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Housing Allowance Now in the Crosshairs of Atheists

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Pastors are fighting back amidst efforts to strip them of their tax exemption for ministerial housing. More than 5,000 have already signed on to an Alliance Defending Freedom (ADF) campaign defending the exemption.

For nearly six decades, religious leaders have enjoyed a housing tax exemption from the IRS, known as the “parsonage exemption” but one atheist organization, the Freedom From Religion Foundation (FFRF), is demanding it end. FFRF began a legal battle back in 2011 to strip the tax break in a move that would mean churches across the country would be hit with almost $1 billion in new taxes.

FFRF is suing the IRS and charging the provision violates the Establishment Clause of the First Amendment.

Since the original suit was filed, two courts have ruled in favor of FFRF, most recently in October. An appeal of that ruling began last week in the Seventh Circuit Court of Appeals.

The Becket Fund for Religious Liberty, which intervened in the case on behalf of Embassy Church and several others, says the plaintiff’s claim doesn’t add up. That’s because many secular businesses and organizations receive similar tax treatment.

“Treating ministers like other professionals isn’t an establishment of religion; it’s fair tax treatment,” said Luke Goodrich, deputy general counsel at Becket.

Many ministers pay both the employee and employer share of these taxes. In other words, they’re already being taxed 15.3 percent on their housing allowance. Overturning the law without taking into account the self-employment tax issue would recreate the problem that Congress tried to fix—namely, ministers would be uniquely disadvantaged.

“The same group of atheists claimed it was unconstitutional to put Mother Teresa on a postage stamp, so it’s no surprise they’re trying to sic the IRS on churches,” Goodrich said.

Becket argued in its opening brief that the lower court ruling, if allowed to stand, would have devastating practical effects on ministers and communities across the country. “For over a century, churches and ministers have relied on these rules to start ministries, purchase property and help the communities they serve.”

Currently, 81 percent of full-time senior pastors in the U.S. receive a housing allowance. The typical church spends about 9 percent of its total budget on housing compensation.

The pastors who have joined the suit argue that their jobs demand they live among their church members and use their residences for church activity; in some cases, their homes serve as the primary gathering place for the congregation.

Chris Butler, pastor at Embassy Church on the south side of Chicago, told the federal appeals court: “For the majority of churches, the pastors are like me and experience at some level the same problems that we’re trying to face in the community. If you take away even a little bit, it can become a lot of trouble quickly.”

Embassy Church is an inner-city congregation that serves at-risk teens and the city’s homeless. Without the tax exemption, the church will be unable to serve its community.

Becket’s legal team expects several Christian groups, including ADF, to file supporting documentation—amicus briefs—this week, the next step before the case goes to court later this year.

If the appeals court were to affirm the lower court’s decision, clergy in Illinois, Indiana and Wisconsin—under the jurisdiction of the Seventh District—would be immediately affected. But since the IRS applies federal tax code universally across the country, such a decision could prompt a U.S. Supreme Court review.