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Judge again strikes down clergy tax benefit

by Evan Wilt
Posted 10/10/17, 11:57 am

A federal judge in Wisconsin sided with an atheist group Friday and overruled a tax exemption for clergy. U.S. District Judge Barbara Crabb ruled in favor of the Freedom from Religion Foundation that challenged a longstanding clergy housing allowance. Since 1954, a “minister of the gospel” doesn’t have to pay income taxes on compensation designated as housing costs. It’s the biggest tax benefit available to ministers, and U.S. clergy see $800 million a year in tax breaks from the law, according to the latest estimate by the congressional Joint Committee on Taxation. Crabb ruled the tax law provides an unfair benefit to religious persons, violating the establishment clause of the U.S. Constitution. The ruling could affect pastors in Wisconsin, Illinois, and Indiana if upheld. Crabb deferred granting relief to the Freedom from Religion Foundation, which previously sued to overturn the law. Crabb sided with them in 2013, but the 7th U.S. Circuit Court of Appeals reversed the ruling, saying the co-presidents of the organization didn’t have standing to bring the lawsuit because they had never been denied the housing exemption. So in 2015, they requested the tax benefit and were rejected by the IRS, leading them to file a new lawsuit last year. Crabb gave both sides until Oct. 30 to make arguments for what consequences would be suitable. The Becket Fund for Religious Liberty, which represents churches affected by the ruling, said it breaks nearly 65 years of precedent and threatens the viability of churches in the area. The firm intends to challenge the decision.

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Evan Wilt

Evan is a reporter for WORLD Digital based in Washington, D.C.

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  • Janet S
    Posted: Tue, 10/10/2017 01:32 pm

    I actually see the atheist point.  As a Christian layperson I personally have never understood why the clergy had this benefit.   I really do not see the argument that to take it away would threaten the viability of the area churhes. The churches are already paying the money, it actually only affects the amount of money the pastor has to report as income doesn't it? 

  • Bob C
    Posted: Tue, 10/10/2017 04:08 pm

    Janet S. - The benefit is in the Tax Code or Tax Law. A judge should not be changing a law. Congress makes or changes the law. Obviously there was a good reason, at the time, it was made a law.  If this tax break gets taken away it means that the clergy in America will have to come up with $800,000,000 to pay the tax. Individual churches may decide to raise the clergy’s pay by reducing other ministry programs to pay it.  Whatever happens the churches in America lose.     

  • Joe
    Posted: Tue, 10/10/2017 06:49 pm

    Janet, to answer your question, just follow your logic to its conclusion: if the pastor has to report tens of thousands of dollars more in income, then he has to pay thousands more in taxes.  For a low paid pastor in a smaller church (which is the vast majority), where is this additional thousands of dollars supposed to come from?  Either he has to take a side job, his wife has to take a job (if she does not already), or they sink into debt, or the church has to increase what they pay the pastor to make up the difference.  Any of these threatens the viability of said church.  Unless you attend a megachurch where the pastoral staff are paid 6 or 7-digit packages, please discsuss this matter with your pastor and his family to gain additional insight.  Most are faithful stewards doing the best they can to stretch their resources as far as possible so they can devote their lives to ministering the gospel.  This lawsuit is nothing more than a financial attack on churches in America by those who would like to see any vestige of religion removed from society.  Since the housing exemption applies to any religion, not just Christians, the government is not "estabilshing" any religion.

  • E Cole
    Posted: Tue, 10/10/2017 05:03 pm

    I’m no expert on this subject, but I think very often living in a manse is a sacrifice for ministers, and perhaps the tax break was related to that reality. Especially in times past when home prices were increasing regularly, pastors who were given housing by the church were not able to benefit from an active housing market and could not make the investment that most of us see as an important part of our life savings. And of course the housing provided is considered part of the package offered to a minister so the monetary value sometimes amounts to just forcing the pastor to rent from the church.  During the relationship, the pastor often lives somewhere they might not choose for themselves and might not even be a good fit based on the size of their family. Then when the relationship ends, the pastor has no equity built up since there was no ownership. Im afraid it is often more of a benefit to the church than to the pastor but of course there are other arrangements beside the manse arrangement that come into play.

  • Joe
    Posted: Tue, 10/10/2017 06:38 pm

    While I agree with the sentiment of your comment, I feel the problem of lack of equity of pastor living in a manse is a somewhat different issue that churches.  One way to address it would be by providing a retirement plan to the pastor, including a generous contribution.  The tax benefit of a housing allowance is available to the pastor whether he lives in a manse or not.  The main requirement is that the church notes the amount of the housing allowance in the pastoral compensation package in their budget.

  • Brendan Bossard's picture
    Brendan Bossard
    Posted: Thu, 10/19/2017 02:05 pm

    It is unwise to base church finances on current tax law.  As this case proves, it could change in a moment.  It is fine to take advantage of benefits that exist, but good financial planning *always* tries to account for the worst.

  • Vista48
    Posted: Tue, 12/19/2017 02:01 pm

    I am torn between sadness as America drifts further away from her Christian moorings, and elation as God will prove once again that "the gates of hell shall not prevail against" his Church. The apostate churches will most likely continue in their apostacy, but the true Church only gets stronger with adversity. It is not hard to see that the tax exemptions for churches themselves will eventually be a target, but the FFRF crowd will never get the victory that they seek. Just as The Grinch learned that Christmas was not made of presents and tinsel, so the FFRF will learn that the Church is not made of buildings and tax exemptions but is sustained by the power of God. So, while I am a little saddened, I am certainly not worried. God wins!