WSJ: The Pope Took a Vow of Poverty. He May Still Need to File U.S. Taxes.

WSJ: The Pope Took a Vow of Poverty. He May Still Need to File U.S. Taxes.

This article was more interesting than I expected.

Leo is the first American pontiff in history. And U.S. citizens, no matter where they live or who they are, are required to pay tax on their worldwide income—if they owe any.

To Americans, nationality usually means something like, “where are your people from?”.  We like being one-eighth Irish, or being half-Macedonian, even if we couldn’t find Macedonia on a map.  When traveling overseas, “nationality” means the country of which you are a legal citizen. 

A pope’s nationality, in the American sense, is always announced and interesting, but nobody talks about the citizenship.  Vatican City is the smallest country in the world, but it is a country.  The pope is the monarch of Vatican City, so does the pope get dual citizenship?

People with dual citizenship usually do that to travel more freely or to have the option of moving back to their home country.  Those wouldn’t be the concerns of a pope.  The article doesn’t address it, but Pope Leo may wish to renounce his US citizenship.  We should not take that as an insult, it’s just business.

Members of the Order of St. Augustine, which Leo entered as Robert Prevost in his 20s, take the strictest vow of poverty, known as a Solemn Vow. On the night before they join the Order as full members, they sign a document renouncing their right to own property and saying they turn over all their goods to the Order.

If an Augustinian receives a gift or other income, he relinquishes that as well. Halstead adds that when the now-pope became a cardinal, he turned over a generous sum he received as a gift.

So, before trying to bribe a pope or cardinal, make sure he isn’t an Augustinian.  Fr. James Halstead, treasurer of the Midwest Augustinians, is surprisingly forthcoming on how the money stuff works.  Apparently they don’t take a vow of financial confidentiality. 

In addition, members don’t personally pay into Medicare and Social Security. Instead, the Order pays the levies from its income on behalf of them.

As a result, Augustinians don’t file individual U.S. tax returns, and Halstead says the Order has no record of Leo’s filing any returns.

If the Order pays into Medicare and Social Security on behalf of the members, what happens when a member gets old?  That’s not a problem for the pope, but there are a bunch of other members.

Now that he’s pope, Leo and his advisers need to consider what to do going forward. The pope remains an Augustinian, and Halstead hopes he can continue his past practice. In that case, any payment or stipend for the pope could go directly to the Augustinians and he might not need to file.

I bet a pope could pull in plenty of payments and stipends.  Too bad the Catholic Church doesn’t sell indulgences anymore, the Augustinians would make bank.  Even without indulgences, the Augustinians won’t have a problem affording beer, pumpernickel bread and those Fryer Tuck outfits.

I have no idea what Augustinians actually spend their money on.

If Leo determines that he has income and needs to file a U.S. return, he could face issues that torment many Americans living abroad. The paperwork for expats is often onerous, and rules to prevent double taxation have gaps.

State income tax can also be a pain in the ass.  When I was working in Hong Kong, I had to file state income tax for Maryland, even though I didn’t set foot in the state.  My employer, Johns Hopkins is located in Maryland. 

In addition, Vatican officials need to check whether Leo should file forms notifying U.S. authorities of certain foreign accounts or assets he has an interest in.

Oh boy.  The Catholic Church has been around for thousands of years, the Vatican has been around for hundreds of years and Vatican City has been a nation-state for decades.  Don’t open that can of worms.

One thing the pontiff probably doesn’t need to worry about is owing U.S. tax on the value of his accommodations, meals, travel, clothing and other expenses paid by the Vatican. Michael Graetz, a former Treasury official and emeritus professor at Yale Law School, says that in the pope’s case they don’t count as taxable income because they’re a condition of his employment.

That’s a comfort.  Like the president, that would be awfully difficult to unpack.

He explains, “Filing a tax return is a way for Leo to show respect for his citizenship, and it actively affirms that he owes little to no tax.”

Nuts to that.  Becoming a pope is a life-long commitment to give up being a person and accept being the human embodiment of the Church.  Surrender earthly possessions like national citizenship and the promise of Social Security benefits, and embrace the role.  Show respect for US citizenship by recognizing that it isn’t part of his life anymore.