January 2015 Church & State | People & Events

A federal appeals court has rejected a lawsuit that attempted to have the tax-exempt clergy housing allowance declared unconstitutional.

The Wisconsin-based Freedom From Religion Foundation (FFRF) had sought to end the exemption, but lost its case on “standing” – or the right to file the lawsuit.

The 7th U.S. Circuit Court of Appeals in November invalidated a decision by U.S. District Court Judge Barbara Crabb, who had previously ruled in Freedom From Religion Foundation v. Lew that the parsonage 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.”

FFRF co-presidents Annie Laurie Gaylor and Dan Barker based their case around the fact that they do not receive a housing allowance because they run a secular non-profit organization and are not “ministers of the gospel.”

“Dan took the allowance when he was a minister, but now that he is head of the largest atheist and agnostic organization in the country, he cannot take it,” Gaylor said. “That clearly shows preference for religion.”

Churches typically set aside a portion of clergy salaries for a housing allowance. As Religion News Service explained, a pastor who earns a salary of $50,000 may receive a tax-free housing allowance to the tune of $16,000 – one-third of his or her income. This effectively raises that pastor’s salary to $66,000, but he or she does not have to pay taxes on that additional income.

The Joint Committee on Taxation’s Estimate of Federal Tax Expenditure said the parsonage exemption amounts to about $700 million per year.

In its ruling, the appeals court did not discuss the merits of the case. Rather, it ruled that the FFRF lacked the right to bring the legal challenge.

“The plaintiffs here argue that they have standing because they were denied a benefit (a tax exemption for their employer-provided housing allowance) that is conditioned on religious affiliation,” wrote Judge Joel Martin Flaum in the unanimous opinion. “This argument fails, however, for a simple reason: the plaintiffs were never denied the parsonage exemption because they never asked for it. Without a request, there can be no denial.”