FFRF Co-President Annie Laurie Gaylor introduced Stuart Watson, a longtime investigative reporter in North Carolina, during FFRF’s mini-convention in Raleigh, N.C.:
We got to know Stuart because he called us when he saw our parish exclusion lawsuit that FFRF is filing against the 1954 law that allows ministers to be paid through a housing allowance, which is fully exempt from taxation. It’s wonderful investigative reporting, the old-fashioned kind that’s hardly done anymore.
He’s been an investigative reporter for more than 30 years and has won many national awards, including the George Foster Peabody Award, the DuPont Columbia Silver Baton, the National Headliner Award and many others. He had a Nieman Fellowship at Harvard.
They don’t make them like this any more, so we are really privileged to have Stuart Watson here.
Watson’s speech, edited for space, was delivered on May 3, 2014.
By Stuart Watson
I grew up a fundamentalist. My father believed that the bible was the holy and inerrant word of God. Every comma. I fell away from that when I went off and met my wife at Vanderbilt University.
I fell away from the church and from fundamentalism when someone told me I was going to hell because when I was baptized I was sprinkled instead of dunked. I thought that any god that’s going to send me to everlasting damnation for want of a few gallons of water is no god that I can believe in. That was the end of me and that.
So now, I would describe myself as just a searcher. Just a seeker. Somebody who asks a lot of questions. I’m biased in favor of people who think, and I’m biased in favor of people who ask challenging questions. So I feel very much at home here.
As a reporter, many of our best stories come from tips, and someone sent me a tip that said that a pastor was building a 10,000-square-foot home. It turned out it was a 15,000-square-foot home, 10,000 of which was a heated, four-car garage. When I started looking into it, people said, “Really? Is that all it is? Just a story about a pastor with a big home?” And I said, “No, I don’t think it is.”
Investigative reporting moves in what they call “the three eyes.” You investigate individuals, you investigate institutions, and then you move on to issues or ideas. And so you kind of move up a hierarchy; you move from the specific to the general. And so investigative reporting is about saying, “Is this an isolated incident? Or is it part of pattern? Is it part of something bigger?”
So we aired our report about the huge home that this pastor was building. The name of this church — the largest megachurch in North Carolina — is called Elevation Church. It’s a multisite model, which means that the preacher preaches live in one place and it’s broadcast around to other places simultaneously, and also over the web and on television. It’s technically televangelism, but it’s also much more than that.
But something that I never really asked came up on Glenn Beck’s website. Beck asked if it’s OK for pastors to live in extravagant homes. It was not asked to cause class jealousy or create issues of envy or class warfare or anything. It wasn’t, “Well, his house is too big.” That, curiously, is a question that is asked within the Christian church. Those outside the Christian church were asking a different question.
The Christian church said, “You’re asking questions about whether this guy is following Jesus’s footsteps? Or is he biblical? Or is he theological?”
But outside people were saying, “No, the only stake we have in what this church does is that you get a tax break. You get a big tax break.” So this is a guy who became quite wealthy, using a tax-exempt institution. And then we narrowed it down to talk specifically about the housing allowance. You might call it the parsonage allowance.
Why the tax break?
The issue is that Dan and Annie Laurie, as heads of a small nonprofit, are not eligible to take this tax exemption. Whereas, if you are a rabbi, if you are a minister, if you are a priest or if you are an imam, you are eligible.
So there is a distinction made. Their argument is that it is a violation of the Establishment Clause, which is the first part of the First Amendment: “Congress shall make no law respecting an establishment of religion.” The courts and the lawyers have to determine whether this tax-exemption for religious leaders is de facto establishing a religion.
The way that this impacts atheists and agnostics is that it gives these pastors nonprofit status. So the church itself does not pay property taxes, the church gets tax exemptions. But more importantly for the purposes of the federal lawsuit, the bigger the house, the bigger the tax break for the pastor.
Let’s watch this video so we can see what I’m talking about.
[A video is shown to convention attendees. An edited version of the video has been transcribed here.]Stuart voiceover: When we first reported how Elevation Pastor Steven Furtick was building a 16,000-square-foot home, we got a lot of complaints from his supporters. “So what if he builds a huge house? How is that any concern of yours or anyone else’s?”
Well, the answer is, if you are a taxpayer, it is your concern because pastors don’t pay income taxes on the salary for housing. It’s called a parsonage allowance. And when preachers are exempt from paying a big chunk of income taxes, guess who does pay?
Pastor Steven Furtick will not reveal how much Elevation Church pays him as a tax-free parsonage allowance. But his mentor, Ed Young Jr. in Dallas, gets about a quarter million dollars a year, tax-free, just for housing.
But my question about the parsonage allowance doesn’t start or end with Pastor Steven and his big house. Seventeen years ago as a young reporter, I wanted to know why the CEO of Goodwill Industries of Eastern North Carolina, a man named Dennis McClain, got $54,000 a year just for expenses.
McClain, a Methodist minister assigned to Goodwill, gets a parsonage allowance even though he doesn’t pastor a church. The Raleigh News and Observer reports McClain and his wife, also at Goodwill, earn nearly $800,000 a year. Thanks in a large part to the parsonage allowance, more than $147,000 of that is tax-free.
Dan Barker voiceover: We think that’s unfair. I was an ordained minister. After 19 years of believing, really believing and preaching the gospel, I changed my mind.
Stuart voiceover: When Dan was a preacher, he got a tax break for housing.
Dan voiceover: You don’t even have to report it! It was nice. I mean, who wouldn’t want that advantage? If you’re paying your taxes, you want every break you can get.
Stuart voiceover: But as atheists, Barker and his wife and co-president, Annie Laurie Gaylor, sued the IRS over the parsonage exemption. The atheists sued in federal court in Madison, Wis., where the headquarters is. They claim the parsonage allowance violates the Establishment Clause of the First Amendment to the Constitution because Congress gave a tax break to clergy, but not to all nonprofits. The bigger the house, the bigger the tax break, because the parsonage allowance is limited only by the fair market rental value of the pastor’s home.
Annie Laurie voiceover: So if you choose to live in the Sistine Chapel or a mansion, you can’t claim more than the fair rental value, but that could still be astronomical.
Stuart voiceover: Dan and Annie Laurie couldn’t care less what Elevation Church pays Steven Furtick, but they do care about the tax breaks.
Dan voiceover: If they want to pay the pastor $50 million a year, we are not complaining about that, that’s freedom. But if they are excluding housing from taxation, tax liability, then that’s hurting all of us.
Stuart voiceover: And thanks to the secrecy Congress affords churches, taxpayers have no idea how much the parsonage allowance is even worth.
Annie Laurie voiceover: It’s shielded from public scrutiny, yet the public is subsidizing churches.
Stuart voiceover: You see, most nonprofits have to make their tax forms public. Only last week a federal judge in Wisconsin handed the atheists a first-round victory. The judge ruled the tax break for the parsonage allowance is unconstitutional and should be thrown out. The decision will almost certainly be appealed.
[End of video]Questions raised
We went to the church early on and said we’d like to interview Pastor Steven. Not just about his house, but about the whole movement. The movement has really been phenomenal and in eight years has gone from seven families to about 15,000 people a week. So it mushroomed. It became really kind of extraordinarily successful.
So, just like any other nonprofit institution, there are questions raised.
My argument to them was that we are not picking on you, but you have become big. And so we are asking the same types of questions we would ask a health care nonprofit or a United Way nonprofit — any kind of charitable nonprofit enterprise. We’re asking you where the money goes. Some of my colleagues in journalism said this a story about faith. I said this is a story about money, a story about real estate, a story about tax law. But if you go to people and say, “Hey, let me educate you on the tax exemption of the parsonage allowance,” well, there aren’t enough open bars in the world to keep people fixated on that!
But if you say this is about Pastor Steven and his 15,000-square-foot home, then all of a sudden people are paying attention. They wonder about that guy, they’ve seen him on television, they wonder what’s his deal.
Well, we tried to pursue what his deal was. Along the way, they said they would not give us a financial statement. They later released it after all of our reports. Because of the money that flows around it, the financial statement doesn’t give the complete picture, but at least they released an audited financial statement.
They made both volunteers and certainly church employees sign a confidentiality agreement. He would not submit to an interview. I met with him face to face and asked for an interview, offered to do unedited interviews and put them on television, offered to put them on the web, offered to let him shoot the interviews himself. I offered to let him ask me any questions on camera that he wanted to. I submitted registered letters requesting interviews. I asked in every way I knew how to ask. Every way short of carrier pigeon. The answer was always no.
Cloak of secrecy
At first, I took that personally and thought that he doesn’t like me. But then I discovered that it was pretty much the same way with everyone. This was a calculated strategy, not to sit in front of anybody who could ask a critical or challenging question. This room, I suspect, is filled with people who ask critical and challenging questions.
This cloak of secrecy extended to things that I thought were even benign or beneficial to them. I asked them for their bylaws. How is the church governed? What is his salary? Could anyone fire him? Is there anyone who has the power, or is this a theocracy in which he is God’s chosen, God’s anointed?
People are not writing checks to Pastor Steven, they are writing tax-deductible checks to the church. In exchange for giving $100 or $100 million, do they get accountability? Do they get any say in how he runs it? No, they do not, because the way the board is selected is not democratic. The board of directors is made up of other megachurch pastors. He pays them to come preach at his church, they pay him to come preach at their church, and so it’s all very nice and cozy. They’re the ones who set his salary. I think that is one of the reasons why you don’t see the bylaws.
Increasingly, I wonder what is actually giving and what is buying public relations? If you come to the community and you want to get a name for yourself, you start throwing money around. How is that any different from advertising?
Yet, for a certain amount of money, you can guarantee yourself good PR by saying how great you are. So we wanted to scrutinize a lot of this $11 million they said that they’d given over the course of eight or nine years in the community.
They showed us the top contributions. They showed us the glossy annual report with full-color pictures. But they said if you want to know about the complete picture, you need to go and ask the recipients. That’s very strange, because how do we know who the recipients are? How do I know where you gave your money? It strikes me that if you are the United Way and I ask you what my money was used for, they will do backflips to tell you every little organization that they give $5,000, $10,000 to.
And yet they were only showing us the big ones. The rest of ’em? Guess! Guess where the money is going!
We were criticized. People said we were picking on him, that we just don’t like him, we’ve made this personal. But this is not limited to one church, one faith, one pastor. There are multiple people who are living in these big houses who are eligible for these breaks. But you don’t get to see them — unlike Dan and Annie Laurie where you can see it on their IRS Form 990, it’s right on the web, it’s full transparency — because they are not the same as a ministry and outside nonprofit agencies. In the case of a church or a synagogue, those religious institutions do not have to declare this.
[Another video is shown to convention attendees. An edited version of the video has been transcribed here.]Stuart voiceover: Preachers, really all clergy, don’t have to pay income taxes on whatever they’re paid for housing, no matter how much that is. They don’t even have to tell you about it. We talked to a CPA who broke it down for us.
Peter J. Reilly voiceover: Clergy housing allowances can be in the hundreds of the thousands.
Stuart voiceover: Todd Coontz preaches the Gospel of Prosperity on TV. That god wants you to be rich, if you’ll just send Todd some money. Todd’s church, Rockwealth International, owns a million-dollar condo where he lives. Here’s the thing. He doesn’t even have to tell you if he gets a tax-free housing allowance.
Reilly voiceover: You don’t have transparency with churches. That’s probably to me one of the biggest problems with churches compared to other not-for-profits.
Stuart voiceover: Peter J. Reilly is a CPA from Massachusetts who’s written on Forbes.com about the parsonage benefit of the clergy, and why special tax treatment needs to go.
Reilly voiceover: Churches are kind of a black hole. There is no limit! The rule is one house for the exemption. It can be a really big house, but only one.
Stuart voiceover: So while Congress sides with the preachers’ lobby, Peter O’Reilly has a suggestion: Reform the loophole. Cap the tax break. Limit it the same way that the U.S. military does. But that would take an act of Congress, and Congress has not been inclined to act. There are lots of lobbyists in Washington, but few more powerful than the church.
[End of video]
Just to articulate Peter’s position: If you want to make a common-sense test, say, in the military, if you have an admiral and by virtue of his job he has to live on the Cape. Then they cap the amount that he can deduct for the off-base housing. So in the military they have a limit to the amount military personnel can write off on their taxes as part of their housing allowance. And he’s just saying that the same kind of common sense should apply to the clergy that applies to them.
Annie Laurie and Dan are filing this lawsuit, and all of you are funding it, on the basis of principle in that the clergy as a class are treated differently than other nonprofits.
