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Federal judge strikes down law that exempts clergy from paying taxes on housing allowance

(Pixabay/stevepb)A federal judge has struck down a law that exempts clergy from paying taxes on their income designated as part of their housing allowance.

A federal judge in Wisconsin has struck down a law that exempts clergy from paying income taxes on compensation that is designated as part of their housing allowance.

On Friday, U.S. District Judge Barbara Crabb declared the 60-year-old law unconstitutional because the exemption is only provided to religious persons and no one else, violating the establishment clause of the U.S. Constitution.

"In reaching this conclusion, I do not mean to imply that any particular minister is undeserving of the exemption or does not have a financial need for one," the judge wrote, as reported by Associated Press.

"The important point is that many equally deserving secular employees (as well as other kinds of religious employees) could benefit from the exemption as well, but they must satisfy much more demanding requirements despite the lack of justification for the difference in treatment," she continued.

Crabb had previously ruled against the housing allowance in 2013, stating that the second part of Section 107 of the IRS tax code 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."

The judge further noted that the law could also present other problems because it is not limited to ministers with lower incomes, but wealthy prosperity preachers can still live in multi-million dollar homes tax-free.

The latest estimate from the congressional Joint Committee on Taxation has indicated that the tax break saves clergy, including non-Christian religious leaders, $800 million a year in taxes.

In 2014, her decision was overturned by an appeals court, which argued that the plaintiffs from the Freedom From Religion Foundation (FFRF) cannot challenge this in court since, in the first place, they didn't ask for an exception, so they cannot prove that they've been denied this in the first place.

At the time, the Department of Justice defended the law by saying atheist leaders also qualify as "ministers of the gospel" and could claim the exemption for themselves.

The FFRF made changes on how its leaders are compensated to match the housing allowances that churches provide to pastors, and the group sued again when its co-presidents were denied the tax break.

Although Crabb declared the law to be unconstitutional, she deferred taking action on granting relief, which could include an injunction to block the granting of the tax break. The judge ordered both sides to present their arguments by Oct. 30 on what remedies would be appropriate.

According to Christianity Today, her ruling would only apply to pastors in Wisconsin, Illinois and Indiana if upheld by the Seventh Circuit Court of Appeals.

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