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Federal Court Removes Tax-Exempt Housing Allowances for Clergy
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In response to a lawsuit by the Freedom From Religion Foundation challenging federal income tax exemptions received by “ministers of the gospel” US District Judge Barbara Crabb ruled on Friday that the exemptions were unconstitutional. The FFRF had argued the exemptions as violating the establishment cause of the First Amendment and equal protection under the Fifth Amendment.


While the claim was narrowed to the portion that excludes from gross income a minister’s “rental allowance paid to him as part of his compensation,” it is of significance.

In fact, it was the defendants who moved for summary judgment, and received it.

The judge held the exemption to be unconstitutional on merits “because the exemption provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.”

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In her opinion, Judge Barbara Crabb also observed, “Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility.”

Anne Laurie Gaylor, co-president of FFRF and said, “A church currently could pay a minister $50,000 but designate $20,000 of it a housing allowance so that only $30,000 would be taxed as salary.”

The court also drew attention in its opinion to the statement made by Congressman Jim Ramstad during promoting the Clergy Housing Allowance Clarification Act of 2002, that the exemption under 26 U.S.C.§107  would relieve ministers of $2.3 billion in taxes over the next five years.

The court held “the significance of the benefit simply underscores the problem with the law.”

When interpreting the First Amendment, the court observed, what was to be kept in mind was that “if the government were free to grant discriminatory tax exemptions in favor of religion, then it would be free to impose discriminatory taxes against religion as well. Under the First Amendment, everyone is free to worship or not worship, believe or not believe, without government interference or discrimination, regardless what the prevailing view on religion is at any particular time…”



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