Pastors have traditionally been allowed to take a large percentage of their salary as a tax-free housing allowance. A lower court last year ruled that the benefit is unconstitutional. But now an appeals court has overturned that decision, meaning that the housing allowance is still on.
From Good News for Pastors: Court Overturns Atheist Victory on Housing Allowance | Gleanings | ChristianityToday.com:
Churches can stop worrying that their pastors’ best benefit will be taken away by an atheist lawsuit—for now.
Today, the Seventh Circuit Court of Appeals overturned a lower court’s high-profile 2013 decision that the longstanding clergy housing allowance was unconstitutional. The 60-year-old tax break excludes the rental value of a pastor’s home from their taxable income.
The Freedom From Religion Foundation (FFRF) challenged the law last year in Wisconsin, and federal district judge Barbara Crabb agreed that the allowance violates the First Amendment because it 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.”
Her November 2013 ruling only applied to pastors in Wisconsin, Illinois, and Indiana if upheld. But it ended up “sending shockwaves through the religious community,” stated the Evangelical Council for Financial Accountability (ECFA) at the time, “leaving many ministers wondering what the impact of this case will be.” The housing allowance is “the most important tax benefit available to ministers,” according to GuideStone Financial Resources.
In response, a broad spectrum of religious groups and the Obama administration urged the appeals court to reconsider. The exemption, which costs the federal government approximately $700 million per year, applies to about 45,000 ministers, priests, rabbis, and imams.
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