Appeals Court Upholds Housing Allowance Tax Exemption for Clergy

The Daily Signal | 3/19/2019 | Staff
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Thomas Jipping is deputy director of the Edwin Meese III Center for Legal and Judicial Studies and senior legal fellow at The Heritage Foundation.

The Internal Revenue Service has a rule allowing ministers to exclude the amount of a housing allowance from their taxable income.

December - Case - Atheist - Group - Rule

In December, I wrote about a case in which an atheist group challenged that rule, claiming it’s an unconstitutional establishment of religion.

On March 15, a three-judge panel of the U.S. Court of Appeals for the 7th Circuit disagreed and unanimously upheld the rule.

Congress - Income - Tax - Rules - Income

Since Congress imposed an income tax in 1913, the rules for what constitutes “income” have become increasingly complex.

What about when an employer provides housing or compensates an employee for its cost? In 1923, Congress enacted a statute excluding a church-provided parsonage from a minister’s taxable income and later extended that to housing allowances.

Freedom - From - Religion - Foundation - FFRF

The Freedom From Religion Foundation (FFRF) prepared to challenge this rule by first giving its own co-presidents a housing allowance similar to what a minister might receive.

On their 2012 and 2013 income-tax returns, those individuals claimed refunds based on excluding that allowance from their taxable income. The IRS denied their refund claim because they are not ministers, and they sued.

US - District - Court - Wisconsin - Favor

A U.S. District Court in Wisconsin ruled in favor of FFRF, striking down the IRS rule.

Three 7th Circuit judges—Senior Judge William Bauer, appointed by President Gerald Ford; Senior Judge Daniel Manion, appointed by President Ronald Reagan; and Judge Michael Brennan, appointed by President Donald Trump—reviewed the district court’s decision. Brennan wrote the unanimous opinion.

Areas - Law - Supreme - Court - Establishment

Few areas of constitutional law are as confused as the Supreme Court’s Establishment Clause cases. The court has used several different tests to determine whether a government action is an establishment of religion, enabling lower courts to pick and choose which one will produce a desired result.

In this case, the district...
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