Good News for Pastors: Court Overturns Atheist Victory on Housing Allowance

But question remains: Will IRS agree with DOJ that atheists are ‘ministers of the gospel’?

Churches can stop worring that their pastors’ best benefit will be taken away by an atheist lawsuit—for now.

Today, the Seventh Circuit Court of Appeals overturned a lower court’s high-profile decision that the longstanding clergy housing allowance was unconstitutional. The 60-year-old tax break exempts the money churches pay for their pastors’ housing.

The Freedom From Religion Foundation (FFRF) challenged the law last year in Wisconsin, and federal judge Barbara Crabb agreed the allowance violated the First Amendment by providing “a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.”

In response, a broad spectrum of religious groups and the Obama administration urged the appeals court to reconsider. The exemption, which costs the federal government approximately $700 million per year, applies to about 45,000 ministers, priests, rabbis, and imams.

The case was overturned on “standing,” which means the FFRF had no right to sue because it did not seek an allowance for itself. “[A]bsent any personal denial of a benefit, the plaintiffs’ claim amounts to nothing more than a generalized grievance about [the parsonage allowance’s] unconstitutionality, which does not support standing,” the opinion stated.

In other words, the FFRF should apply for the same benefits that churches get. This was the intriguing argument the Department of Justice made earlier in the case: that atheists would qualify as “ministers of the gospel” under IRS guidelines.

CT’s sister publication, Church Law and Tax, offers more analysis, including how the Seventh Circuit rejected …