Housing tax benefits help members of the clergy live close to the churches they serve. But a federal lawsuit filed by the atheist group the Freedom From Religion Foundation (FFRF) disputes such tax breaks for faith groups, arguing that the Internal Revenue Service (IRS) unlawfully gives ministers special treatment by allowing them to receive housing-related tax breaks. A ruling in the case is expected early in 2019.
Like many clergy members, the Rev. Chris Butler, pastor of the Chicago Embassy Church and the defendant in the lawsuit, receives a tax-free housing allowance, which he considers essential for both his ministry as well as the small church’s very survival. Butler sees his house’s close proximity to the church as vital, as he routinely hosts Bible studies and offers counseling to church members there. He says living nearby to his congregation also allows him to devote more time to serving at-risk youth, the poor, and those looking to make a connection with God.
But FFRF leaders remain unconvinced that such tax breaks are necessary or even fair. “Many of us could argue that we need to live close to our place of employment,” said FFRF co-president Annie Laurie Gaylor. “The government is showing a preference for religion over non-religion. The rest of us pay more because ministers pay less,” she said. “If these ministers were so concerned about social welfare, they should be paying their taxes. They’re robbing the treasury of certain taxes that should go to help everybody.”
Sam Brunson, Loyola University tax law professor follows her reasoning in his 2018 book, God and the IRS: Accommodating Religious Practice in United States Tax Law. “The very existence of the parsonage allowance discriminates between clergy and non-clergy,” he writes. “Instead of addressing religion in a consistent way, grounded in tax policy, the development of the parsonage allowance and its subsequent expansion demonstrate the ad hoc and reactionary nature of the legislative process surrounding religious taxation.”
Since 1954, an IRS provision known as the parsonage allowance has permitted religious workers to exclude the part of their compensation designated for housing payments, utilities and maintenance from the gross income listed on their tax returns. The provision was approved as a way to promote fairness for smaller or less established churches that might not have been able to afford rectories or other church-owned housing. Clergy members say the tax benefit helps them afford to live closer to their places of worship and that doing away with the allowance would reduce their net salary, impede their ministries, or potentially force their often cash-poor congregations to raise their salaries.
Although the U.S. Supreme Court has long upheld tax exemptions in place for churches, there have been numerous challenges made to these provisions. In 2017, a district court judge in Wisconsin ruled that the parsonage allowance violates the First Amendment, reasoning that it has “no secular purpose or effect and because a reasonable observer would view the statute as an endorsement of religion.” The FFRP filed a similar complaint in 2013 and the same judge ruled in their favor then, but the Seventh Circuit vacated the decision on the ground that the plaintiffs did not have standing to sue. While the 2017 ruling has yet to be enforced, many clergy are rightfully concerned about its potential impact, as well as the result of the current lawsuit. More than just forcing religious leaders to relocate is at stake — it stands to redefine how religious organizations are treated under the law.
As Rev. Butler recently told the Chicago Tribune, “I know that when a lot of people think about the housing allowance, what comes to mind is the big-time preachers they see on television. But the reality is that the vast majority of pastors and churches are like me, they are like my church, laboring in obscurity among the neediest communities in the country. There may be a small group of leaders who can sustain this financial blow, but many will have to shut down important ministries or even close their doors entirely,” he added.