Judge declares tax-free housing for clergy unconstitutional
Posted by doctore0 on November 25, 2013
A federal judge has found unconstitutional a law that lets clergy members avoid paying income taxes on compensation that is designated part of a housing allowance.
The decision Friday by U.S. District Judge Barbara Crabb could have far-reaching financial ramifications for pastors, who currently can use the untaxed income to pay rental housing costs or the costs of home ownership, including mortgage payments and property taxes.
“It’s a really big deal,” said Annie Laurie Gaylor, co-president of the Madison-based Freedom From Religion Foundation, which filed the lawsuit. “A church currently could pay a minister $50,000 but designate $20,000 of it a housing allowance so that only $30,000 would be taxed as salary.”
Crabb acknowledged in her decision that the exemption is a boon to ministers, referencing a 2002 statement by then-U.S. Rep. Jim Ramstad of Minnesota that the tax exemption would save clergy members $2.3 billion in taxes from 2002-2007. But she said the magnitude of the benefit only underscores what’s wrong with the law.
The exemption “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,” Crabb wrote.
The defendants in the case are U.S. Treasury Secretary Jacob Lew and acting IRS commissioner Daniel Werfel. Attempts to reach those agencies late Friday were unsuccessful.