Clergy housing allowances ruling

by | Oct 10, 2017 | Not In USe

To the clergy of the Desert Southwest Conference:

A federal judge in Wisconsin has once again ruled against the constitutionality of the tax exemption for clergy housing allowances. Nothing changes for now, as the ruling does not take effect immediately.  The ruling will likely go on to the 7th Circuit Court of Appeals again. Judge Crabb’s first decision several years ago to strike down as unconstitutional the law that gives clergy tax-free housing allowances was reversed in that Court of Appeals. The ruling will probably go to the Supreme Court if held up in the 7th Circuit.

It is my understanding that if upheld, this ruling would only initially affect the states covered by the 7th circuit (which are Illinois, Indiana, and Wisconsin). So, clergy in our conference with housing allowances will not be immediately affected. Also, this ruling does not yet challenge the clergy housing tax exemption for pastors who live in church-owned parsonages. It’s only for clergy who receive a housing allowance. How it affects retired clergy is also unknown at this time. That provision is not being specifically challenged, as far as I can tell.

So, the bottom line is that there is no need to panic yet, but this is a development that we all need to continue monitoring. I understand the federal government and the Church Alliance will vigorously defend the continuation of the housing allowance. And if by some reason the housing allowance is ever discontinued nationally, I would hope that clergy would stop being treated as self-employed for Social Security and Medicare taxes so that tax could be cut in half from 15.30% to 7.65%.

I will continue to update you as developments occur. In the meantime, you may be interested in a brief summary news article on the ruling at https://www.usnews.com/news/best-states/wisconsin/articles/2017-10-09/federal-judge-strikes-down-tax-free-housing-for-clergy. Click here to download the full ruling.

Randy BowmanConference Treasurer
Conference Treasurer

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Author: Randy Bowman

Conference Treasurer and Director of Finance and Administration.
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