Jump directly to the content
Kentucky Court's Ruling Favors Churches, Clergy

Kentucky Court's Ruling Favors Churches, Clergy

Judge’s opinion may shed light on how Wisconsin housing allowance appeal may go.
PAGE 1 of 3Single Page

A federal district court in Kentucky on Monday dismissed a lawsuit brought against the Internal Revenue Service by three different atheist groups that challenged various church and clergy tax provisions.

The dismissal may be a sign of things to come on a clergy housing allowance challenge in Wisconsin that gained steam late last year.

The American Atheists Inc., Atheists of Northern Indiana Inc., and Atheist Archives of Kentucky Inc. claimed churches and religious organizations receive unconstitutional preferential treatment. The defense and the court identified five specific tax provisions that would fit under the groups' claim, including church exemption from filing a Form 1023 to receive tax-exempt status, church exemption from filing annual Form 990s, and the clergy parsonage allowance.

The groups said they suffered "unconstitutional discrimination and coercion arising from their inability to satisfy the IRS test to gain classification to secure the same treatment as religious organizations or churches…" However, the groups said they never actually tried to become 501(c)(3) religious organizations, explaining that such attempts to do so would violate their beliefs.

The court dismissed the case, saying the atheist groups lacked standing—because they never attempted to file as religious organizations, they never suffered direct injuries, and any possibility of injuries was "mere speculation." "(I)njury for standing purposes must be an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical," the court's opinion said, citing a 1992 case, among others, related to standing.

A sign of things to come?

Although this ruling only pertains to Kentucky, it may shed light on another high-profile lawsuit brought by the Freedom From Religion Foundation (FFRF) in Wisconsin. Last November, a federal judge there ruled the clergy housing allowance exclusion in her district was an unconstitutional preference for religion. In January, the U.S. Department of Justice appealed. The benefit remains unaffected until the Seventh Circuit Court of Appeals issues a ruling.

Its decision isn't expected until later this year, but the Kentucky federal court's ruling may be a preview of how the Seventh Circuit will rule. According to Richard Hammar, senior editor of ChurchLawAndTax.com, the Kentucky case "has direct relevance to the housing allowance appeal, due to the Kentucky court's handling of the technical issue of standing."

Posted:
May 20, 2014

Related Resources

See All
from our store
20 Finance Questions Churches Ask eBook

20 Finance Questions Churches Ask eBook

Richard Hammar shares his answers to 20 of the most widely asked and relevant tax and finance questions for church leaders.
2014 Church & Clergy Tax Guide

2014 Church & Clergy Tax Guide

Get a comprehensive understanding of tax laws as they relate to pastors and churches.
Preventing Top Tax Pitfalls

Preventing Top Tax Pitfalls

Learn the background you need on tax laws to know what questions to ask.
Churches and the Health Insurance Credit

Churches and the Health Insurance Credit

Richard Hammar explains how churches might qualify for this tax credit.
browse
Follow us:Church Law & Tax on FacebookChurch Law & Tax on TwitterChurch Law & Tax RSS FeedsChurch Law & Tax on Youtube

Shopping