On Nov. 22, a judge of the US District Court for the Western District of Wisconsin ruled that the housing allowance that is made available to clergy by the Internal Revenue Service (IRS) is unconstitutional. The decision has no immediate impact because it is not yet effective, and the ruling is on hold until all appeals are exhausted.
The Ministry Office provides a link to information on the ruling at www.brethren.org/ministryoffice . This update from Church Law and Tax and “Christianity Today,” notes this section of the federal tax code “exempts from federal income taxation that portion of a minister’s compensation that is designated in advance by an employing church as a housing allowance to the extent that it is used for housing expenses and does not exceed the home’s fair rental value…. The parsonage exclusion remains intact, at least for now.”
Brethren Benefit Trust (BBT) president Nevin Dulabaum attended the Church Alliance meeting this week in Baltimore, Md., where a subcommittee drafted a plan to file an amicus brief appealing the ruling. The Church Alliance is an advocacy group of 38 church benefit programs representing more than 1 million clergy, lay workers, and their family members. Through BBT’s membership, the Church of the Brethren will be a part of the amicus brief, Dulabaum said.
BBT staff are feeling urgency to be proactive in this matter, in order to aid Church of the Brethren ministers who have heard the news and are wondering what is next and whether it impacts them, Dulabaum said. This is important to BBT as it designates several payments as housing allowance, giving recipients a tax advantage. Those payments include annuity payments for retirees, Church Workers’ Assistance Plan grants for retirees, and long-term disability payments for active pension plan members.
The court ruling is expected to be appealed to the 7th US Circuit Court in Chicago. If it is upheld by that court, the case is then expected to be appealed to the Supreme Court. It could be several years before a final decision is rendered. Until that time, the housing allowance tax benefit will continue to be available to clergy.
For questions about the amicus brief contact BBT president Nevin Dulabaum at firstname.lastname@example.org or 800-746-1505 ext. 388. For general questions about the clergy housing allowance contact Mary Jo Flory-Steury, executive director of the Ministry Office and associate general secretary, email@example.com or 800-323-8039.
–– BBT communications staff Brian Solem contributed to this report.