After FFRF’s historic victory against the clergy housing tax allowance, the judge’s next move is eagerly awaited. U.S. District Judge Barbara B. Crabb, who in October ruled the clergy privilege unconstitutional, now must decide how to implement her ruling.
Crabb, seated in the Western District of Wisconsin, ruled in favor of a tax-code challenge by FFRF, saying it demonstrates “a preference for ministers over secular employees.”
In a fascinating twist, both FFRF and the government are urging Crabb to nullify this provision, rather than extend the benefits to others.
That provision, enacted in 1954 to reward “ministers of the gospel” for carrying on “a courageous fight against [a godless and anti-religious world movement],” permits churches to pay ministers with a “housing allowance.” The unique allowance is not a tax deduction but an exemption, allowing clergy to subtract major portions of their salaries from taxable income.
While ruling in FFRF’s favor, Crabb left open the remedy, giving FFRF, the U.S. government and religious intervenors the opportunity to file supplemental briefs.
The options include an injunction requiring the IRS to extend the benefits to FFRF Co-Presidents Dan Barker and Annie Laurie Gaylor, who have been designated a housing allowance by FFRF, or to nullify the entire statute. The IRS has denied the pair a housing allowance. FFRF argues that allowing clergy this benefit while denying it to similarly situated heads of a nonreligious group is discriminatory.
FFRF is asking Crabb to prospectively nullify the statute, to order the IRS to refund the plaintiffs’ housing allowance and to award plaintiffs legal costs. Nullifying the law would mean that Section 107(2) could no longer be used to provide favorable tax treatment to clergy and churches.
This is FFRF’s second time in front of Crabb over this particular inequity in the tax code. Crabb ruled in FFRF’s favor in 2014, creating near hysteria by the clerical press.
The 7th U.S. Circuit Court of Appeals, however, ruled that Gaylor and Barker lacked standing to sue because they had failed to apply for a refund.