New Housing Allowance Challenge

The Freedom From Religion Foundation (FFRF), after losing at the 7th circuit court of appeals previously, has returned filing a new case against the housing allowance and parsonage exemption.

IN the prior case the foundation won at the district level, but the 7th court of appeals tossed out the case on standing grounds. In that same case the court gave directions, in effect, to the foundation on how to refile their case and not lose on standing.

In this new case, the FFRF used the housing allowance provision, and then the employees who used the allowance attempted to get the money refunded. the IRS, correctly in my opinion, denied that claim.

What the FFRF did, as far as I can tell, was misuse the law and their own tax exempt status ignoring both the text of the legislation passed in 1954 and the various revenue procedures that discuss the ministerial housing allowance and parsonage exemption.

The IRS has not really modified the housing rules set forth in 26 USC 107 since they are uncomplicated for the most part. In a private letter ruling dated October 18, 2007 the service provided a detailed history (PDF) of how it has viewed the role of minister with regards to the housing allowance. While a private letter ruling cannot be cited to support IRS policies, they can give us an insight into what and how the service is thinking. Clearly the IRS, at least to date, is very supportive of the minister exemption and leans heavily on the ordination and consecration of a minister to the gospel witness.

What should upset qualified ministers and even the courts in this case is how the FFRF has attempted to misuse section 107 and abuse its own tax exemption. By claiming a housing allowance for its own employees, who by all accounts are not ministers of the gospel as defined by section 107, FFRF has, in my opinion, willfully violated federal tax law.

If they, FFRF, are successful in their challenge, similar housing allowances and exemptions could also be in jeopardy such as the the exemptions for military and U.S. citizens living abroad.

The filing asked for injunctive and declaratory relief so a ruling may come before the end of the summer.