Recent Clergy Housing Allowance
Concerns Following Funding Freeze Announcement (And Rescission)
Recently, the General Council on Finance and Administration (GCFA) was made aware of concerns about the state of the clergy housing allowance exemption found in the United States Tax Code, following the announcement of a federal “funding freeze.” The clergy housing allowance exemption is a provision that allows ordained ministers to exclude from their taxable income a portion designated and used for housing expenses. This exemption is designed to provide financial assistance to clergy members, offsetting the costs of maintaining a residence, whether owned or rented.
What Happened?
On Monday, January 27, the Trump administration, via the White House Office of Management and Budget (OMB), issued a memo requiring federal agencies to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance.”
After the memo was released, a questionnaire was distributed to various federal agencies, inquiring about a long list of “programs,” many of which are carried out in the form of grants and loans. The list also included many income tax exclusions and deductions currently found in the Tax Code, including the clergy housing allowance exemption.
The U.S. District Court of the District of Columbia issued a preliminary injunction on Tuesday, January 28, prohibiting the memo from going into effect.
The OMB rescinded its memo on Wednesday, January 29 after backlash throughout the country.
However, after the memo was rescinded, the Trump administration has clarified that the “federal funding freeze” is still in effect. The memo was simply rescinded, according to the administration, “to end any confusion created by the court’s injunction.” Additionally, the underlying Executive Orders the memo was intended to “implement” have not been rescinded.
What now? There are a few points that clergy should remember:
Congressional members have already sounded the alarm that the OMB’s freeze memo could possibly violate Congress’s authority over federal spending granted by the United States Constitution and implemented by the Impoundment Control act of 1974. In other words, Congress holds the power of the purse, not the President.
Like many other items listed in the questionnaire, the clergy housing allowance exclusion is memorialized in the Tax Code and accompanying regulations. Any attempt to change such provisions via Executive Order would likely be ineffective.
However, based on dialogue during the fall 2024 campaign season and ongoing rhetoric from the Trump administration, concerns linger about the Trump administration proposing changes to the Tax Code, possibly impacting the clergy housing allowance exemption.
GCFA’s Legal Services Department will be closely monitoring this and other tax, legal, and administrative issues that may be impacted by the new administration and will update the United Methodist Connection as more information becomes available. For up-to-date information, be sure to subscribe to GCFA’s monthly newsletter, The Collaborator, at gcfa.org/subscribe.