By Nevin Dulabaum, Brethren Benefit Trust
The housing allowance provision that provides pastors with a tax benefit for their housing expenses is constitutional. That decision was announced on March 15 by the Seventh Circuit Appeals Court, which is located in Chicago.
The case, heard by the appeals court last Oct. 24, originally was heard by Wisconsin District Court Judge Barbara Crabb, who ruled in favor of Freedom From Religion Foundation that the housing allowance was unconstitutional. However, in announcing its verdict, the Seventh Circuit Appeals Court cited a number of court cases and actions by Congress in its 29-page ruling, before simply ruling, “We conclude (Internal Revenue Code, Chapter 1, Section 107 that describes the housing allowance) is constitutional. The judgment of the district court is REVERSED.”
“Although FFRF can appeal this decision and ask that the US Supreme Court hear this case, the decision by the Chicago appeals court is a major victory for pastors, regardless of denominational affiliation,” said Nevin Dulabaum, president of Church of the Brethren Benefit Trust (BBT). “Many church budgets are tight, as is compensation to pastors. The housing allowance is one provision that provides much-needed tax savings to pastors; without it, many pastors would be hard pressed to take on an additional tax burden.”
The scope of this benefit extends beyond actively employed pastors. For example, all retirement payments issued by BBT to Brethren Pension Plan retired clergy have the potential to be claimed as housing allowance. The significance of the ruling today is that, for the indefinite future, retired pastors who live on fixed incomes will not receive an unexpected tax increase that could be several thousand dollars or more.
The ruling was announced recently, and so this notice is just a brief reporting of that news and the ramifications for the court’s decision. No doubt there will be more information coming, to further interpret the Seventh Circuit Appeals Court’s decision, and to also follow whether this case ultimately is addressed by the US Supreme Court.
-- Nevin Dulabaum is president of Brethren Benefit Trust. Find out more about the ministries of BBT at www.cobbt.org .