In a 2013 count case in Wisconsin the Freedom From Religion Foundation (FFRF) challenged the Minister’s housing allowance, claiming it provided an unconstitutional subsidy of religion. They won that case, but it was overturned on appeal. The reason for overturning it was that the appeals court indicated that the FFRF did not have standing (or reason to sue) as they had not been damaged by the housing allowance law. The FFRF took it to heart and certain leaders in FFRF paid themselves a housing allowance and excluded it from tax on their individual 1040’s. The IRS disallowed some of them. This led to a new suit, heard by the same Wisconsin judge who made the 2013 ruling. Once again, she ruled the housing allowance unconstitutional.
The case is certain to be appealed. However, since the FFRF basically did what the appeals court suggested, the likelihood of their success is better. Currently the ruling does not apply outside the 7th District Court of Appeals – Wisconsin, Illinois, and Indiana. It is unlikely that anything would be finalized before 2020.
I am by no means an expert on courts and procedures. I also lack a reliable crystal ball. However, there are several possible scenarios that I envision. I see any of the following as an end result:
- FFRF wins all the way to the Supreme Court and the housing allowance disappears. I should note here that the provision of a parsonage was not a part of the suit, so churches would be free to provide a parsonage rather than a housing allowance. Not saying that is a desirable alternative, but it is a possibility.
- The IRS backs off and allows the housing allowance to individuals who are part of an organization such as FFRF. This is a possibility, in my opinion. It would not be a huge step to further broaden the definition of a minister to be more inclusive.
- The IRS wins the case and the housing allowance is preserved. I don’t really see this as a significant possibility, as there is somewhat of a hostile attitude by many toward religious organizations. Many of these would revoke the tax-exempt status of churches and religious organizations.
At issue here is approximately $800 million annually in income. From a government revenue standpoint, that is a huge influx of taxable income. However, the people paying and receiving the housing allowance are religious people from all stripes of religion and not just Christian. It would be immensely unpopular in religious circles to ban the housing allowance. And these religious people do vote. But, as mentioned, we do live in an increasingly hostile environment toward religion. Broadening the definition of a minister may gain the housing allowance some support and some strange bedfellows (as in politics makes strange bedfellows).
Stay tuned. Updates will be made as more information becomes available.
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