Update on the Ministers Housing Allowance Case

Appeals court issues a surprising decision—Warren v. Commissioner, 2002 WL 338145 (9th Cir. 2002)

Article summary. A federal appeals court has issued a preliminary order in the Warren case, requiring the parties, and a law school professor, to submit briefs addressing the question of whether the housing allowance violates the first amendment's nonestablishment of religion clause. This article summarizes the background of this important case, reviews the appeals court's recent ruling, and reviews several possible outcomes.

In one of the most significant clergy tax cases in recent years, the United States Tax Court ruled in 2000 that a housing allowance is nontaxable for income tax reporting purposes so long as it is used to pay for housing-related expenses. Warren v. Commissioner, 114 T.C. 23 (2000). The court threw out the annual "rental value" test that the IRS adopted in 1971, which ...