are laid off.
Another religion-based tax break — the only one consistently defeated in the courts in recent years — is an exemption from state sales taxes for religious publications but not for secular ones.
This sales tax break has been struck down as unconstitutional in at least five states, most recently in Georgia in February, when a United States District Court judge, Richard W. Story, ruled that “the unique and preferential treatment the state provides to ‘religious’ literature raises serious constitutional concerns” under the First Amendment clause prohibiting an “establishment” of religion.
Yet a few states still have a sales tax exemption for religious publications. One of them is Florida, where state officials, lawyers for two religious publications and a national religious liberty advocacy group have joined forces to defend the tax break from a constitutional challenge waged almost single-handedly by an Orlando lawyer named Heather Morcroft.
Ms. Morcroft is a Legal Aid staff lawyer who works with foster children. She is a believer in Wicca, which she described as a neo-pagan faith loosely based on the traditions of ancient earth-centered religions, and serves as president of the state’s small Wiccan Religious Cooperative.
The cooperative is the formal plaintiff in the pending lawsuit Ms. Morcroft filed almost five years ago to challenge the constitutionality of the Florida exemption. Her arguments echo those that have prevailed in other states: that by exempting religious publications from the sales tax, the government is favoring religious ideas over secular ones, and that tax officials should not be in the business of deciding what publications are sufficiently religious to be exempt.
In contrast to Ms. Morcroft’s lonely fight in Tallahassee, Pastor Warren, who declined to be interviewed for this article, had a host of allies when he went to battle to defend the special tax deduction for housing expenses of clergy members. Ultimately, the allies included both houses of Congress and the president of the United States.
The Housing Exemption
The one small passage in the vast federal tax code that originally conferred the housing-expense exemption on clergy members did not cap the deduction. But in 1971, the Internal Revenue Service limited it to the “fair market rental value” of the furnished home, utilities included.
During a routine audit in 1996, according to court documents, the I.R.S. decided that Pastor Warren’s housing deduction exceeded the rental value of his new home on Via Del Sol in the rugged Trabuco Canyon, southeast of Los Angeles.
That’s when the fireworks began.
Pastor Warren, who gives 90 percent of his considerable income to charities, later explained in an open letter to other ministers that he decided to sue because the housing allowance was the only way small churches could pay their pastors enough to live — and he knew that those ministers could not fight the I.R.S. as he could.
The deduction, usually called the parsonage exemption, is available to ministers, rabbis and other clergy members of all faiths working at houses of worship. It allows them to live in congregation-owned housing without being taxed on the imputed value of their free housing, as almost all other employees are when they live in company-paid housing.
Articles in this four-part series examine how American religious organizations benefit from an increasingly accommodating government.
Part 1: Favors for the Faithful
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