Pastors Housing Tax Exemption Ruled Unconstitutional

Another secular atheist group, ‘The Freedom from Religion Foundation’, has won a stunning victory in the United States District  Court For The Western District Of Wisconsin. Judge Barbara Crabb has ruled that a substantial tax benefit enjoyed by many thousands of pastors, priests, rabbis and muslim is unconstitutional.  Code Section 107(2) provides that the gross income of a “minister of the gospel” does not include:

“the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.”

They sited the law’s Christian terminology and lack of gender neutral language (meaning, that it didn’t include homosexual and language referring to women) as the basis for ruling it unconstitutional.  The law’s exclusion for in-kind housing for “ministers of the gospel” 107(1), which remains untouched by the decision, goes back to 1921.  The exclusion was extended to cash allowances in 1954.  In 2002, the limitation “to the extent such allowance does not exceed the fair rental value of the home ……..” was added.

How Big Is This for Christian Leadership?

According to the Joint Committee on Taxation Estimate of Federal Tax Expenditure the exclusion is worth about $700,000,000 per year.  The estimate is not broken down between in-kind, which remains intact, and cash, declared unconstitutional.  Over the decades, churches have moved away from owning parsonages to paying cash allowances, so I would guess that more of the lost revenue comes from the cash allowance.  We might be talking half a billion or so until we get into “dynamic scoring”, since it is likely that there will be a resurgence in the popularity of providing housing in-kind.  One of the reasons that in-kind housing went out of favor was that ministers were missing out on the practically automatic wealth increase that came with home ownership. This ruling once again puts into spotlight the need for Churches and ministry leaders to adopt the Corporation Sole into their ministries housing strategies. If a Corporation Sole owns custody of the house or title to the property, then that house is exempted from being required to file annual informational returns to the IRS pursuant to 26 USC 6033(A)(1-3). This ruling is further evidence of the need for Churches to completely rid themselves of the restrictive law of 501c3 and instead reorganize their ministries with the help of a Corporation Sole to be under the better law of 508(c)(1)(a) whereas they can completely circumvent these type of foolish rulings that only apply to 501c3 incorporated Churches. In fact, Churches DO NOT rid themselves of 501c3 laws, then very soon Atheist will begin to rule every Christian tax exemption privilege under 501 to be unconstitutional. This should be a MAJOR wake up call for every Pastor here in America.

Will There Be An Appeal?

Considering the lack of knowledge on the part of Christian leadership to engage in lawful suits of this nature and the Obama administration determined that the constitutionality of DOMA was indefensible and stopped defending it, it might be safe to say that an appeal might be far fetched at this time for this case.

By Joshua Kenny-Greenwood
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