Housing Tax Break for Pastors, Religious Workers Ruled Unconstitutional
A long-standing tax break that allowed religious workers such as pastors to receive tax-free housing allowances has been ruled unconstitutional by a federal judge in Wisconsin. The judge, U.S. District Court Judge Barbara Crabb, ruled Friday in favor of the Freedom From Religion Foundation, saying that tax break provides a benefit to the religious, but not to others, that is unrelated to freedom of religion.
The exclusion originated decades ago, when more churches provided clergy with church-owned parsonages. It was extended to include housing allowances as an equivalent benefit. It is these housing allowances that were targeted in the case. Parsonages are still exempt.
In the complex carrot-and-stick world of the U.S. tax code, where behavior is encouraged or discouraged by allowances, penalties and loopholes, a ruling such as this one specifically targeting religion would represent a significant change if upheld in appeals. It would cause an immediate loss of income for clergy, a field where pay is typically modest at best. Some small congregations would be unable to afford a pastor as a result. Others would be forced to divert funds used for ministries and services to staff compensation to maintain current post-tax levels.
The decision is likely to be appealed to the 7th Circuit. Until then, Wisconsin pastors are unaffected, as the decision was stayed by the judge until appeals are completed. Judge Crabb also ruled in 2010 that the National Day of Prayer was unconstitutional.