An atheist group is suing the Internal Revenue Service in hopes of overturning a law that allows churches to pay clergy an income-tax-free housing allowance; however, religious liberty advocates argue the IRS code makes similar provisions for faith and non-faith based organizations alike.
The Freedom From Religion Foundation successfully sued the IRS last fall in federal district court in Wisconsin, winning a ruling in favor of ending the “parsonage exemption.” The court cited the First Amendment’s Establishment Clause, which prevents the government from establishing a state-supported church.
The result of overturning the tax provision, which has been in place since 1954, would be a combined total of over $1 billion in new taxes on members of the clergy, according to brief filed last week by The Becket Fund for Religious Liberty, which is representing the churches.
The case is currently before the 7th U.S. Circuit Court of Appeals in Chicago.
Though the housing allowance is not included for calculating income taxes, it is included in determining faith leaders’ total compensation for payroll taxes purposes. These taxes fund Social Security and Medicare.
Chicago pastor Chris Butler told the appeals court last Thursday that taking away the income tax break would be a big blow to both religious leaders and the communities they serve, CBN News reported.
“For the majority of churches, the pastors are like me and experience at some level the same problems that we’re trying to face in the community,” said Butler. “If you take away even a little bit, it can become a lot of trouble quickly.”
Becket noted, “For much of the past century, pastors, rabbis, imams and other faith leaders – whose job requires them to live close to their church or in an underserved community – have been eligible for a tax-exempt housing allowance under the same tax principle that allows businesses and the military to reimburse travel and overseas housing costs and provides tax-free housing to teachers and police who live in the communities they serve.”
In its brief, the group argued for over 100 years Congress has applied the “convenience of the employer doctrine” to religious and non-religious groups alike designating certain types of compensation that are not subject to federal income tax.
Becket stated that the value to hundreds of thousands of nonreligious employees is over $10 billion every year.
“Treating ministers like other professionals isn’t an establishment of religion; it’s fair tax treatment,” Luke Goodrich — deputy general counsel at Becket — told CBN.
“The same group of atheists claimed it was unconstitutional to put Mother Teresa on a postage stamp, so it’s no surprise they’re trying to sic the IRS on churches,” he added.
According to Christianity Today, oral arguments in the case could take place as early as this summer.
If the 7th Circuit rules against the churches, it will likely mean a U.S. Supreme Court review, since the IRS must have a uniform tax code across the country.
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