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Parsonage for Female Judaic Studies Teachers: Take 2

Posted by: dperla

August 22, 2018

By: Dan Perla and Maccabee Avishur
Back in the fall of 2011, we published a short piece on the issue of parsonage and whether female Judaic studies teachers could treat part of their income as non-taxable parsonage (original article below and here). We noted a trend in which more and more Orthodox day schools had explored the issue, with some even obtaining favorable legal opinions. Based on the requirement that a recipient of parsonage perform religious instruction and other “sacerdotal” functions, we urged schools to explore a variety of training programs that would offer female teachers a certification in these areas and a stronger legal rationale for offering them parsonage.
Seven years late, many Orthodox day schools continue to explore the parsonage issue and an increasing number appear to allow female Judaic studies teachers to take part of their salary in the form of parsonage. Some schools require that a teacher complete a certification program and Prizmah recently introduced a Certificate in Spiritual Guidance, a cohort-based program that provides female faculty with certification that supports the sacerdotal functions they perform for their schools.
At the same time, the number of female Judaic studies teachers availing themselves of the parsonage option, where their school offers it, appears to be modest. Possible explanations for this dichotomy include the following: 1) Accountants and tax advisers to teachers may be recommending against the parsonage option out of an abundance of legal conservatism and based on the requirement that recipients of parsonage pay a double portion of FICA on parsonage proceeds 2) With many teachers already receiving tax benefits from their voluntary retirement contributions, flex spend plans, and health care premiums, teachers may not find the additional deductibility (and the additional FICA payment) overly compelling 3) Some Judaic studies teachers are married to rabbis who already receive parsonage.
If your school offers parsonage to female Judaic studies teachers, what percentage avail themselves of the option and why? If your school doesn’t offer parsonage to female Judaic studies teachers, have you or your board explored the issue?
Parsonage: Not Just for Rabbis
By: Dan Perla
Here’s a little-discussed idea that has the potential to save day schools and/or their teachers some money—allowing certain female Judaic studies teachers to treat part of their income as non-taxable parsonage. This is a benefit already widely available to rabbis, all of whom are men in Orthodox day schools. According to legal and halakhic scholar Michael Broyde, “there is now ample foundation for women who hold a certificate as a teacher or a certificate of advanced knowledge in Jewish law and who teach Jewish subjects in a yeshiva, to be given parsonage by their home institution”.
To wit, there is at least one legal opinion from a major law firm (prepared for a group of day schools) that concludes that female Judaic studies teachers typically qualify for parsonage. In addition, in a 2009 memorandum to its day school principals and administrators, Agudath Israel concluded that it is reasonable for a school to pay a parsonage allowance to a female limudei kodesh teacher who performs clearly religious functions–davening with students, teaching Limudei Kodesh, and providing religious counseling.
What exactly is parsonage? Under the current tax code, parsonage is a non-taxable housing allowance that is equal to the lower of 1) an individual’s actual housing expenses or 2) the fair market value of such housing. According to section 107 of the Internal Revenue Code, parsonage may be paid to any individual deemed to be a “minister of the gospel”, and this amount part of the employee’s salary is not subject to income tax.
The language of “minister of the gospel” would seem on its face to include male and female rabbis (the Jewish equivalent of a minister) but would seem to exclude everyone else teaching in a Jewish day school, including all women in Orthodox schools. That isn’t necessarily so. To quote Michael Broyde again, “The Jewish legal tradition lacks almost any ecclesiastical function that can be performed by ordained rabbis only and recognizes that lay leadership can rise to the level of clergy in functionality, form, title and duties…. [I]in many yeshivas, some women serve in roles identical to those served by rabbis, e.g., supervising prayer, providing religious guidance, teaching sacred texts with religious fervor, conducting themselves as religious role models, and otherwise serving sacerdotal functions. These women are entitled to the parsonage allowance exclusion according to the laws of the United States”.
I am not a lawyer and don’t want to be misconstrued as opining on any legal issues here. But based on the litmus tests contained in the relevant regulations and court cases, the legal opinion I referenced earlier asserts that all Judaic studies teachers should be eligible for parsonage. The Aguda memorandum bases parsonage eligibility upon a certificate from a seminary or other qualified Jewish program designed to prepare limudei kodeshteachers. According to Agudah’s memorandum,  the certificate should also state that the recipient is authorized to perform clearly religious functions.
Agudah does not specify which seminaries or training programs for women qualify to provide this certification, but Broyde suggests that the Bais Yaakov Teachers Seminary and Yeshiva University’s Graduate Program for Women in Advanced Talmudic Studies are two programs that would seem to qualify. Some day schools appear to treat female Judaic study teachers’ income as parsonage based on certification from other programs.
While each school must rely on advice from its own legal advisors, it seems to us that any day school board that does not already offer female Jewish studies teachers the opportunity to benefit from this tax break should at least explore the issue.  Parsonage for women provides teachers with greater take-home pay and may allow schools to pay less in gross salary. Even if gross salaries are not affected, parsonage can save schools money by reducing payroll tax expense. A female teacher earning $50,000 of fully taxable income costs a school about $4,000 in FICA and Medicare taxes ($50,000 x 8%). If that same teacher receives $20,000 of parsonage, the cost savings to the school is about $1600 ($20,000 x 8%). Teachers may be obligated to pay the difference in self-employment tax from their tax savings.
Based on the legal opinion and Agudah memo, many modern orthodox schools in the NY/NJ area as well as Haredi schools have adopted the practice of paying parsonage to female Judaic studies teachers. Has your day school at least explored the issue? Do you have experience in this area to share? If so, please join the conversation.
Dan Perla is Senior Director of Financial Vitality and Maccabee Avishur is Senior Director of Prizmah Services at Prizmah: Center for Jewish Day Schools.

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