Almost as soon as the ruling was made public, I began to receive inquiries through social media, by email, by text, and by phone. U. S. District Judge Barbara Crabb of the Western District of Wisconsin ruled unconstitutional a provision in the U. S. tax code that allows ministers to declare some or all of their ministerial income as a housing allowance. That allowance is not subject to federal income tax.
Though it is still too early to gauge the full implications of this ruling, there are several questions many are asking. I will somewhat randomly try to respond to those questions I’ve heard.
- The housing allowance law was passed by Congress in 1954. Subject to certain guidelines, ministers are able to declare a portion of their ministry income as a housing allowance that is not subject to federal income tax.
- There is no doubt that ministers have benefited from this law. Many churches have as well, particularly smaller churches. The smaller churches are able to pay a minister a salary that has greater take home pay than a non-ministry counterpart. They are thus able to afford to pay pastors that they could not have afforded otherwise.
- This ruling was not a complete surprise. Judge Crabb does not have a friendly track record on ruling on issues dealing with religious matters.
- Judge Crabb stayed the ruling until the appeals process is exhausted. That means there is no immediate impact on ministers’ housing allowances.
- My best guess is that this ruling will eventually be overturned or reversed. Predictions are difficult, particularly when dealing with the intersection of legal and religious issues. But, because so many have asked me to do so, I will go out on this particular limb. Still, I predict that the ministers’ housing allowance will continue to be challenged, even if this particular effort at reversing the law proves unsuccessful.
- I advise ministers to be very conservative as they deal with this issue in the future. If at all possible, do not be dependent on the tax benefits garnered from having a housing allowance. Look carefully at the tax benefits you gain with the housing allowance. Be prepared to know what to do if the benefit goes away.
- The amount a minister can take as a housing allowance has clear guidelines. Make certain you stay within those guidelines and do not abuse the tax privilege.
- Watch for insights and updates from the Ethics and Religious Liberty Commission and Guidestone. Both organizations have top-flight leaders who are staying on top of these matters. You can read their initial joint statement after the ruling here.
We who are ministers are under the authority of the God we serve. But our God also told us to be subject to the laws of the land where we live and minister. Though matters such as these can be disconcerting and unsettling, we know that God is always in control. For that reason, we have no cause to worry.
Stay tuned to this blog as well. I will continue to update you with any major new developments.
Please feel free to comment or ask questions. I will get to as many of them as I can.