By Roy Hayhurst, GuideStone Financial Resources
DALLAS, Texas – A federal district court judge ruled Oct. 6 that the minister’s housing allowance, which allows churches to designate part of eligible ministers’ income as a tax-free housing allowance, is unconstitutional.
The judge in the case — Barbara Crabb, an appointee from President Jimmy Carter’s administration — made the same ruling in 2013. That ruling was overturned in 2014 by the Seventh Circuit Court of Appeals in Chicago. Both the 2013 case and this year’s case were brought by the Wisconsin-based Freedom From Religion Foundation (FFRF).
In 2014, the case was dismissed by the circuit court of appeals because the plaintiffs did not have standing to bring the case.
“We have monitored this case and its predecessor cases closely and will seek as part of a long-standing coalition of ministerial benefit boards to file a friend-of-court brief on appeal at the appropriate time,” said GuideStone President O.S. Hawkins. “The housing allowance, far from being a government endorsement of religion, as Judge Crabb contends, actually removes government from the equation. Were it not for the housing allowance, the government would be imposing a tax on religious employers and their employees that is not imposed on non-religious employers.”
Beyond declaring the housing allowance unconstitutional, Judge Crabb has ordered the parties to submit additional briefing on the form of a final judgment by the end of October. GuideStone anticipates a final judgment will be entered before the end of the year and in all probability stayed pending appellate review.
In 2014, the Obama administration appealed Judge Crabb’s initial decision to the Seventh Circuit Court of Appeals, which oversees the district courts in Wisconsin and other parts of the Midwest. In light of the systemic impact on all faiths and their employees, GuideStone is certain that this decision will again be appealed to the Seventh Circuit Court of Appeals.
Ministers should consult with the annual tax guide made available at GuideStone.org/taxguide and GuideStone’s housing allowance information at GuideStone.org/housingallowance to ensure they are properly documenting housing allowance as part of a church business action and reporting it appropriately on their income tax returns.
“We continue to live and minister in a world that is increasingly hostile to religious life as compared to the world in which many of us grew up,” Hawkins said. “Rather than discouraging us, we seek to continue to serve as an advocate for hundreds of thousands of pastors and other ministers we have the privilege to serve.”