This was a big week for supporters church/state separation, when U.S. District Judge Barbara Crabb ordered the suspension of the IRS regulation that allows Christian ministers to deduct housing allowances from their taxable income, because the deduction benefits religious leaders and no one else. The ruling filed on Dec 13, 2017 addressed the often abused housing allowance that allowed megachurch preachers to live tax-free in multimillion dollar homes. Judge Crabb correctly noted that by allowing the allowance only to ministers provides an undue benefit to religion by writing:
that 26 U.S.C. § 107(2), which excludes from the gross income of a “minister of the gospel” a “rental allowance paid to him as part of his compensation,” is unconstitutional. Specifically, I concluded that § 107(2) violates the establishment clause of the First Amendment because it does not have a secular purpose or effect and because a reasonable observer would view the statute as an endorsement of religion.
The ruling goes on to say that Congress has 180 days to produce an alternative, which might be extend the housing allowance to other non-profits (meeting certain requirements) or remove the housing allowance altogether.
Either way, the ruling puts an end to long-standing fight by the Freedom From Religion Foundation (FFRF), which began several years ago when they first challenged the law, asking why their non-profit organization cannot get this benefit for its “leaders”. The initial response from the courts was rather curious. They said that FFRF was never denied the exemption because FFRF never asked for it. So, the next year, the Executive Board of FFRF designated a portion of the salary as a housing allowance for its co-Presidents, Annie Laurie Gaylor and Dan Barker, who then filed an amended return asking for a refund. The IRS denied this request, which then allow FFRF to sue on the behalf of all secular non-profits. This chain of events resulted in the landmark Dec 13th ruling linked above.
What happens next, however, is somewhat unclear as Crabb’s decision gives others a chance to appeal and gives Congress six months to rewrite the law. The revision could go several ways. The benefit could be extended to other non-profits, including FFRF. The benefit could be removed for all parties. Or, there may be some other creative alternative, which would be interesting to see what emerges. Whatever, the outcome might be, I am sure that we will hear from Joel Osteen, Rick Warren, and others on the list of richest pastors in America, as to why paying taxes is so unfair.