When Pepperdine President Dr. Andrew K. Benton last year decided that Pepperdine should release its 990 tax forms, the Pepperdine community anxiously waited to discover the top administrators’ and faculty’s salaries.
But it was another, somewhat obscure item in these tax forms that, for the first time, invited new scrutiny. It’s known as the “ministerial housing allowance” and it represents a substantial tax benefit for some Pepperdine professors and administrators who qualify.
Working as a fellowship of autonomous congregations with no central headquarters, the Churches of Christ have often differed in many ways both from each other and from many other Christian denominations. One way the Churches of Christ differ is in their definition of a minister.
When this definition is applied for the purposes of receiving a ministerial housing allowance, the church’s GRAM SHEA/STAFF PHOTOGRAPHER
broad definition of minister, which
originates from the Protestant Reformation and the New Testament, allows many active members of the Churches of Christ, the church Pepperdine is affiliated with, to receive tax deductions that would be unavailable for members of other denominations.
“Martin Luther argued from Scripture that there was a ‘priesthood of all believers,’ and not a priesthood of individuals which has been set aside through a special rite or ordination and who rather than laymen could access God’s ear,” said Dr. David Baird, dean of Seaver College and church elder.
“Every believer, and the Churches of Christ would emphasize baptized believer, is a minister,” Baird explained.
The IRS allows ministers who are professors and administrators of religiously affiliated schools to claim deductions on their taxes for items such as mortgage payments, rent, utilities, repairs and improvements, real estate taxes and causality insurance. Ministers allot a part of their salary for the housing allowance and this money is not taxed by the government.
In order to receive the allowance, an employee must submit a one-time letter from church leaders stating the person is a minister, as well as an annual follow-up letter, which must provide proof, for example a church bulletin, that he or she is an active member of the congregation.
These duties can include heading up a church committee, teaching Sunday school or leading singing. Once the University has the letters, it can determine who is eligible for the allowance and for what amount.
The University Church of Christ has approved nearly 100 percent of applicants.
“The University asks us to affirm whether Mr. or Mrs. Pepperdine person remains an active member of our congregation,” Baird said. “I know of only one time when we said anything other than ‘yes.’”
The Churches of Christ’s definition of minister differs from the majority of Christian denominations, which hold that a minister is a person ordained or certified to lead a congregation. This greatly limits the amount of ministerial allowance allotted to members of other denominations.
“Many other denominations limit ‘clergymen’ or ‘minister’ to ordained individuals who are separated and distinguished from the laymen of the congregation,” Baird said. “Pepperdine people who attend such a denomination by practice and theology are thus not ‘ministers’ as defined by the IRS code, which is regrettable in my personal judgment, but as it is said, ‘it’s the law.’”
Essentially, the wording of the law allows the majority of active Church of Christ members to be eligible, while professors across the nation who are involved in ministries within their own church, cannot receive the allowance because of a lack of ordination or licensing.
Some say the IRS code most likely didn’t intend for the exemptions to extend so broadly. Dr. Douglas Swartzendruber, professor of biology at Pepperdine, said he doubts the law was meant to be interpreted as it has been.
“As far as the laws, I think they are intended for the leader of the congregation, not the whole congregation,” Swartzendruber said. “It seems like a bit of a stretch.”
Baird said he recognizes those concerns, as he himself did not approve of the exemptions when he first arrived at Pepperdine.
“There are some individuals who under the present tax law would qualify for the ministerial allowance who choose not to accept it on matters of principle,” Baird said. “I understand their position for it was once mine.”
Baird has since altered his view and now takes a ministerial housing allowance.
Other Churches of Christ schools follow a very similar process when determining eligibility for the exemption, including Lubbock Christian University in Texas. However, participation at Lipscomb University, although all employees are members of the Churches of Christ, is very low. This is interpreted by Lipscomb’s general counsel, Phil Ellenburg, as a personal, moral decision.
“We make it known and do emphasize that it is available,” said Ellenburg, who chooses not to take an allowance. “I’m sure the majority would qualify, but a very small percentage, less than 50 people of our 500 employees take it.”
“It’s a personal decision, and probably a theological decision,” Ellenburg added. “For me, even though in the Churches of Christ there is Scripture that may say we are all ministers in one sense, I don’t preach every Sunday so I feel I shouldn’t take advantage.”
But University Church of Christ elders say there is nothing to be embarrassed by, and the allowance is not only legal, but perfectly acceptable in the eyes of the church.
“The church is by no means ashamed of it,” said Dr. Harold Bigham, retired law school professor and church elder. “We don’t believe we are violating moral, ethical or legal issues.”
Aside from moral or theological qualm, there are other arguments against the tax break, the most prominent that it does not comply with the mandated separation between church and state.
“I believe it is unconstitutional,” said Erwin Chemerinsky, Sydney M. Irmas Professor of Public Interest Law, Legal Ethics, and Political Science at University of Southern California. “It is unconstitutional to provide ministers of the Gospel a benefit that no one else gets. This gives a benefit to people of religion that non religion don’t get. It absolutely goes against the constitutionality of favoring religion. It needs to be challenged.”
Chemerinsky said he may be the person who makes that move. In 2002, the professor fought to keep a dismissed case open in the 9th U.S. Circuit Court of Appeals in an effort to prove the unconstitutionality of the allowance. The court ruled that the particular case, which surfaced when an Orange County-based pastor and the IRS disagreed with the amount of exemption claimed, was not the best vehicle for his challenge, and that bringing it to circuit court in the first instance rather than as an appeal would be more appropriate.
Chemerinsky made it clear he is not specifically targeting the Churches of Christ, but rather the law as a whole.
Some Pepperdine officials say ministerial allowances are a way to recruit professors to come to Pepperdine, a benefit of sorts, and many professors say they would have trouble residing in the area without the help.
“There’s no way I could even begin to live in Malibu, California, without it,” Campus Minister Scott Lambert said. “I would have to live an hour and a half from work and a lot of faculty and staff are probably in the same boat.”
Chemerinsky doesn’t think it is the government’s responsibility to provide that support.
“If the university wants to pay them more, they should,” he said. “But the government shouldn’t be paying for that. Religious schools should not get benefits secular schools don’t.”
Dr. J. Goosby Smith, assistant professor of management at Pepperdine, shares a similar view.
“There has to be a uniform way, regardless of religion or denomination, to calculate a person’s organizationally related or non-taxable benefits,” Smith said. “Whatever the rule is, I think it should be uniformly enforced regardless of religion.”
But as long as it’s not uniform, Pepperdine and many other Church of Christ schools will continue to use the law and their definition of the term minister to their advantage.
“As long as it exists, religious institutions and professors would be foolish not to take advantage of it,” Bigham said.
The IRS guidelines for receiving a ministerial allowance do not include specific tasks that must be completed, but rather says any minister employed by a religious school is eligible.
“If you are a minister employed as a teacher or administrator by a church school, college or university, you are performing ministerial services for purposes of the housing exclusion,” IRS Publication 517 says. “If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you.”
Basically this means anyone who is a minister and teaches at a religiously affiliated school is eligible for this benefit. In most denominations, this excludes all members of the congregation aside from clergymen as potential candidates for the housing allowance.
At California Lutheran University, for example, the ministerial allowance approval by the school is given only after a certified letter of call is received in a candidates name from the Evangelical Lutheran Church in America.
The theological debate of who is eligible to be a minister may never be fully resolved, but the Internal Revenue Service clearly states in Publication 517 who it considers to be a minister in terms of the housing allowance:
“Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. They are given authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of the church or denomination.”
Despite the Churches of Christ’s definition of minister, church attendance alone does not guarantee someone the ministerial housing allowance. In 1998, church elders Baird and Bigham established a set of guidelines for writing letters for members of the University Church of Christ.
“Letters will be written only for those members of the University Church who are involved, regularly attending members, and in good standing. … ‘Active participation’ may include teaching Bible classes, participation in various church ministries, preaching, serving on special committees, playing an active role in the public worship of the church’s assemblies, preparing curricular materials and any other activity deemed by the elders to contribute to promoting the work of this congregation and qualifying one to be considered to be a spiritual leader of this congregation. … Ministerial housing allowance letters will be submitted on behalf of qualified individuals who have actively participated in the life of the congregation in the preceding year and remain active at the time of the request.”
After the church has provided a letter of good standing, it is up to Gary Hanson, legal counsel, to determine who will receive the allowance, based on evidence of the person’s involvement in the church.
Hanson refused an interview.
For now, the IRS has its guidelines, and Pepperdine administrators say they follow them. And even if it seems unfair to others, it is the law.
“The issue of ministerial tax allowances for employees of private church related institutions is a matter between the IRS and individual universities,” University Church Elder John Wilson said. “This seems to be a political and governmental issue and not a religious or moral one. As far as I know, individuals in our country are not allowed to create their own tax system, based upon what they individually think is ‘fair’ or ‘equitable.’”
Submitted October 30, 2003