Housing Allowance Upheld

On November 13, 2014, the Seventh Circuit Court of Appeals in Chicago vacated the decision by the Federal District Court of Wisconsin declaring the housing allowance unconstitutional and instructed the District Court to dismiss it.

The Court of Appeals ruled that the organization bringing the suit, the Freedom From Religion Foundation (FFRF) lacked the legal right — known as “standing” — to challenge the housing allowance.

The Court listed several reasons the FFRF lacked standing, most succinctly stating that “The plaintiffs here argue that they have standing because they were denied a benefit (a tax exemption for their employer-provided housing allowance) that is conditioned on religious affiliation. This argument fails, however, for a simple reason. The plaintiffs were never denied the parsonage exemption because they never asked for it. Without a request, there can be no denial.”

The Seventh Circuit panel did not address the housing allowance’s constitutionality. “We think it important to allow the IRS and Tax Court to interpret the boundaries of a tax provision before we assess its constitutionality,” their opinion stated MMBB Financial Services signed onto an amicus or friend-of-the-court brief with a diverse array of religious organizations in support of the housing allowance. Filed in April 2014, the brief asked the appellate court to uphold the housing allowance based on several arguments.

  • Ministers are typically expected to live near the church they serve; in smaller congregations ministers often function as the building’s primary caretaker.
  • Ministers are on call day and night and are frequently expected to open their homes to church events, meetings with parishioners and out-of-town guests like visiting missionaries.
  • Ministers often face frequent moves and limited choice, especially if they are poorly paid.
  • The housing allowance reduces discrimination among religions that rely extensively upon church-owned parsonages by reimbursing the minister for housing expenses when the church does not own a parsonage.