IRS Must Stop Exempting Clergy Housing Allowance

MADISON, Wisc. (CN) — A federal judge ordered the IRS to stop letting clergy deduct housing allowances, after finding that the federal law violates the Establishment Clause of the First Amendment by endorsing religion.

U.S. District Judge Barbara Crabb ruled for atheist group Freedom From Religion Foundation, or FFRF, in October, finding that a provision of the tax code, Section 107(2) of Title 26, unconstitutionally allows Christian ministers to deduct housing allowances from their taxable income, because it benefits religious leaders and no one else.

Crabb ordered the IRS on Wednesday to stop enforcing the exception, and said it is up to Congress to rewrite the law.

“This is a decision ultimately affecting all clergy and retired clergy nationwide who’ve received this unconstitutional tax privilege,” Freedom From Religion Foundation Co-President Dan Barker said in a statement.

The foundation said the law allowed clergy to exempt up to the fair market value of their residences and that ministers could deduct costs for home improvements, maintenance, repairs, cable television and other expenses.

It cited the findings of a congressional Joint Committee on Taxation that found the exemption cost the government $700 million a year in lost revenue.

Religious groups said the law allows religious leaders to live near their churches and that the ruling hurts communities where pastors, rabbis, and imams work, and exposes them to $1 billion in new taxes.

“This decision is crippling to the equal treatment of our nation’s faith leaders, but it will not stand,” the Rev. Chris Butler of the Chicago Embassy Church said in October. “Our job and our life’s purpose are one and the same: to serve our congregations and our communities 24/7. Living close to our faith communities is vital to our missions, and we should not face discriminatory tax penalties for doing so.”

On Wednesday Crabb enjoined Treasury Secretary Steve Mnuchin and Internal Revenue Service Commissioner John Koskinen from enforcing the 65-year-old statute.

Crabb rejected the protestations of religious leaders who argued that the court should hold off on an injunction, and simply declare that the clergy housing allowance is unconstitutional.

But Crabb found: “The intervenors’ position is not persuasive, as they are essentially arguing that the government should be permitted to continue allowing ministers to take advantage of § 107(2), despite the court’s holding that the statute is discriminatory and unconstitutional.”

The injunction shall remain in effect for 180 days until the exhaustion of any appeals.

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