Why The Ministerial Housing Allowance Might Not Survive

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On September 7, as was discussed in “Appeals Court Upholds Clergy Housing Exemption,” the Seventh Circuit of appeals reversed a Federal District Court decision that ruled the minister’s housing allowance was unconstitutional. The suit had been brought by the Freedom From Religion Foundation. So the housing allowance survives, for now.

The Appeals Court ruling was actually based on the fact that the plaintiffs, Dan Barker and Laurie Anne Gaylor (co-presidents of FFRF) did not have standing to sue as they had not been denied the benefit of a housing allowance. In ruling that the plaintiffs did not have standing, the court did not actually address the issue of the constitutionality of the housing allowance.

The court suggested that the officers would have standing if they filed returns claiming the housing allowance and the claim was subsequently denied by the IRS. To do so would be somewhat of a stretch for the officers, as it would require them to file a return as ministers who have been ordained, licensed, or commissioned by an appropriate church body. As a side note, Barker is a former minister, but is not entitled to a housing allowance if employed in a non-ministerial position. On the surface, this would seemingly create an inconsistency as their website states “The Foundation works as an umbrella for those who are free from religion and are committed to the cherished principle of separation of state and church.” In claiming the housing allowance, they would be certifying on their return that they are ministers ordained by a church body, working in a ministerial capacity.

In press release, the plaintiffs stated that “Gaylor and Barker took issue with the appeals court’s cavalier assessment that they have suffered no concrete injury, since they must pay taxes on their housing allowance, while ministers are rewarded, simply for being religious leaders, with a unique and substantial tax benefit. The parish allowance is not a tax deduction but an exemption — housing allowances are subtracted from taxable income. ‘We will continue to challenge this indefensible favoritism for religion in other forums until the issue cannot be circumvented,’ Barker said.”

The housing allowance remains intact for now, but future challenges appear to be a certainty. Ultimately, the allowance could be lost. It remains to be seen how this issue will play out.

Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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