Some legal developments actually bring smiles to pastors’ faces. Within the last several months, two court cases and a clarification of taxing regulations have favored pastors and churches.
Self-employment tax relief
When the self-employment tax rate increased from 13.02 percent in 1989 to 15.3 percent in 1990, pastors (considered self-employed for social security purposes) stood to part with an additional 2 percent of their income.
The good news is that a significant change in the self-employment tax took effect on January 1, 1990. Clergy and other self-employed persons are now permitted a deduction of half their self-employment tax for both income tax and self-employment tax purposes. Previously, the deduction appeared to be allowed for only one of the taxes, as some IRS publications even stated. Late in 1989, however, the IRS chief counsel’s office confirmed the dual deductions, and IRS materials in 1990 reflect this decision.
The reason for the dual deductions is “to achieve parity between employees and the self-employed,” as was Congress’s intent. Currently, employees pay social security tax at the rate of 7.65 percent of their income, and employers kick in the other 7.65 percent (totaling the 15.3 percent that self-employed people pay). Employees, however, aren’t required to report the employers’ 7.65 percent contribution as income for either social security or income tax purposes. Now the self-employed are allowed to deduct a like percentage from their reported income so they don’t have to pay taxes on it, either.
Pastors can figure the deductions as follows:
Self-employment tax. First, compute your net earnings from self-employment. Second, multiply that amount by .0765 (half of 15.3 percent) to determine how much you can deduct. Third, subtract that amount from your net earnings to find the taxable self-employment earnings. Fourth, multiply this figure by .153 to compute your self-employment tax.
Income tax. Now that you know exactly how much you will pay for self-employment tax, you can divide that amount by 2 to find the amount you can deduct from your income for income tax purposes.
Many people are finding that this newly allowed deduction from both self-employment tax and income tax just about nullifies the tax-rate increase for 1990, making their 1990 rate of taxation roughly comparable to the 1989 rate.
Zoning support
Churches wanting to build or expand often run into roadblocks erected by neighbors and/or local government. Here’s a case where the first amendment guarantee of religious freedom prevailed in court.
Our Saviour’s Evangelical Lutheran Church in the Chicago suburb of Naperville had outgrown its parking facilities. The church sought permission from the city to convert into parking its two adjacent lots with private residences. The city denied this request on the grounds that the new parking would adversely affect the value of neighboring properties.
When the church took the matter to trial court, the judge ruled with the city. At the circuit court of appeals, however, the judgment went in favor of the church. (The state supreme court refused to hear a further appeal.) While conceding that city zoning ordinances are presumed valid, the appeals court observed that this presumption “diminishes” when an ordinance “limits the free exercise of religion.” The court concluded: “The location of a church can be regulated by zoning ordinances in proper cases; however, in determining whether this is a proper case for such a restriction, we must take into account that the freedom of religion and other first amendment freedoms rise above mere property rights. In addition, first amendment rights and freedoms outweigh considerations of public convenience, annoyance, or unrest.”
This decision (Our Saviour’s Evangelical Lutheran Church of Naperville v. City of Naperville, 542 N.E.2d 1158 [Ill. App. 2nd Cir. 1989]) represents one of the strongest court statements of a church’s right to develop its property despite the complaints of neighboring landowners. It will be a useful legal authority for any church whose building plans trigger local opposition.
Confidentiality made clearer
In another decision, a New York state appeals court addressed the issue of privileged communications to clergy. Here is the background to its decision.
A man entered an office building in New York City, pulled a gun, ordered several people to lie on the floor, and fired at least one shot. Then he left the building and went into a nearby Catholic church. When he met the priest in the sanctuary, the man said his saintly mother was a member of the parish. He then admitted he had done something wrong and, upon questioning by the priest, told what he had done.
The priest told him that since he hadn’t hurt anyone, he “would be better off” turning himself in to the police, but the man refused, saying he wanted to pray. A short time later the priest slipped outside and notified police officers, who disarmed and arrested the man. He was indicted on twenty-four counts by a grand jury, which based its decision in part on the conversation between the priest and the man in the church.
The man then sought and won a court order dismissing the indictment on the grounds that it was based on privileged communication. A New York law provides that “unless the person confessing or confiding waives the privilege, a clergyman . . . or minister of any religion . . . shall not be allowed to disclose a confession or confidence made to him in his professional character as a spiritual adviser.”
The court held that the man with the gun “was seeking some type of spiritual advice from [the priest] and had the reasonable expectation that his conversation with the priest was to be kept secret. Therefore, [the priest] was not at liberty to testify before the grand jury as to his conversation with [the accused]” (People v. Reyes, 545 N.S.S.2d 653 (1989)). It appears from this case that clergy may be exempt from testifying against people who confide in them specifically as spiritual advisers.
-Richard R. Hammar
legal counsel, Assemblies of God
Springfield, Missouri
Copyright © 1991 by the author or Christianity Today/Leadership Journal. Click here for reprint information on Leadership Journal.
