Recently, Church Law & Tax, a publication which helps church leaders stay up-to-date on legal and tax matters, asked Dalton & Tomich attorney Noel Sterett to comment on the status of the case challenging the constitutionality of the clergy housing allowance. In an article which can be accessed here, Noel explains why the Seventh Circuit Court of Appeals has not issued its decision yet and may not do so for a while. The court may very well be waiting to see if the Supreme Court, in the Bladensburg memorial cross case, clarifies how lower courts are to interpret and apply the Establishment Clause of the First Amendment.
Last October, the Seventh Circuit Court of Appeals heard oral argument in the case involving the constitutionality of the clergy (or ministerial) housing allowance. Since then religious leaders across the country have been eagerly, and perhaps anxiously, waiting for the court’s decision–a decision which could do away with a significant tax benefit that a wide range of religious leaders have enjoyed since 1954. Under the housing allowance exemption, a “minister of the gospel” is exempt from income taxation on compensation that is part of a housing allowance. The IRS has interpreted the term “minister of the gospel” broadly to include religious leaders of all faiths.
Noel attended the oral argument in October and co-authored a friend-of-the-court brief with Alliance Defending Freedom attorney Erik Stanley on behalf of 8,899 pastors in support of the housing allowance. Coincidentally, Noel argued a religious land use case before the Seventh Circuit just a week after the housing allowance case was argued. Noel received a favorable decision from the Seventh Circuit in the religious land use case in January, 2019, but given the complexities and impact of the housing allowance decision, it may still be quite some time before we hear from the Seventh Circuit concerning the constitutionality of the housing allowance.