GCFA STATEMENT ON THE CLERGY HOUSING CASE IN WISCONSIN
On November 21, 2013, a federal district court judge in Madison, Wisconsin held that a portion of Section 107 of the tax code is unconstitutional. Section 107 is the provision dealing with tax-favored housing benefits for clergy. Specifically, the court held that Section 107(2), which permits clergy to receive a tax-free cash “housing allowance,” is unconstitutional because it violates the Establishment Clause of the First Amendment of the U.S. Constitution (“Congress shall make no law respecting an establishment of religion…”). Section 107(1), which allows clergy to reside tax-free in a church-provided parsonage, was not affected by the court’s decision.
In the case, Freedom From Religion Foundation, et al. v. Lew, et al., the United States government was the party which defended the constitutionality of Section 107, a federal law enacted by Congress many decades ago. As the losing party, the government must now decide whether it wants to appeal this decision to the next level of the federal court system, the Seventh Circuit Court of Appeals in Chicago. GCFA believes an appeal is likely.
The court in Wisconsin delayed the implementation of its decision until any appeals which may be filed by the government are concluded or until the deadline for filing an appeal has passed, whichever is later. GCFA understands that the government will have sixty days to file an appeal, and so the district court’s decision will have no effect until sometime in 2014 at the earliest. If an appeal is filed, it is certainly conceivable that this case could take several more years to be finally decided.
GCFA is tasked by the Book of Discipline with the responsibility to protect the legal rights and interests of the United Methodist denomination. However, it is too early to fully understand the impact of this case, or to predict the chances for this decision to be reversed. GCFA will continue to actively monitor the case as it develops, and will take the appropriate actions at the appropriate times to represent the interests of the denomination.
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Editor's Note: In the article "Five Things to Know about the Ministers Housing Allowance Ruling," Richard Hammer, a respected voice on church tax issues, reflects on the housing allowance rule.
In the article he says there is no direct path for clergy from the Baltimore-Washington Conference,(or any clergy outside of Wisconsin, Indiana, and Illinois) to be affected by the current ruling, unless the appeal goes to the U.S. Supreme Court. Hammer describes this as “an unlikely outcome.”
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