A lawsuit filed on September 12, 2011 threatens the constitutionality of sections 107 and 265(1)(6) of the federal tax code, which establishes the housing allowance for ministers. The Atheist group (Freedom from Religion Foundation) filing the lawsuit asserts the unique benefit set aside especially for “ministers of the gospel” is a violation of separation of church and state.

No ruling has yet been made in the lawsuit, and no changes have been made to the tax code allowing the parsonage exemption. Any ruling in the case will likely be appealed to the Supreme Court.

A similar lawsuit was filed by the “Freedom from Religion Foundation” in 2009. On June 17, 2011, this legal challenge to the clergy housing allowance was voluntarily dismissed in a California U.S. District Court. The reason the lawsuit was dropped was due to the fact that the atheist group was not directly affected by Sections 107 and 265(1)(6) of the federal tax code and therefore they do not have the standing to challenge it. The September 12, 2011 version of the lawsuit includes plaintiffs that are affected by the Sections 107 and 265(1)(6) of the federal tax code.

Clergy Financial Resources

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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