The exemption “violates the establishment clause of the First Amendment to the United States Constitution,” U.S. District Judge Barbara Crabb of Wisconsin’s Western District wrote Nov. 22 in her decision in Freedom from Religion Foundation v. Lew and Werfel.
The law, part of the Administrative Procedure Act of 1954, provides “a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise,” Crabb continued.
The Madison, Wisc.-based Freedom from Religion Foundation brought the case against U.S. Treasury Secretary Jacob Lew and acting IRS commissioner Daniel Werfel, who were in turn defended by the Justice Department.
The law allows housing allowances given to clergy to purchase homes to be exempt from income taxes, and also permits clergy to be exempted from taxable income up to their home’s fair market rental value.
Crabb's decision will not affect clergy's housing allowances until all appeals have exhausted.
Annie Laurie Gaylor, co-president of the Freedom from Religion Foundation, called the lawsuit a “really big deal.”
“Once the clergy get wind of it, I expect they will be very upset,” she told the Wisconsin State Journal, adding that she expected the decision to be appealed to the 7th Circuit Court of Appeals in Chicago.
“When you’re dealing with some of these mega-church pastors with huge mansions, they can be paid an enormous amount in housing allowances,” Gaylor added.
Tony Perkins, president of the Family Research Council, which oversees a pastors’ network from over 25,000 churches around the country, called the ruling an act of “supreme arrogance” against a tradition that helps, rather than harms, society.
“The Supreme Court has made perfectly clear that neither taxpayers or organizations have standing to bring federal lawsuits with this sort of challenge because the law they are challenging has not caused them any direct harm,” Perkins explained in a statement.
The tax-free housing allowance for clergy exists “because of the tremendous benefit that churches in turn give to society,” he continued. “Clergy help carry the burden of many social ills that would otherwise become the burden of taxpayers and the federal government.”
He added that Crabb has ruled in favor of the Freedom from Religion Foundation against the National Day of Prayer. Her ruling that the day was unconstitutional was overturned by the Seventh Circuit court because the foundation “had not suffered an injury due to the law and so lacked standing to sue in the first place.”
Ken Klukowski, director of the Center for Religious Liberty for the Family Research Council, added in a statement that since “the U.S Supreme Court has made crystal clear that these sorts of laws do not injure anyone, we expect the U.S. Court of Appeals in Chicago to promptly reverse this decision.”
"This is a decision that flies in the face of controlling precedent," he concluded.
A law granting clergy members an exemption from income tax on housing allowances is unconstitutional, according to a federal judge's recent decision.
Freedom from Religion Foundation, Administrative Procedure Act