Saturday, November 23, 2013

Brethren, our housing allowance is now unconstitutional

It has been ruled so by a federal district judge in Wisconsin. I don't know how widely the decision is to be applied.

My CPA blogging friend, Peter Reilly has greater understanding of this than I, so here is what he says:

The Freedom From Religion Foundation has won a stunning victory in the United States District  Court For The Western District Of Wisconsin where Judge Barbara Crabb has ruled that a substantial tax benefit enjoyed by many thousands of clergy – ministers, priests, rabbis, imams and others – is unconstitutional.

The ruling concerns only those housing allowances which are paid in cash, not those claimed by ministers living in pastoriums. I'd guess that most SBC pastors are in the former group and, absent subsequent action, face some serious recalibration of their compensation and tax payments.

The Freedom From Religion Foundation comments on the victory:

 The Freedom From Religion Foundation and its co-presidents Annie Laurie Gaylor and Dan Barker have won a significant ruling with far-reaching ramifications declaring unconstitutional the 1954 “parish exemption” uniquely benefiting “ministers of the gospel.”
“May we say hallelujah! This decision agrees with us that Congress may not reward ministers for fighting a ‘godless and anti-religious’ movement by letting them pay less income tax. The rest of us should not pay more because clergy pay less,” Gaylor and Barker commented.
U.S. District Judge Barbara B. Crabb for the Western District of Wisconsin issued a strong, 43-page decision Friday declaring unconstitutional 26 U.S. C. § 107(2), passed by Congress in 1954. Quoting the Supreme Court, Crabb noted, “Every tax exemption constitutes subsidy.” The law allowed “ministers of the gospel” paid through a housing allowance to exclude that allowance from taxable income. Ministers may, for instance, use the untaxed income to purchase a home, and, in a practice known as “double dipping,” may then deduct interest paid on the mortgage and property taxes.
“The Court’s decision does not evince hostility to religion — nor should it even seem controversial,” commented Richard L. Bolton, FFRF’s attorney in the case. “The Court has simply recognized the reality that a tax free housing allowance available only to ministers is a significant benefit from the government unconstitutionally provided on the basis of religion.”
Crabb wrote: “Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility. It is important to remember that the establishment clause protects the religious and nonreligious alike.”

You can expect GuideStone, the Ethics and Religious Liberty Commission, and every SBC leader living and breathing to be in a raging inferno over this decision and to be furiously lobbying for some legislative amelioration.

I haven't read the decision and don't know exactly what this means for clergy around the country. Let the lawyers and experts jump on it.

Alas, Sacred Clergy Tax Break in some trouble.

Those of you who live in pastoriums may now crow a bit, since you aren't affected by the decision.


Tim Bonney said...

Fine by me if my church has to pay half of what I pay towards SSI. But if I have to be 100% to SSI when no other profession does and the housing allowance is gone that seems to me to be unfair.

RLBaty said...


Thanks for your coverage of this issue.

Anonymous said...

I'm a pastor. I also lean libertarian in my economic philosophy, so I think less taxes and less government is better for all of us in the long run, so I don't like to see anyone have to pay more taxes just for the government to waste it. But I think the ruling is not unreasonable or unfair. I do believe it is going to significantly hurt small church pastors that depend on this tax break to be able to afford to serve their congregations full time.

FBC Jax Watchdog said...

Nice shout-out to you in the Forbes article, William! Any idea when this will go into effect? Tax year 2014?

William Thornton said...

Any enforcement remedy was enjoined by the judge's decision until after the conclusion of any appeals. Presumably, the government will appeal. Nothing is changed for now.