Judge strikes down law that gives clergy members tax-free housing allowances

A federal judge has found unconstitutional a law that lets clergy members avoid paying income taxes on compensation that is designated part of a housing allowance.

The decision Friday by U.S. District Judge Barbara Crabb could have far-reaching financial ramifications for pastors, who currently can use the untaxed income to pay rental housing costs or the costs of home ownership, including mortgage payments and property taxes.

“It’s a really big deal,” said Annie Laurie Gaylor, co-president of the Madison-based Freedom From Religion Foundation, which filed the lawsuit. “A church currently could pay a minister $50,000 but designate $20,000 of it a housing allowance so that only $30,000 would be taxed as salary.”

Crabb acknowledged in her decision that the exemption is a boon to ministers, referencing a 2002 statement by then-U.S. Rep. Jim Ramstad of Minnesota that the tax exemption would save clergy members $2.3 billion in taxes from 2002-2007. But she said the magnitude of the benefit only underscores what’s wrong with the law.

The exemption “provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise,” Crabb wrote.

Read more: http://host.madison.com/news/local/judge-strikes-down-law-that-gives-clergy-members-tax-free/article_b8b1c816-bd2b-5f46-9d5a-68c5ad0ed39d.html#ixzz2lax8B1Do

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