The 7th U S Circuit Court of Appeals has dismissed a lawsuit by the Freedom From Religion Foundation (FFRF) that challenged the constitutionality of the clergy housing allowance. The suit was originally brought in the District Court for the Western District of Wisconsin where Judge Barbara Crabb ruled that the tax break for ministers was unconstitutional. Her basis for the ruling was that the law benefited religious people and no one else. The decision, which would potentially eliminate the most important tax break for ministers, was stayed pending appeal.
The law allows ministers of the gospel to exclude income tax on amounts designated by the church as housing allowance. Self-employment taxes are payable on these amounts. In addition, ministers may “double dip,” as they are allowed to deduct mortgage interest and property taxes paid on this untaxed income on their Schedules A.
In reversing Judge Crabb’s decision the appeals court ruled 3-0 against the decision. The basis for this ruling was that the plaintiff lacked standing to bring suit on this matter. The court stated that the FFRF has only a general grievance against the rule and has not suffered a personal injury because of the law. The plaintiffs had not been denied the housing allowance because they never asked for it. Judge Crabb, in her ruling, stated that there was no legitimate purpose served by making the plaintiffs go through the effort of claiming the exemption, since they are not ministers of the gospel and would clearly have the claim denied.
It appears to be unlikely that the case will be appealed to the Supreme Court, or that the Supreme Court would hear such an appeal. However, the FFRF is likely to seek another approach to strike down this legislation. Annie Laurie Gaylor, co-president of FFRF stated that the foundation will continue to seek a way to bring down the housing allowance.
So the housing allowance survives for now. Stay tuned to see what the FFRF has up their sleeves next.