A three-judge panel of the Seventh Circuit Court of Appeals in Chicago ruled unanimously on March 15 that the housing allowance tax exemption for ministers is constitutional. The decision reversed a 2017 opinion by U.S. District Judge Barbara Crabb. Crabb ruled that the exemption provides an unconstitutional benefit to religious individuals, thereby violating the establishment clause of the U.S. Constitution.
The lawsuit that led to the 2017 decision was brought by the Wisconsin-based Freedom From Religion Foundation (FFRF). The group was challenging a federal law passed in 1954, under which a “minister of the gospel” is exempt from income tax on compensation that is designated part of a housing allowance. The FFRF—which has fought against the housing allowance provision for more than 10 years—argued that the law discriminates against secular employees.
“I am thankful that with the Seventh Circuit’s decision, this matter is settled—at least for now,” said Jeff Jeremiah, EPC Stated Clerk. “I am confident that the FFRF and other atheist groups are not going to give up their fight easily, so we will continue to monitor the situation and keep our churches and ministers informed.”
Crabb also had ruled in 2013 that the housing allowance was unconstitutional—a decision that was overturned by the Seventh Circuit in November 2014. At the time, the appeals court stated that they did not rule on the “issue of the constitutionality of the parsonage exemption,” leading to the case being refiled under a different legal tactic.
In their most recent ruling, the judges declared that the 1954 law “falls into the play between the joints of the Free Exercise Clause and the Establishment Clause: neither commanded by the former, nor proscribed by the latter” and therefore neither endorses nor inhibits religion, and does not cause excessive government entanglement. The judges also noted that Congress has been providing federal tax exemptions for religious organizations as far back as 1802.
Writing for the panel, Judge Michael Brennan said that the primary effect of the housing allowance “is not to advance religion on behalf of the government, but to allow churches to advance religion, which is their very purpose. Providing a tax exemption does not connote sponsorship, financial support, and active involvement” of the government in religious activity.