Ruling on Clergy Housing (U.S.)

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The following is an announcement that was e-mailed last week to all U.S. Christian Reformed church ministers. We are sharing it here on The Network.

To: All U.S. CRCNA ministers
 
A ruling in U.S. federal district court this week may impact most ministers serving in the United States who live in their own homes. The ruling is described below in a report from ECFA (the Evangelical Council for Financial Accountability). 
 
While the potential for a significant impact to each minister is great, the judge ruled that none of the action would be effective until all appeals had run their course, which could take several years. 
 
Our intention is to make you all aware of the ruling and to let you know that we will be monitoring the situation. We will send out another notice if something material changes.
 
John Bolt, Director of Finance and Administration, CRCNA
 

Judge Declares Clergy Housing Exclusion Unconstitutional

For over two years now, ECFA has been closely tracking a federal court challenge brought by Freedom From Religion Foundation (FFRF) to declare the clergy housing exclusion of Section 107 of the tax code unconstitutional.
 


In a decision that is sending shockwaves across the religious community, a federal district court judge has declared a portion of the statute unconstitutional, leaving many ministers wondering what the impact of this case will be.


 
While it is still too early to know all the potential ramifications of this decision, here is some of what we know up to this point and what to be looking forward to in the coming days:
  • The court’s decision applies only to ministers who receive a cash housing allowance from their employers to provide housing. Ministers who live in employer-provided housing (ex. church-owned parsonages) are not affected.
  • Even ministers who receive a cash housing allowance will not be immediately impacted by the ruling. The district court’s decision on the clergy housing exclusion may be appealed by the government’s attorneys to the Seventh Circuit where it could be overturned. Since the case was filed attorneys for the federal government have defended the constitutionality of the clergy housing exclusion and have argued that FFRF lacked legal standing to bring the challenge in the first place.
If allowed to stand, what effect would this ruling have on clergy and their families?
  • For the most part, pastors across the country are compensated modestly for very demanding work. The history of the clergy housing allowance provided parity to pastors who did not live in church-owned parsonages.
  • Many members of the clergy have relied on this exclusion for decades. This ruling in effect would force clergy of nearly every religion across America to pay additional taxes, regardless of faith or creed.
  • This will either force congregations to increase clergy compensation to offset these taxes or require pastors to dig deep to see if they are able to absorb these taxes.
  • In most cases, this will lead to several thousands of dollars in additional taxes each year for clergy.
  • Retired clergy in particular would be impacted by this ruling, given their more limited sources of income to help offset the loss of the income tax exclusion.
Stay tuned to ECFA’s “In the News” page for future developments in these cases and for other legal, tax, and finance updates affecting Christ-centered churches and nonprofit organizations.
 
ECFA440 W Jubal Early Dr, Suite 100 Winchester, VA 22601
Posted in:
  • Church Admin & Finance > Taxes and Legal
  • Pastors > Financial Shalom > Clergy Housing
  • Blog
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