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Housing Allowance Case Dismissed

Today, the 7th Circuit Court of Appeals dismissed a constitutional challenge to the income tax exemption of clergy parsonage allowance, citing plaintiffs did not have standing.

Nearly a year ago on Nov. 21, 2013, U.S. District Judge Barbara B. Crabb for the Western District of Wisconsin issued a strong, 43-page decision declaring 26 U.S.C. § 107(2), passed by Congress in 1954, as unconstitutional. The Church Alliance, a coalition of chief executive officers of 38 denominational benefit programs, filed an amicus brief to support dismissal of the case, Freedom From Religion Foundation, Inc., et al. v. Jacob Lew, et al. (FFRF v. Lew). Those who signed included James Hamlett, President and CEO of Pension Fund of the Christian Church, and Rev. Dr. Sharon Watkins, General Minister and President of the Christian Church.

Code §107(2), commonly called "clergy housing exclusion" or "clergy housing allowance," excludes from income taxation the cash compensation provided to "ministers of the gospel" (clergy) toward the cost of their housing. This section of the Code essentially excludes the value of clergy-owned housing from income taxation. It is related to Code §107(1), which excludes from a minister's taxable income the value of church-provided housing (commonly called a parsonage, vicarage or manse). The FFRF v. Lew appeal did not involve a challenge to Code §107(1).

While the suit may surface again, for now this case is resolved.