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Federal Appeals Court Upholds Clergy Housing Allowance

For Immediate Release

Contact: Yvette Vanterpool
MMBB Financial Services

Federal Appeals Court Upholds Clergy Housing Allowance

On Friday, March 15, 2019, the Seventh Circuit Court of Appeals ruled in favor of the clergy housing allowance. In a unanimous 3-0 decision, the judges ruled that the housing allowance is constitutional and cited two legal precedents in support of their ruling. This is a tremendous victory in the case of Gaylor v. Mnuchin and overturns a 2017 ruling in which a U.S. District Judge in Wisconsin had declared the minister’s housing allowance to be unconstitutional.

The Freedom from Religion Foundation (FFRF) had filed a new lawsuit in April 2016 challenging the constitutionality of the housing allowance under section 107 of the Internal Revenue Code. A Seventh Circuit judge ruled the housing allowance unconstitutional; however, the judge “stayed” the lower court decision until a ruling by the U.S. Court of Appeals for the Seventh Circuit was completed. Oral arguments were heard on October 24, 2018.

In their ruling, the Seventh Circuit Court of Appeals held that the cash clergy housing allowance which became law in 1954 has: (1) a secular legislative purpose; (2) the principal or primary effect of the cash clergy allowance does not advance or inhibit religion; and (3) section 107(2) of the Internal Revenue Code does not foster excessive government entanglement with religion. These three factors were set forth in Lemon v. Kurtzman.

Also, the Court held that the statute passes the historical significance test as determined in Town of Greece v. Galloway. In our advocacy work on behalf of the housing allowance, MMBB had signed onto an amicus or friend-of-the-court brief with a diverse array of religious organizations in 2014. Since then we have worked with the Church Alliance to support the constitutionality of the housing allowance.

We are grateful for the favorable ruling of the Seventh Circuit Court of Appeals and that MMBB clergy will continue to enjoy this important tax benefit.