As expected, a federal district court judge in Wisconsin entered a final order December 13, declaring the minister’s housing allowance unconstitutional. The ruling was stayed for 180 days after all appeals are exhausted, meaning it currently does not have any impact. Observers expect the government will appeal the order.
The minister’s housing allowance exclusion allows churches to designate part of eligible ministers’ income as a tax-free housing allowance.
The judge in the case — Barbara Crabb, an appointee from President Jimmy Carter’s administration — made the same ruling in 2013. That ruling was overturned in 2014 by the Seventh Circuit Court of Appeals in Chicago. Both cases were brought by the Wisconsin-based Freedom From Religion Foundation.
In the 2013 case, the Seventh Circuit ruled that the plaintiffs did not have standing to bring the case. This case is different in that this time the plaintiffs were granted a housing allowance by the Foundation, “paid income taxes on the housing allowance, sought a refund of those taxes paid and arguably have been denied tax refunds by the IRS,” according to the Church Alliance, a broad coalition of large and historic denominational pension boards, including GuideStone®.
The challenge specifically applies to the cash housing allowance; the part of the tax law that provides for tax-free use of a parsonage or other church-owned home is not impacted.
“We have monitored these challenges closely and will be prepared to provide amicus briefs at the appropriate time,” said GuideStone President O.S. Hawkins. “We believe the housing allowance law as it currently exists removes government-imposed favor and allows churches to determine whether a church-owned home or providing a cash allowance is the best way for a church to provide for its minister’s needs. We look forward to advocating on behalf of all pastors along with other denominational pension boards and with our Southern Baptist partners.”