Explaining the Federal Court Ruling Striking Down the Housing Allowance for Pastors

December 3, 2013

Housing Allowanceby Nathan A. Cherry

One of the most deceptive attacks on religious freedom has taken place and you might not have even heard about it.

I briefly touched on this subject last week just a couple of days after it happened, but I want to spend a little more time unpacking how a recent decision by a federal judge could significantly impact religious freedom across the nation.

On Friday, November, 22, 2013, federal district court judge Barbara Crabb issued an order declaring the minister’s housing allowance in the IRS Code unconstitutional. Siding with the Freedom From Religion Foundation, judge Crabb agreed that the housing allowance exemption violates the Establishment Clause of the Constitution.

The first thing to understand is that this ruling has not gone into effect at this time and will not go into effect until the appeals process has been completed. Almost as if the judge anticipated the outpouring of appeals, she decided to stay her ruling until after that process. So for now nothing has changed and pastors and churches don’t have to worry about the impact of the ruling. On this aspect of the ruling senior legal counsel for Alliance Defending Freedom Erik Stanley noted:

“[T]he Judge’s ruling will almost certainly be appealed to the 7th Circuit Court of Appeals.  Judge Crabb is the same judge who declared the National Day of Prayer unconstitutional.  That ruling was overturned by the 7th Circuit.  The same outcome is likely in the appeal of Judge Crabb’s ruling against the minister’s housing allowance.  The ruling is suspect on a number of legal fronts, including the ability of the Freedom From Religion Foundation to even bring the lawsuit in the first place, and the power of the Judge to enter an injunction against a tax statute.  These legal arguments will be raised on appeal and stand a good chance of resulting in the dismissal of this case.”

Linking the lack of standing for the Freedom of Religion Foundation to bring a lawsuit against the housing allowance exemption, the likely overturning o the decision by the 7th Circuit Court of Appeals, and the practical implications of the decision was a comment by Family Research Council President Tony Perkins in an email sent last week:

“We have seen many courts over the years attempt to banish God in various ways from the public square, but this case in particular reveals a level of supreme arrogance. Once again, Judge Crabb has neglected to consult the Constitution that she was sworn to uphold. Society has long provided this tax housing allowance to clergy because of the tremendous benefit that churches in turn give to society. Clergy help carry the burden of many social ills that would otherwise become the burden of taxpayers and the federal government. The Supreme Court has made perfectly clear that neither taxpayers or organizations have standing to bring federal lawsuits with this sort of challenge because the law they are challenging has not caused them any direct harm.”

Further laying out the purpose for this tax exemption and the real-world impact it would have was Dan Busby, president of the Evangelical Council for Financial Accountability:

“For the most part, pastors across the country are compensated modestly for doing very demanding work. So many members of the clergy have relied on this exclusion for decades. This ruling, in effect, forces clergy of nearly every religion across America to pay additional taxes regardless of faith or creed. The bottom line is: This will force congregations to either increase clergy compensation to offset these taxes or require pastors to dig deep to see if they’re able to absorb these taxes. But in most cases, this will lead to several thousands of dollars in taxes a year for clergy that they have not been paying. And it’s especially hurtful to retired clergy.”

All of these comments help to clear up the current situation and shed a dim light on the implications of the decision should it somehow withstand the appeals process. Thankfully it is believed by most pundits that the decision has little chance of making it through appeals and will likely be struck down. That is the good news. But there is some not-so-good news that no one has yet discussed as an inherent implication of this decision.

This inherent implication is the easy jump from declaring the housing allowance unconstitutional to declaring the tax-exempt status of churches unconstitutional.

Churches by their mere existence are tax-exempt. Sure, they can apply for and receive a letter from the IRS affirming this tax-exempt status, but it’s not necessary. Simply be existing as a church they are tax exempt and there is nothing – right now – the federal government can do about it. All the blustering by the IRS and government over churches losing their tax exempt status is nothing more than fear mongering with no bite to the bark.

But one can easily see how if the housing exemption is ruled unconstitutional it won’t take long for the tax-exempt status of the church to be attacked as well. The same arguments used against the housing allowance can easily be used against the tax exempt status of the church.

Now more than ever churches need to be informed, vigilant, and active in defending their freedoms. The same churches that scoff at anyone involving themselves in politics could find themselves on the other end of a huge tax bill, or lacking the tax protections that currently afford them a full-time pastor. Then what?

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Tags: allowance, churches, Establishment Clause, Evangelical Council for Financial Accountability, Freedom From Religion Foundation, Housing, pastors, Tax exemption, United States

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