Pastors, stand up for the Ministerial Housing Allowance
By / Apr 13

Lend your voice by signing onto the brief before April 23.

The Ministerial Housing Allowance is under legal attack. A federal court in Wisconsin struck down this tax exemption as unconstitutional, and the case is now on appeal at the Seventh Circuit.

Pastors, you have the unique opportunity to make your voice heard on this issue by signing onto Alliance Defending Freedom’s friend-of-the-court brief.

For decades now, pastors across the country have benefitted from the ministerial housing allowance. This allowance permits “ministers of the Gospel” to exclude from their gross taxable income a rental allowance paid to them as part of their compensation package.

But that tax exemption is now under threat. An activist atheist group, Freedom From Religion Foundation, filed a lawsuit claiming that the minister’s housing allowance violates the Establishment Clause. They filed a similar case a couple years ago, but ultimately lost on procedural grounds. This time around, it’s the real deal. We expect the federal appeals court to consider head-on the constitutionality of the ministerial housing allowance exemption.

The exemption is certainly constitutional. It does not threaten to “establish” religion or impermissibly favor religion in violation of the Establishment Clause. It accommodates religion. And it keeps the government from excessively entangling itself with the affairs of church. Alliance Defending Freedom will make these arguments in its brief.

But pastors, it is also important that the court hears your voice. You and your church will feel the brunt of this decision if the ministerial housing allowance is struck down.

Of the estimated 375,000 churches in America, as many as half are congregations of less than 80 members. For many small or poorer churches, this tax exemption makes the difference between existing and extinction. Many churches cannot afford to pay their pastor a living wage, so the pastor relies heavily on the housing exclusion to reduce his family’s tax burden and make ends meet. Without the exemption, some churches would be forced to close and their pastors leave the ministry.

Take one pastor in central California, for example. He was called to pastor a small church of 40 members in a financially depressed area with a high unemployment rate. The only form of compensation the church could offer was a housing allowance. And he graciously agreed to serve this small, needy population.

This spring, you have the opportunity to communicate to the court the importance of this tax benefit to carrying out gospel ministry. It is important that the Seventh Circuit hear from thousands of pastors across the country, expressing how important this tax benefit is to their mission.

Alliance Defending Freedom is filing a friend-of-the-court brief on behalf of America’s pastors. As part of our Church Alliance mission, we equip, empower, and advocate for churches across the nation. Our mission is to help keep the doors open for the spread of the gospel, and one of the ways we do that is by strategically filing friend-of-the-court briefs in key cases that shape the legal landscape.

To advocate effectively on your behalf, we are looking for thousands of churches across the country to sign onto our brief. We want the Seventh Circuit to know that its decision in this case will impact not only churches in its jurisdiction, but ultimately pastors and churches across the nation.

Join us, by signing onto the brief before April 23.

5 Facts about the Civil Rights Act of 1968
By / Apr 12

Yesterday marked the 50th anniversary of the signing of the Civil Rights Act on 1968. Here are five facts about the final great legislative achievement of the civil rights era.

1. The original goal of the Civil Rights Act of 1968 was to extend federal protection to civil rights workers, who were being intimidated, assaulted, and sometimes murdered, while organizing and registering black voters throughout the South. The bill was eventually expanded to address racial discrimination in housing, which is why it is most commonly known as the Fair Housing Act.

2. In the wake of the assassination of Dr. Martin Luther King Jr., riots spread through 110 cities throughout the United States. Washington, D.C. was among the most affected cities, as the mayor imposed a curfew and President Lyndon B. Johnson dispatched more than 13,000 federal troops to curtail the riots. At the time, the legislation was languishing in the House of Representatives’ Rules Committee. But as Marion Morris and Charles Mathias, Jr., note, “The Rules Committee, jolted by the repeated civil disturbances virtually outside its door, finally ended its hearings on April 8. The next day, it reported to the full House a rule for debate that agreed to the Senate amendments, including the compromise fair housing title, and prohibited any additional amendments.” The following day, April 10, the House debated for one hour the Civil Rights Act of 1968 and passed it 250–71. The very next day, President Johnson signed the bill into law.

3. The Civil Rights Act of 1968 prohibits housing discrimination because of race, color, religion, familial status, or national origin (gender was added in 1974, and people with disabilities and families with children in 1988). The law makes it illegal to refuse to “sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because they belong to the prohibited category.” The Act also makes it unlawful to “deny any person access to or membership or participation in any multiple-listing service, real estate brokers' organization or other service, organization, or facility relating to the business of selling or renting dwellings, or to discriminate against him in the terms or conditions of such access, membership, or participation, on account of the prohibited category.”

4. The Act includes an exemption for religious organizations. According to the law, a religious organization, association, or society, or any nonprofit institution or organization operated, supervised or controlled by or in conjunction with a religious organization, association, or society, is exempted from limiting the sale, rental or occupancy of dwellings which it owns or operates for other than a commercial purpose to persons of the same religion, or from giving preference to such persons, unless membership in such religion is restricted on account of race, color, or national origin.

 5. The legislation also included the Anti-Riot Act. This provision is sometimes referred to as the “H. Rap Brown Law” since it was believed to be a response to H. Rap Brown, a member of the Black Panther Party who was arrested and charged with inciting a riot. The text of the law states:

Whoever travels in interstate or foreign commerce or uses any facility of interstate or foreign commerce or uses any facility of interstate or foreign commerce, including, but not limited to, the mail, telegraph, telephone, radio, or television, with intent – (A) to incite a riot; or (B) to organize, promote, encourage, participate in, or carry on a riot; or (C) to commit any act of violence in furtherance of a riot; or (D) to aid or abet any person in inciting or participating in or carrying on a riot or committing any act of violence in furtherance of a riot . . . Shall be fined under this title, or imprisoned not more than five years, or both.

Why do pastors receive a tax exemption for housing?
By / Nov 25

A federal judge recently ruled that an Internal Revenue Service exemption that gives clergy tax-free housing allowances is unconstitutional. In her ruling U.S. District Court Judge Crabb claims that, “Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility.”

Despite the judge’s claim, appealing to “equality” is not enough to make the action non-hostile nor is it in line with previous court decisions. Not only has the Supreme Court previously stated that the Establishment Clause prohibits hostility against religion as much as it prohibits the establishment of a state religion, it has also noted that its “precedents plainly contemplate that on occasion some advancement of religion will result from governmental action.”

But aside from the question of constitutionality, the clergy exemption raises a question that many people — whether religious or not — are likely to be wondering: Why exactly do ministers receive a tax exemption for their housing allowance?

To answer the question we must first consider how taxation of church property, including clergy housing, has historically been considered.

Since at least the time when Joseph served in Pharaoh’s Egypt, religious property has been exempt from certain forms of taxation. (Genesis 47:26) The practice continued in the Roman Empire and through medieval Europe and was part of the common law, which America adopted from England. The common law granted tax exemptions to established churches and, through the equity law tradition, to all churches. From the 15th century to the 19th century, most pastors lived in the parsonage, a house provided by the church. Housing was thus a form of non-cash payment that was exempt from taxation since the parsonage was church property.

By the early 20th century, though, both clergy housing and taxation had changed considerably. So in 1921, Congress passed the Revenue Act, which exempted from the gross income of ministers the rental value of any “dwelling house and appurtenances thereof” provided by a church as a part of clergy compensation. This parsonage exemption, however, applied only to ministers who lived on property owned by their church and disadvantaged ministers whose churches provided a housing allowance rather than a church-owned parsonage. In 1954, Congress amended the tax code to allow ministers to exempt a portion of their income to the extent used by the minister for housing. According to the Senate Report, the purpose of this addition was to eliminate the disparity in the tax code between ministers who lived in a church-owned parsonage and those who were given a stipend with which to secure housing.

The clergy, of course, are not the only ones to receive such an exemption. Congress included several categories of tax-free housing allowances to demonstrate a willingness to give tax breaks to classes of taxpayers who have little choice about their personal living space, such as members of the military, members of the Peace Corps, members of the Foreign Service, etc. As Peter J. Reilly explains,

Whether the employer provides a cash allowance or a home, each benefit serves the same purpose; that is, often the employer’s needs affect the living space needs of its employees. Many times, these classes of employees frequently relocate, thus preventing them from settling down and hindering long term close friendships. Further, the employers frequently require them to use their homes to conduct employer business. Additionally, the employee’s place of service may not be desirable. These employees must reside where their employer requires and must frequently use their residence for employer business. Some employees sacrifice amenities that most citizens take for granted, such as long term stability in one locale and privacy.

The constitutionality of the parsonage exemption would be difficult to challenge since it has been encoded in statutory law for over almost a hundred years. That is why critics of clergy exemptions have focused on the housing allowance.

The obvious counter might appear to be for churches to simply buy a parsonage and directly provide housing for their ministers. But this ignores the fact there may be theological reasons based on church polity for not providing a parsonage. As Justin Butterfield, Hiram Sasser, and Reed Smith explain in an article for The Texas Review of Law and Politics, a “congregation’s choice to offer a housing allowance rather than allow the minister to live in a church-owned dwelling is not one of mere accounting or convenience, but rather one rich with theological and ecclesiastical underpinnings.”

The parsonage exemption, for instance, provides a preference for institutional churches whose ecclesiastical properties are owned by a central governing body (e.g., Roman Catholic). Smaller, independent, local churches often have less money to provide a parsonage. It also presents a bias in favor of wealthy, established churches over younger congregations and church startups. For instance, how could a congregation that can’t even afford a church building afford to buy a parsonage?

Because of this reality, the courts cannot allow the parsonage exemption and exclude the housing exemption without showing preference for certain religious groups over others.

Both the parsonage and pastor housing exemption are part of a legal tradition that serve to prevent the entanglement of the state in ecclesiological concerns. By her decision, though, Judge Crabb has — albeit unintentionally — incorporated a form of denominational favoritism into the tax code. In her attempt to prevent an imaginary violation of the Establishment Clause she has inadvertently created a real infringement.