Attorneys for the U.S. Justice Department, the Becket Fund for Religious Liberty and the Wisconsin-based Freedom From Religion Foundation presented oral arguments before a three-judge panel of the Seventh Circuit Court of Appeals on Wednesday (October 24), considering the constitutionality of the minister’s housing allowance. The panel consisted of Judges William Bauer, Daniel Manion and Michael Brennan.
The minister’s housing allowance exclusion allows churches to designate part of an eligible minister’s income as a housing allowance, which the minister may be able to exclude from his or her federal taxable income.
Barbara Crabb, a federal district court judge in Wisconsin, entered a final order December 13, 2017, declaring the minister’s cash housing allowance unconstitutional because it violated the Establishment Clause of the First Amendment. The ruling was stayed until 180 days after all appeals are exhausted, meaning it currently has no impact. Crabb made a similar ruling in 2013, which was overturned on appeal in 2014.
The challenge specifically applies to the cash housing allowance; the section of the Internal Revenue Code that provides for tax-free use of a parsonage or other church-owned home is not the focus of the current litigation.
Justice Department attorney Jesse Panuccio defended the housing allowance as constitutional, arguing that it satisfies the requirements of Lemon v. Kurtzman, a 1971 United States Supreme Court decision that articulated a three-prong test for determining whether a legislative act violates the Establishment Clause. He also argued that the provision is constitutional under Town of Greece v. Galloway, a 2013 Supreme Court decision regarding prayers before the opening of a legislative session that suggested that Establishment Clause challenges must be viewed by reference to historical practices and understandings.
Luke Goodrich, a Becket Fund for Religious Liberty attorney representing several churches and ministers that intervened in the case, noted that that tax exemptions regarding ministers’ housing predate the founding of the United States.
Richard Bolton, an attorney representing the Freedom From Religion Foundation, argued that the cash housing allowance is unconstitutional because it essentially provided a tax benefit for ministers that is not available to other taxpayers. The co-presidents of the Foundation had sought to avoid paying income taxes on housing allowances provided to them by the Foundation, but were denied by the IRS.
Harold R. Loftin Jr., GuideStone Chief Legal Officer, who attended the oral argument, said the attorneys for the government and the Becket Fund for Religious Liberty offered compelling evidence for maintaining the allowance.
“Both history and precedent point to the fact that the cash housing allowance for ministers is a reasonable benefit that does not violate the Establishment Clause, nor does it unfairly benefit churches,” Loftin said.
Larry Hansen, an attorney with Locke Lord LLP, who was the principal co-author of an amicus brief in the case on behalf of GuideStone along with a long-standing and broad coalition of large and historic denominational pension boards and other religious organizations, also attended the argument.
“Attorneys for the government and the intervenors made a convincing argument that the cash housing allowance for ministers is constitutional because it is part of a wider scheme that provides tax-free housing benefits to various classes of individuals, including certain members of the military, government and other individuals living abroad, and employees of educational institutions,” Hansen said.
GuideStone, along with both Southern Baptist partners and other denominational pension boards, continues to advocate for this important benefit on behalf of pastors and other ministers who receive housing allowance both during their vocational ministry years and during retirement.
“We are always monitoring these challenges to the housing allowance and are prepared to provide amicus briefs and other advocacy at the appropriate time,” said O.S. Hawkins, GuideStone President. “We believe that the housing allowance law as it currently stands removes government from being involved in decisions best left up to churches. How a church chooses to provide for its pastor’s needs, whether through a church-owned home or through a cash housing allowance, should be left up to the church with no government favor shown for one option over another. We look forward to the Seventh Circuit’s decision in the matter.”
No timeline for a decision from the Seventh Circuit has been announced.
Roy Hayhurst is director of denominational and public relations services for GuideStone Financial Resources of the Southern Baptist Convention®.
Director of Denominational and Public Relations Services
GuideStone Financial Resources of the Southern Baptist Convention
Roy.Hayhurst@GuideStone.org | (214) 720-2141