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Today, the Seventh Circuit Court of Appeals reversed a 2013 ruling by U.S. District Judge Barbara Crabb that identified the housing allowance benefit for clergy(IRS Code §107(2)) unconstitutional. The original lawsuit, filed by the Freedom From Religion Foundation argued that the parsonage allowance exclusion violates the separation of church and state and the constitutional guarantee of equal protection. In the November 22, 2013, ruling Judge Crabb stated that the parsonage allowance 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.” Today, Seventh Circuit Court of Appeal reversed Judge Crabb’s 2013 ruling due to the fact that the Freedom From Religion Foundation lacked standing. In their ruling, the Seventh Circuit Court of Appeals stated: We conclude that the plaintiffs lack standing to challenge 107(2). We therefore do not reach the issue of the constitutionality of the parsonage exemption. The judgement of the district courts is vacated and the case remanded with instructions to dismiss the complaint for want of jurisdiction. The Freedom From Religion Foundation felt they had standing due to the fact that they theoretically were harmed because they couldn’t claim the housing allowance benefit. The Seventh Circuit Court of Appeal ruled that being theoretically harmed did not give them standing for the lawsuit. In order to have standing, they would have to file their tax returns and be denied the housing allowance benefit by the IRS. This approach will most likely be the next step for the Freedom From Religion Foundation’s legal battle against the housing allowance exclusion. Source: Clergy Financial Resources

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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.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com