Federal Court Declares Housing Allowance Unconstitutional

On November 22, 2013, the US District Court for the Western District of Wisconsin ruled that the payment of a tax-free housing allowance to members of the clergy is unconstitutional. The court did not challenge the rent-free use of a church-owned parsonage that is provided to ministers. The judge decided that the law violates the First Amendment’s “establishment clause” because it provides a benefit to religious persons that is not afforded to the secular public. The same plaintiff who brought the challenge (the Freedom From Religion Foundation), is also challenging the church exemption from filing Form 990 and has brought a lawsuit against the IRS for allowing churches to violate the law by engaging in political speech. For now, the effect of the Wisconsin ruling is delayed pending an appeal. Obviously, this ruling has implications for every minister in the US who is paid a housing allowance from a church or church organization. A copy of the ruling can be viewed here: http://www.scribd.com/doc/186404063/FFRF-v-Geithner-Parsonage-Exemption. The exemption for church-provided parsonages was made a part of the tax code in 1921, and the exclusion for ministers who owned their own home was added in 1954.