On November 22, 2013, a federal district court judge in Wisconsin struck down the ministerial housing allowance as an unconstitutional preference for religion. The ruling was in response to a lawsuit brought by the Freedom From Religion Foundation (FFRF) challenging the constitutionality of the housing allowance and the parsonage exclusion.
Here are five things to note about this ruling:
- FFRF narrowed its challenge to the ministerial housing allowance, meaning that the parsonage exclusion remains intact, at least for now.
- A ruling by a federal district court judge in Wisconsin is not binding on other courts, and does not apply to ministers in other states. If the ruling is appealed and affirmed by the Seventh Circuit Court of Appeals in Chicago, it will apply to ministers in that circuit (Illinois, Indiana, and Wisconsin). It would become a national precedent binding on ministers in all states only if affirmed by the United States Supreme Court (an unlikely outcome). However, the Internal Revenue Service also has discretion to follow, or not follow, the ruling nationwide.
- An appeal could take up to a year to resolve. This decision is stayed until all appeals are resolved.
- The Wisconsin court concluded that the housing allowance is an unconstitutional preference for religion since the same benefit is not provided to other taxpayers.
- The financial impact of this ruling will be significant, especially for ministers who purchased homes in reliance on the continuing availability of the housing allowance. This impact would be mitigated if Congress eliminates the treatment of ministers as self-employed for Social Security.
