The latest constitutional challenge to the clergy housing allowance brought by the Freedom From Religion Foundation (FFRF) cleared its first significant legal hurdle in October, when a federal district court judge ruled the valuable longtime tax benefit for ministers to be an unconstitutional preference for religion. The parsonage allowance pertaining to church-owned housing remains unaffected.
The decision may now head to the Seventh Circuit Court of Appeals. Were the Seventh Circuit to affirm the lower court's decision (a decision is expected to come during the second half of 2018), it would apply only to ministers in that circuit (Illinois, Indiana, and Wisconsin). It would become a national precedent binding on ministers in all states if (1) such a decision is ever affirmed by the United States Supreme Court, or (2) the Internal Revenue Service follows a Seventh Circuit affirmation to promote consistency in tax administration nationwide. Because the Supreme Court accepts less than 1 percent of all appeals, it is uncertain that the Court will agree to hear the case and, moreover, uncertain how the Court would rule. Absent a Court decision, it's unclear how other federal circuits would address future litigation as well.