Appeals Court Hears Case That Struck Down IRS’ Parsonage Allowance

By Barbara Hollingsworth | September 11, 2014 | 1:01pm EDT


The Parsonage of Horatio Alger's father, the Rev. Horatio Alger, Sr. when he was minister of the Eliot Church in Natick, Mass. (National Park Service)

( –  A three-judge panel of the 7th Circuit Court of Appeals heard oral arguments Tuesday in an appeal of a ruling by a federal judge in Wisconsin that struck down the tax code’s 60-year-old “parsonage allowance”.

The 2011 case was filed by the Freedom From Religion Foundation (FFRF), an atheist group that sued the Internal Revenue Service (IRS), claiming that “preferential tax benefits provided exclusively to religious clergy violate the Establishment Clause” of the U.S. Constitution.

U.S. District Court Judge Barbara Crabb agreed, ruling that the exemption passed by Congress “provides a benefit to religious persons and no one else.”

But Luke Goodrich, deputy general counsel at The Becket Fund for Religious Liberty, which filed an amicus brief in the case representing a number of religious denominations, argued that the parsonage allowance makes up just a tiny fraction of IRS-approved housing allowances, and that it actually promotes the separation of church and state by keeping the IRS out of churches’ internal affairs.

“Ever since the United States has had an income tax, Congress has included an exemption for churches that provide houses to their ministers,” Goodrich told “What’s at issue today was a similar tax provision that says if instead of giving a minister a house, the church gives the minister an allowance to buy a house, that too will not be treated as income.”

“The Becket Fund made several arguments against the Freedom From Religion Foundation suit,” Goodrich said. “Three main purposes are served by this tax provision:

“One, it reduces discrimination between rich churches and poor churches. So wealthy churches can maybe afford to buy a house and give it to their pastor, but poor churches may be able to afford only a housing allowance. So what this tax provision does is make sure that all churches are treated equally.

“Second, and just as important, there are all sorts of provisions in the tax code that exempt housing allowances for secular reasons, such as military service members or people who live overseas. And so what this tax allowance does is treat churches equally with other types of secular employers who also get housing allowances. So it’s not a special favor for churches, it’s an issue of neutrality.

“And then finally, this tax exemption ensures that the IRS doesn’t have to go trundling around in the internal affairs of churches and figure out how’s this particular pastor is using his housing allowance and if this is really necessary for the mission of the church. So what this tax exemption does is it to actually keep the IRS out of a church’s internal affairs and it promotes separation of church and state.”

Clergy members say that Crabb’s ruling, which will not go into effect until the appeals process is finished, would have a significant financial impact on them.

“The removal of the clergy housing alliance would hamper a pastor’s ability to serve the poor, the weak, and the forgotten; we serve where others do not serve or where others refuse to serve,” Bill Devlin, pastor of Infinity Bible Church in New York’s South Bronx, told the Alliance Defending Freedom (ADF).

(The Becket Fund for Religious Liberty)

Other pastors said that if the ruling stands, they may be forced back into the secular workforce.

The parsonage allowance case is just one of many in which the Becket Fund has gone toe-to-toe with FFRF over First Amendment religious rights.

“Any time the government does something that is not hostile to religion, FFRF objects,” Goodrich told, pointing out that the atheist group also filed another lawsuit against the IRS trying to get the tax agency “to more closely monitor sermons of churches to make sure that churches aren’t endorsing political candidates from the pulpit.”

“The Becket Fund intervened in that case, and basically Freedom From Religion Foundation got scared and agreed with the IRS to dismiss that lawsuit,” he said.

Big Mountain Jesus, a statue erected on leased land at the Flathead National Forest ski area in Montana by the Knights of Columbus in 1955 . (AP photo)

In another case which is currently on appeal in the 9th Circuit, FFRF sued to get a statue of Jesus removed from a U.S. Forest Service ski area in Montana.

But the Becket Fund won “a great ruling” on behalf of the Knights of Columbus, which erected the statue, Goodrich said.

“The FFRF has a very extreme view of separation of church and state,” he added.

“They think government should never make any reference to religion in the public square."


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