The clergy housing allowance remains legal…
Pastors in the U.S. received welcome news last Friday. On March 15th, the U.S. Court of Appeals for the 7th Circuit overruled a Federal District judge in Wisconsin. The judge had previously ruled the Clergy Housing Allowance provision of the IRS violated the Establishment Clause of the First Amendment. As a result, this would have eliminated the tax benefit to pastors.
Richard R. Hammar is the premiere attorney, CPA, and author specializing in legal and tax issues for churches and clergy. In the video above he shares his thoughts on the recent clergy housing allowance ruling.
The clergy housing allowance provision is probably the most valued tax benefits for pastors. Some pastors have the benefit of a church-owned home (parsonage). Others are afforded clergy housing allowance from the church. Both are tax exempt.
Since clergy are among the lowest compensated career group in the U.S., these folks are motivated by the mission of the church. Seeking more compensation is frequently awkward for pastors and seldom do they ask for increases. Therefore, the housing allowance benefit really helps pastors increase their otherwise low income (comparatively speaking).
Thoughts from Church Law & Tax…
Matthew Branaugh, editor of Church Law & Tax, wrote an extensive article detailing much of the ruling and its background. He walks through the claims of the Freedom From Religion Foundation (FFRF). This organization brought the original lawsuit to the court in 2017. Check it out here.
According to Branaugh, the court’s reversal affirms the 65-year-old benefit (established through Section 107(2) of the Tax Code) does not offend the First Amendment.
Whether FFRF chooses to appeal the ruling to the Supreme Court is not known. According to Brennan, the Supreme Court receives 8,000 petitions each year and normally only accepts 80 cases.
Where to go from here…
Pastors should continue due diligence in seeking the housing allowance benefit each year. The church’s board or governing body needs to make it part of their minutes. For most churches, this occurs at the end of each year. This needs to be done before the housing allowance is disbursed.
Additionally, in an increasingly secularized society, pastors and their respective churches should regularly monitor the activities of legislatures and courts. You can be sure this and other religious liberty issues will continue to arise in the months or years to come. However, pastors can rest assured for now knowing the clergy housing allowance remains legal for at least the near future.
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