Congress enacted new tax laws in 2011 that include provisions of direct relevance to churches and church employees. Tax laws enacted in prior years also contain provisions that take effect in 2011 or 2012. In addition, a number of court decisions and IRS rulings provided clarification on a number of important tax issues. Several of the most important changes and clarifications are summarized in this feature article. The information in this article will assist ministers and churches in correctly preparing tax forms and returns for calendar year 2011 and beyond.
Part 1—Clergy and Lay Church Employees
A. Miscellaneous Tax Law Changes
1. Housing allowance challenged in federal court
The Freedom from Religion Foundation (FFRF) and several other plaintiffs filed a lawsuit in a federal district court in California challenging the constitutionality of the parsonage exclusion and housing allowance. The lawsuit alleged that the parsonage exclusion and housing allowance were available only to clergy, and therefore amounted to an unconstitutional "establishment" of religion.