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    Oh Snap!  You mean I can’t take a $132,019 housing allowance?

    Oh Snap!  You mean I can’t take a $132,019 housing allowance?

    Bankruptcy proceedings scheduled for yesterday in Southern California for the Crystal Cathedral have been postponed until February 9 to give everyone time to figure out exactly what has been going on with 'insider' compensation packages at the Cathedral.

    The biggest question:  why was Crystal Cathedral Chief Financial Officer Fred Southard in need of a $132,019 housing allowance package.   The court wants to know why Southard was EVEN NEEDED, since the church had a full accounting staff.

    Southard's salary:  $12,000 (+ the $132k housing allowance).

    Family members of the Schullers are also under scrutiny.  The trustee is also questioning the $70k salary for Gretchen Penner (the youngest Schuller daughter) and Neyva Penner Klaassen, who made $55,000 annually to help schedule musical guests for the Hour of Power.

    All in all, Schuller family members (Southard is NOT a part of the family) made over $2 million a year, including over $830k in housing allowances.  All while the ship was sinking... fast.

    According to the report in the Orange Country Register, the Crystal Cathedral is looking at a $36 million dollar mortgage and a total debt of $60 million, including $7.5 to unsecured creditors.

    My understanding of a housing allowance is that you can either take the fair market rental value or actual expenses.  Given, this is California... but a $132,019 housing allowance seems a tad bit excessive by IRS standards.  I think it would be an automatic red flag to have that percentage of your salary be designated as your allowance.

    What do YOU think?  Should the bankruptcy proceedings be upset with salaries and housing allowances, or is this just a diversion?


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    1. Allen White on Thu, January 06, 2011

      I wouldn’t wish the Crystal Cathedral’s problems to a monkey on a rock. It’s a mess. How and why is yet to be sorted out.

      On the housing allowance, while the $132k housing allowance is in poor taste, it’s not illegal. Legally, “You can claim any amount up to 100 percent of your salary, but not exceeding your salary.”

      Rick Warren got caught in the middle of all of that a few years ago, and won the case. Congress passed a law to back up the courts decision. (Thanks, Rick for fighting that one for us). Of course, since then Rick Warren has paid 100% of his salary and housing allowance back to Saddleback for the first 23 years of his ministry. He no longer takes a salary. I think the Crystal Cathedral could learn a lesson from Rick.

      For details on the legal case with Rick Warren and the law that was passed:

      Read more: Information on Housing Allowances for Pastors |

    2. Todd Rhoades on Thu, January 06, 2011

      Good point, Allen.  I know it is not illegal.  But it is excessive. Especially in the minds of the creditors that are still waiting for their money.

      Especially for the woman who’s small business was owed $50,000 by the CC and lost HER house to foreclosure.

      Bottom line.  The CFO gets a nice salary with a huge tax benefit.  The vender loses her house.

      That will never play well in the media, the church world, or the courts, even if 100% legal.


    3. Peter Hamm on Thu, January 06, 2011

      I’m not surprised… There is no doubt more to come on this.

      Todd writes… {Bottom line.  The CFO gets a nice salary with a huge tax benefit.  The vender loses her house.}


    4. Allen White on Thu, January 06, 2011

      My point is that the housing allowance can be any amount that you designate and can justify. In this case, the housing allowance wasn’t excessive, since pastors can designate 100% of their salary as a housing allowance. In the CC case, the SALARY was excessive given the circumstances. Many of us have foregone raises or accepted salary cuts in the last few years.

    5. bishopdave on Thu, January 06, 2011

      If audited, doesn’t one have to document the housing allowance with mortgage, utiilty, upkeep receipts, etc? Wouldn’t it be open and shut if he can’t show >$11k/month housing expense. You can’t just claim the allowance, you also have to be sure it is reasonably close to what your actual housing expense is.

    6. Peter Hamm on Thu, January 06, 2011

      bishopdave, EXACTLY!

      Fact is, you may be able to have the entire compensation be a housing allowance if in fact you are in a two-income household and all of the income from the pastor part of the household is spent on housing, but boy oh boy, you better be careful with this one.

      Not just to avoid audit, but to be on the up-and-up.

    7. UMJeremy on Thu, January 06, 2011

      The taxes are that you can claim the least of three things:
      (1) your claimed housing allowance
      (2) your receipts (what you spent on housing costs)
      (3) the fair market rental value

      So for Southard to claim $132k, he woulda had to spend that on mortgage and utilities (only $11k a month which as you said seems likely in Cali) AND have his house appraised at $11k/month rental. The latter seems unlikely but the IRS has a hard time enforcing and appraising such things.

      I personally can’t stand Rick Warren and other preachers like this who *abuse* the housing allowance and stoke the fires of other groups who are fighting to remove it. A few shameful acts ruins a great tax break (tho dubious legally, I’ll admit) for servants of the Church.

    8. Peter Hamm on Thu, January 06, 2011

      UMJeremy writes [I personally can�t stand Rick Warren and other preachers like this who *abuse* the housing allowance and stoke the fires of other groups who are fighting to remove it.]

      Really? Do you know he still lives in a modest house after all of his “success” and that he continues to give almost all of his book income away? Are you aware that the only reason he fought the housing allowance case was for the rest of us, as he certainly doesn’t “need” it? And who decides which pastors are abusing it. You? Me? Some cases are very obvious, such as the one we’re discussing… but many are not. And thanks to Rick fighting that case, I could afford to leave the marketplace and go into church ministry full-time, taking a substantial pay cut in the process.

    9. UMJeremy on Thu, January 06, 2011

      Warren’s merits on what he has done with his money are commendable but irrelevant to this situation. It is his past actions have put us in this situation now. You do realize that he was originally investigated because he had claimed $80k in housing allowance but his fair rental value was less than $60k. He fought the IRS and won only via congressional intervention.

      And it is exactly those 2002 tax code provisions which are being debated now in California’s FFRF v. Geithner which has the potential to negate the housing exemption entirely.

      Thus, one pastor’s abuse of the system brought it to the court/legislative’s doorstep and in my lay reading of the FFRF case, it could very easily be lost. If he had acted with integrity then, we wouldn’t have this situation now that threatens all clergy’s livelihood.

    10. Larry on Thu, January 06, 2011

      FYI, the “fair rental value” only applies to a church provided house (i.e., parsonage), I think. If a pastor lives in a church the house owns, the “fair rental value” is whatever that type of house would rent for in that community. If a pastor is buying his house, “fair rental value” has no meaning at all for tax purposes. In other words, it is either “fair rental value” or “house payment.” If a pastor owns his house outright, he loses that part of the tax free claim.

      The housing expenses have to be justified by receipts or some sort of demonstration that the money was actually used. They can include just about anything connected to the house (payments, insurance, taxes, utilities, maintenance, furnishings, etc.)

      Whatever amount of the allowance is not spent on housing expenses must be reported as taxable income. So if someone claims 132,000 housing allowance and only spends 50,000 on housing, the other 82000 is taxable income.

      I don’t think we want the courts/governments involved in deciding what is reasonable compensation for any organization or corporation.

    11. Brian L. on Thu, January 06, 2011

      Larry, good explanation. 

      There has been a time or two when I couldn’t honestly say that I “used up” my housing allowance.  I had the mortgage payments, utilities, etc., but I didn’t have documentation for every penny I spent on the house.  So I had to claim the rest of the housing allowance as taxable income.

      On the other hand, if you spend MORE than your housing allowance, you cannot claim the extra expense as part of your allowance.  You can only claim up to what the church agreed to give you as that allowance.  That’s happened to me as well - just had extra expenses we hadn’t figured on, so oh well.

      Each year I try to give my church a figure that will be close so I can look the tax guy (and the IRS if necessary) and tell them I handled this allowance to the best of my ability.

    12. Doug Hibbard on Thu, January 06, 2011

      The salary while things were collapsing is questionable.

      Remember that just because the church reports it as housing doesn’t mean that’s how it’s filed on the individual’s taxes. You’re responsible to substantiate yourself and report “excess housing allowance” as income. As I understand it, the church isn’t actually responsible for correcting the amount, you are.

      How did the CFO qualify for a “minister’s housing allowance” anyway? That’s one thing the church can be held responsible for doing.

    13. Dave on Thu, January 06, 2011

      I have been instructed that a pastor can only claim the lowest of THREE figures: 1) amount declared in advance by the church, 2) amount actually spent, or 3) fair rental value including furnishing and utilities.

      Secondly, why is a CFO getting a housing allowance! I thought this was only permitted for a duly ordained or commissioned minister credentialed for sacredotal purposes.

    14. Mark Simpson on Mon, January 10, 2011

      I have ministered the gospel in 30 countries. In 29 of them there is no housing allowance. We are living in a bubble that one day soon may break, and then we will find out who is really called.

    15. Roger on Mon, January 10, 2011

      The amount is not excessive for CA. You can claim up to 100% of your salary as housing allowance as long as you can validate it. Actual expenses or fair rental value of the house and it’s contents. It’s the “and its contents” that we forget.  The smaller of the two of course. My question too is why the CEO got one. Was he an ordained minister?

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