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Richard Hammar Reviews Top 10 Tax Changes
Richard Hammar Reviews Top 10 Tax Changes
What to know for 2018 filing and 2019 compliance.

1. Status of the housing allowance

The constitutional challenge to the clergy housing allowance took an important next step in October when oral arguments for the case were heard before a three-judge panel at a federal appellate court in Chicago.

At stake is a benefit estimated by some to be worth nearly $1 billion annually for clergy members, making it the most valuable tax benefit available to them. In 2017, a federal judge in Wisconsin deemed the benefit to be an unconstitutional preference for religion, invalidating it for ministers in Illinois, Indiana, and Wisconsin. However, the judge “stayed” the decision, meaning it would not go into effect until after an expected appeal was made to the US Court of Appeals for the Seventh Circuit.

The oral arguments in October did not produce a decision, and the timing for one remained uncertain as this issue of Church Law & Tax Report went to press. One should come in the near future, according to the Seventh Circuit’s clerk’s office.

If the Seventh Circuit affirms the lower court’s holding, churches and ministers in Illinois, Indiana, and Wisconsin would lose the ability to use housing allowances. Alternatively, the Seventh Circuit could reverse the lower court’s decision, leaving the benefit intact for churches and ministers in the three states.

The parsonage allowance pertaining to church-owned housing is not at issue in the current case and will not be affected by how the Seventh Circuit decides.

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