“It Violates Establishment Clause Of The First Amendment”

A federal judge has declared that the longstanding clergy housing allowance violates the establishment clause of the First Amendment.

Offered only to “ministers of the gospel,” the 60-year-old tax break excludes the rental value of a home from the taxable income of US clergy. It’s the “most important tax benefit available to ministers,” according to GuideStone Financial Resources.

Wisconsin district judge Barbara Crabb first ruled against the housing allowance in 2013, finding that part of the IRS tax code provides “a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.” At the time, the Evangelical Council for Financial Accountability said her ruling “sen[t] shockwaves through the religious community.”

But an appeals court overturned her decision in 2014, ruling that the atheist plaintiffs from the Freedom From Religion Foundation were not sufficiently harmed by the tax break to challenge it in court.

The most “fascinating turn” in the legal fight was when the Department of Justice defended the housing allowance by arguing that atheist leaders qualify as “ministers of the gospel” and could claim the exemption for themselves.

However, the IRS disagreed. The FFRF changed how it compensates its leaders to match the housing allowances that churches give pastors, and sued again when its co-presidents were denied the tax break. Last week, Crabb ruled in their favor again.

Crabb’s ruling would only apply to pastors in Wisconsin, Illinois, and Indiana if upheld by the Seventh Circuit Court of Appeals.