The FFRF wins a big one: federal court rules that ministers’ tax-free housing allowances violate the Constitution

You may know that American ministers have some tax advantages under the law: they often get a housing allowance from their church, and that allowance, in contrast to non-ministers who get such perks, is free from taxes.  Here’s the stipulation from the Internal Revenue Service code:

A licensed, commissioned, or ordained minister may be able to exclude from income the fair rental value of a home (a parsonage) or a housing allowance provided as compensation for ministerial services performed as an employee. A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded can’t be more than reasonable compensation for the minister’s services.

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it’s used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded can’t be more than the reasonable compensation for the minister’s services.

This exemption—the tax-free housing allowance can also be used by ministers for stuff like home repairs, cable television fees, towels, bedding home decor, and computers—costs the government an estimated $700 million per year in taxes, and is used widely. As Christianity Today reports (and they’re pissed off!):

CT previously examined whether pastors’ homes are really that different from everyone else’s. According to the 2018 Compensation Handbook for Church Staff, 81 percent of fulltime senior pastors receive a housing allowance, while 11 percent receive a parsonage allowance. For fulltime solo pastors, 67 percent receive a housing allowance, while 27 percent receive a parsonage allowance; among part-time solo pastors, 59 percent receive a housing allowance, while 10 percent receive a parsonage allowance.

This is a blatantly unconstitutional provision because it gives religious people a tax advantage not shared by nonbelievers. In other words, it privileges religion—a violation of the First Amendment.

On that basis, in 2013 the Freedom from Religion Foundation (FFRF) sued the government in the Federal District Court in Wisconsin—and won! (You can see the court’s ruling here.) But the government appealed, and the appeals court overruled the lower court on the grounds that the plaintiffs—the FFRF and its co-Presidents Annie Laurie Gaylor and Dan Barker—didn’t have “standing” to sue. In other words, they couldn’t prove they’d been injured by the policy, which is necessary to bring a lawsuit.

But the FFRF is tenacious. As GOP USA notes,

The foundation then had two employees who got housing allowances try to claim the exemption on their tax forms, and when the IRS denied them, the foundation re-filed the lawsuit.

Annie Laurie Gaylor, co-president of the Freedom From Religion Foundation, said they followed exactly what the 7th Circuit said they would need to do to have standing in order to bring the lawsuit.

“I think they are going to have a hard time saying we don’t have standing,” she said. “They’re going to have to look at the merits.”

 The Alexandria News explains more:

In November 2014, the Seventh U.S. Circuit Court of Appeals threw out that victory—not on the merits but on the question of standing—arguing that [FFRF Co-Presidents] Barker and Gaylor had not yet sought a refund of their housing allowance from the IRS. Accordingly, they sought them and when denied, went back to court.

FFRF, a national state/church watchdog based in Madison, Wisconsin, renewed its historic challenge of the housing allowance in April 2016. Sued are Steve Mnuchin, U.S. Secretary of the Treasury, and John Koskinen, IRS Commissioner. The case also had religious intervenors as defendants.

Plaintiffs are FFRF Co-Presidents Dan Barker and Annie Laurie Gaylor, and Ian Gaylor, representing the estate of President Emerita Anne Nicol Gaylor, whose retirement was paid in part as a housing allowance.

The new ruling, by the same judge in the same Wisconsin court, was issued on October 6, and it’s another victory for the FFRF. Click on the screenshot below to see the ruling:

The take-home message:

Here are some quotes from Judge Barbara Crabb’s ruling as reported by the News:

“Although defendants try to characterize § 107(2) as an effort by Congress to treat ministers fairly and avoid religious entanglement, the plain language of the statute, its legislative history and its operation in practice all demonstrate a preference for ministers over secular employees,” writes Crabb, for the Western District of Wisconsin.

“As I noted in the earlier lawsuit,” Crabb writes, “there is no reasonable interpretation of the statute under which the phrase minister of the gospel could be construed to include employees of an organization whose purpose is to keep religion out of the public square.”

Any reasonable observer would conclude that the purpose and effect of the statute is to provide financial assistance to one group of religious employees without any consideration to the secular employees who are similarly situated to ministers, Crabb noted. “Under current law, that type of provision violates the establishment clause,” she adds.

“In reaching this conclusion, I do not mean to imply that any particular minister is undeserving of the exemption or does not have a financial need for one. The important point is that many equally deserving secular employees (as well as other kinds of religious employees) could benefit from the exemption as well, but they must satisfy much more demanding requirements despite the lack of justification for the difference in treatment.”

Crabb also discusses financial benefits to even wealthy ministers: “”Thus, an evangelist with a multimillion dollar home is entitled under § 107(2) to deduct the entire rental value of that home, even if it is not used for church purposes. (“Joel Osteen lives in a $10.5 million home and is entitled to exclude the fair rental value of that home so long as he spends that money on the home and his church allocates that amount to housing.”).”

You can also find this on page 4 of the ruling:

Ministers receive a unique benefit under § 107(2); it is not, as defendants suggest, part of a larger effort by Congress to provide assistance to employees with special housing needs. A desire to alleviate financial hardship on taxpayers is a legitimate purpose, but it is not a secular purpose when Congress eliminates the burden for a group made up of solely religious employees but maintains it for nearly everyone else.

Judge Crabb suggests some fixes for the law, but none of those involve favoring religion:

As I have discussed throughout this opinion, Congress could have enacted a number of alternative exemptions without running afoul of the First Amendment. For example, Congress could have accomplished a similar goal by allowing any of the following groups to exclude housing expenses from their gross income: (1) all taxpayers; (2) taxpayers with incomes less than a specified amount; (3) taxpayers who live in rental housing provided by 43 Case: 3:16-cv-00215-bbc Document #: 87 Filed: 10/06/17 Page 43 of 47 the employer; (4) taxpayers whose employers impose housing-related requirements on them, such as living near the workplace, being on call or using the home for work-related purposes; or (5) taxpayers who work for nonprofit organizations, including churches. Or some of these categories could be combined.

Make no mistake about it: this is a big victory, and churches are complaining loudly. Cry me a river! Some churches are whining that they may have to close without such advantages, but that’s too damn bad: they are entitled to no such tax privileges under U.S. law. If they can’t keep their enterprise going without taking advantage of illegal provisions, they shouldn’t be open.

The government will of course appeal, but now that the plaintiffs have standing, I can’t see on what grounds they could lose. This is clearly favoritism of religion. But of course the Supreme Court, where this might ultimately land, is deeply conservative, and might suss out some wonky rationale. If it does, that will be a serious erosion of the Constitution they’re supposed to follow.

Congrats to Annie Laurie, Dan, and the FFRF for this victory.

h/t: Woody


  1. Posted October 12, 2017 at 9:09 am | Permalink

    Woo hoo, FFRF! Way to go!

  2. gravelinspector-Aidan
    Posted October 12, 2017 at 9:17 am | Permalink

    Great work from the FRFF, even though it’s in another country, and reduces my chance of getting tax relief from myself as an Ordained Minister of the CoTFSM.

    • BJ
      Posted October 12, 2017 at 10:22 am | Permalink


      Church of Two Freakishly Small Macaroni Penguins?

      • Derek Freyberg
        Posted October 12, 2017 at 10:30 am | Permalink

        Church of The Flying Spaghetti Monster, I assume. Official headwear is a colander (pasta strainer).

        • BJ
          Posted October 12, 2017 at 6:32 pm | Permalink

          I should have known!

          • Diane G.
            Posted October 13, 2017 at 12:38 am | Permalink

            Although you not knowing was crucial to your gifting us with “Church of Two Freakishly Small Macaroni Penguins?”


            • BJ
              Posted October 13, 2017 at 8:54 am | Permalink

              I think we’re all glad it’s worked out this way.

            • gravelinspector-Aidan
              Posted October 13, 2017 at 10:47 am | Permalink

              … which has a non-trivial pasta component. Verily doth the Noodly Appendage gyre and gymble in mysterious wabes! Sauce Be Upon Him/Her/It/Them !

              • rickflick
                Posted October 13, 2017 at 12:59 pm | Permalink

                I caught myself in a chortle reading that!

              • gravelinspector-Aidan
                Posted October 14, 2017 at 8:59 pm | Permalink

                Someone had mentioned Alice in my hearing. you can see the results.

      • Craw
        Posted October 12, 2017 at 10:35 am | Permalink

        That’s mocking the Great Macaroni! Stop triggering me! This is supposed to be a safe space!

      • gravelinspector-Aidan
        Posted October 12, 2017 at 5:02 pm | Permalink

        Church of The Flying Spaghetti Monster (Sauce Be Upon Him/Her/It/Them).
        Just second while I pass Sithrak some oil.

    • gravelinspector-Aidan
      Posted October 12, 2017 at 5:08 pm | Permalink

      Ordained Minister of the CoTFSM.

      I sacrificed the optional “(SBUHHIT)”, and will proceed to trying to get an edge onto my keyboard for committing honourable sepukku in atonement for my faithlessness.

  3. Historian
    Posted October 12, 2017 at 9:17 am | Permalink

    The court decision is a great victory for separation of Church and State. Despite the ineluctable logic of the decision, I am not at all convinced that the Supreme Court will sustain it considering that there is a conservative majority of 5 to 4. As was the case for many other decisions, the ruling may come down to the opinion of Justice Anthony Kennedy, a relative moderate as conservatives go. As I noted before, this one man determines the future of the country.

    • Ken Kukec
      Posted October 12, 2017 at 10:11 am | Permalink

      Yeah, the case would almost certainly come down to a 4-4 split, with Justice Kennedy casting the deciding vote (as so often happens in controversial cases). Worse, the conservative justices might be amenable to a fundamental reinterpretation of the Establishment Clause. Justice Thomas is already on record with some outré views about the clause’s original intent being merely to prevent the federal government from interfering with the religions established by the states. And every indication is that Justice Gorsuch will be a doctrinaire conservative, particularly in matters pertaining to religion.

      We are just a Ginsburg or Kennedy heartbeat away from living in a much-altered jurisprudential land.

      • Diane G.
        Posted October 13, 2017 at 12:42 am | Permalink

        Shoot me now.

    • Derek Freyberg
      Posted October 12, 2017 at 11:02 am | Permalink

      Not my area of law, but …
      if the Supreme Court were to sustain the law, that would seem to create some real tax problems. Courts cannot judge which religions are “real” – that implicates all sorts of First Amendment issues, so if someone were to be ordained by the COTFSM (or by whatever church ordained the FFRF people in the case), that person would presumably have a valid tax exemption for their housing. Imagine the effect if even 1% of the population were to do that.

      • Historian
        Posted October 12, 2017 at 11:09 am | Permalink

        This IRS regulation has been in effect for a long time. I can only assume that the agency has managed to deal with it.

        • Posted October 12, 2017 at 11:42 am | Permalink

          I had a colleague at CMU who was ordained as a minister in one of these “prank religions” (Church of the Subgenius or the like?) also for tax purposes. He claimed it worked, but …

      • Posted October 12, 2017 at 11:11 am | Permalink

        Are there any limits as to the numbers of allowances per entity? For example, could I set up a church with 100 people, every one of them donates $20k and declare them all ministers with a $20k allowance? Assume not but how far can you go?

        • Posted October 12, 2017 at 11:13 am | Permalink

          I don’t think so. The Churches of Christ claim the “priesthood of all believers” and thus any active member of a congregation can be certified by the elders a minister and thus claim the deduction.

        • gravelinspector-Aidan
          Posted October 13, 2017 at 10:55 am | Permalink

          My ordination cost $25. What is sauce for the degree mill goose is sauce for the ordination tax dodge gander. Sauce Be Upon Him/Her/It/Them !

      • Ken Kukec
        Posted October 12, 2017 at 11:23 am | Permalink

        My understanding is that, in religion clause cases, the federal courts will not inquire into the truth of any religious claim; they will, however, weigh the evidence regarding whether that religious claim is held sincerely.

      • gravelinspector-Aidan
        Posted October 13, 2017 at 10:53 am | Permalink

        if someone were to be ordained by the COTFSM

        Been there, done that, got the ordination certificate (20-Oct-2012 – a week after the 19th anniversary of my vasectomy, which was pure accident).
        $25 it cost me. Would have been more if I wanted a printed version posting to me.

  4. GBJames
    Posted October 12, 2017 at 9:18 am | Permalink

    Good news like this is always welcome. Too rare.

  5. Posted October 12, 2017 at 9:26 am | Permalink


  6. DrBrydon
    Posted October 12, 2017 at 9:33 am | Permalink

    Well, this is just wonderful news. Great job FFRF, and thanks!

  7. ThyroidPlanet
    Posted October 12, 2017 at 9:40 am | Permalink

    Well, my eyes tended to glaze over trying to understand some of this.

    One idea that comes to mind as I envision an argument over a kitchen table somewhere:

    1st amendment vs. 2nd amendment:

    We here on WEIT tend to argue for an amendment or repeal of the 2nd, or some damn thing to keep people from getting killed in mass murders in the United States. We also tend to argue that 2nd amendment supporters are zealots on the order of religious zealots.

    How does that square with the 1st? Are we adapting the same zealotry as 2nd amendment supporters? What if religious groups then argue, just as we do, for amendments or “some damn thing” to keep their cult leaders living tax free?

    It should be clear I’m playing a sort of Devil’s Advocat here – no pun intended…

    • Posted October 12, 2017 at 9:45 am | Permalink

      My response would be that it’s very clear what the founders meant when they wrote the First Amendment, but the Second Amendment was written for purposes of maintaining an orderly militia, and the courts have, over time, interpreted it wrongly as permitting free public ownership of guns. The First Amendment has been salubrious for the U.S.; the second hasn’t, and it’s time to repeal it since its rationale is gone. Until then, we have to remind the courts why that amendment was written.

      • darrelle
        Posted October 12, 2017 at 10:02 am | Permalink

        I think your 2nd point is really the better justification of the two. The reason for wanting to amend the 2nd but not the 1st is because the 1st works* and the 2nd doesn’t. Easy as that.

        *Meaning contributes to maintaining and moving towards that better society we all dream of.

      • Ken Kukec
        Posted October 12, 2017 at 10:47 am | Permalink

        I agree that the Second Amendment is anachronistic, and the First is not. But I’m not sure the framers’ intent in drafting the First Amendment is quite so crystalline as you suppose. The amendment, and in particular its two religion clauses, have undergone quite a bit of doctrinal growth over the past two centuries. (But then, I don’t believe the courts need be sedulously bound to the framers’ intent, either.)

  8. Debbie Coplan
    Posted October 12, 2017 at 9:40 am | Permalink

    Finally, some great news!

  9. Posted October 12, 2017 at 9:59 am | Permalink

    That’s some great activist work!

  10. Mark Cagnetta
    Posted October 12, 2017 at 10:09 am | Permalink

    Unfortunately, Dan Barker lost in his bid to give a secular address to the US Congress.

  11. BJ
    Posted October 12, 2017 at 10:19 am | Permalink

    “The foundation then had two employees who got housing allowances try to claim the exemption on their tax forms, and when the IRS denied them, the foundation re-filed the lawsuit.

    Annie Laurie Gaylor, co-president of the Freedom From Religion Foundation, said they followed exactly what the 7th Circuit said they would need to do to have standing in order to bring the lawsuit.”

    Heh. I guess sometimes being a lawyer is pretty awesome.

    Pretty great work by the FFRF.

  12. Posted October 12, 2017 at 10:24 am | Permalink

    It will be interesting to see what semantic contortions the Constutional literalists on SCOTUS will come up with to try and get around this.

  13. Posted October 12, 2017 at 10:39 am | Permalink

    I hope that they go for the whole enchilada – revoke the tax-exempt status of all churches.

    • Ken Kukec
      Posted October 12, 2017 at 11:30 am | Permalink

      As do I, but I fear we hope in vain for the foreseeable future.

      • Posted October 12, 2017 at 11:49 am | Permalink

        Sadly agree.

      • Diane G.
        Posted October 13, 2017 at 12:53 am | Permalink

        Trump’s recent executive order allowing preachers to politick from the pulpit is not a good omen…

  14. XCellKen
    Posted October 12, 2017 at 10:50 am | Permalink

    I guess my very favorite neighbor is in a bad way right about now.

    Who is my neighbor?

    Why none other than Joel Osteen.

    I can see his “church” from the patio of my condo. In another lifetime, his “church” was known as The Summit, home of the two time NBA Champion Houston Rockets. yes, his “church” used to be an NBA arena.

    And his home is about two miles from my condo. In River Oaks, Houston, Texas. One of the ten richest hoods in the US. Estimated value $10.5 million !!! And guess how much he pays to live there ???

    But don’t hate me. I live on the poor side of the hood LOL

    • Diane G.
      Posted October 13, 2017 at 12:55 am | Permalink

      Did not know his church was a former NBA arena!

  15. Posted October 12, 2017 at 11:50 am | Permalink

    This is great. Good for my American friends and a useful precedent for all of us.

  16. Randy schenck
    Posted October 12, 2017 at 11:58 am | Permalink

    Only FFRF has the guts and expertise to get this done. And this means revenue for the govt. Doing good can create good. Don’t forget, even that lifetime membership to FFRF is deductible…..

    • Al
      Posted October 12, 2017 at 12:59 pm | Permalink

      “and this means revenue for the govt”

      yep, more money for Donnie’s golfing trips and private jets for the cabinet secretaries.

      • Posted October 12, 2017 at 1:16 pm | Permalink

        Well if the entire amount goes to Trump at least the churches would be paying for it and not me. That’s a step forward anyway.

  17. Posted October 12, 2017 at 12:03 pm | Permalink

    I especially like the bit about the change in status of those guilded, million $ homes of diamond-wearing evangelists.

    • Diane G.
      Posted October 13, 2017 at 12:57 am | Permalink

      Yes, Judge Crabb really did her homework and came up with some great examples and rationales for her ruling!

  18. rickflick
    Posted October 12, 2017 at 12:32 pm | Permalink

    A fellow employee( I won’t say he was a friend) belonged to a fundamentalist group who had church meetings in member’s homes on a rotating basis. I suspected this was a sneaky way to declare all their houses “churches” for tax purposes. I never did know for sure what the deal was.

  19. JonLynnHarvey
    Posted October 12, 2017 at 2:10 pm | Permalink

    For social security and Medicare and payroll tax purposes, a minister is considered to be self-employed, i.e. a contractor, rather than an employee. But for Federal taxes, they are considered an employee.
    The exemption applies only to the latter. As such, ministers are allowed to deduct housing expenses from gross income, but notably not from self-employment taxes!

    An earlier version of the law applying to provided housing went into effect in 1921, and was extended to ANY kind of employee who with limited housing options- having to reside near their place of employment, or do some business in their residence. The 1921 act extended to seamen and hospital workers, and people in the military!!! It was the “convenience of employers” act.
    As such, it was not religion-specific. The law benefited military, ministers, and medics!!
    The rationale was: Taxable compensation does not include housing and meals provided for the convenience of the employer.

    In 1925, this was extended to a cash housing allowance paid to military officers. Later in the 1950s, it was decided this applied to ministers as well. Before 1954, if a church owned a home its ministers paid less in taxes than those ministers of churches that did not own a home.

    This was to avoid penalizing small churches (NOT mega-churches) that could not afford to provide an actual house for their minister!!
    It’s ostensible purpose was to eliminate disparity between ministers who lived in a church-owned property and those given a stipend with which to pay for housing. It was argued that to allow the parsonage exemption and exclude the housing exemption discriminated against poorer churches.

    In 1954, Congress tightened the convenience of employer notion to say that that the employer-provided housing must be on the employer’s premises! This was defined as the place where a majority of the employer’s activities occurred.
    But both military and ministers were exempted from the new more restricted Section 119!!

    I get the notion of tax-free subsidized housing for any jobs that require employees to live near by, the original 1921 law. But Joel Osteen does not seem to deserve this breaks, to me. His luxurious off-campus mansion has nothing to do with his church being unable to afford a house!!! (Also some ministers prefer to live a great distance from their church rather than near. This is a trend in Congregationalist churches.)

    And while we’re at it, the San Francisco Bay Area is one of the few parts of the US, where police officers do NOT live in the town they serve, since they can’t afford to live there. How about some tax-free subsidized housing for them???

    • Randy schenck
      Posted October 12, 2017 at 2:25 pm | Permalink

      Not exactly sure what you are saying in total here, I am not a tax expert of any kind. The reference to military and housing or housing allowance is a tax free benefit I believe. Correct me if wrong on this. Housing allowances in the military are dependent on lack of base or post housing, also based on location and rank.

      • JonLynnHarvey
        Posted October 12, 2017 at 3:43 pm | Permalink

        I’m mostly trying to point out that the tax-free nature of minister housing allowances is an entirely separate issue from the tax-free nature of churches!!!

        The latter has to do with the fact that churches are an “exempt” organization, and a non-profit. (Although churches alone do NOT have to apply for exempt status.)
        In this case, the organization must be set up and run “exclusively for religious, educational, scientific, or other charitable purposes,” its earnings should not benefit private individuals, it should not attempt to influence legislation or intervene in political campaigns, and its purpose and activities may not be illegal or violate fundamental public policy. (

        But the basis for tax-exempt housing allowances is entirely different. It has do do with the employer-convenience legislation, which IMO is of no applicability in mega-churches.

        • Randall Schenck
          Posted October 12, 2017 at 4:15 pm | Permalink

          Got it. The blending in of the housing allowance as tax exempt is a bridge too far. Thanks…

    • Diane G.
      Posted October 13, 2017 at 1:03 am | Permalink

      Interesting history of the issue. Thanks!

  20. gravelinspector-Aidan
    Posted October 12, 2017 at 5:11 pm | Permalink

    Totally irrelevant, but Family Guy :
    [Lois] But Dr Hartmann, you took an oath!
    [DrH] I took a lot of things in medical school …

    • Diane G.
      Posted October 13, 2017 at 1:03 am | Permalink


  21. Posted October 12, 2017 at 6:13 pm | Permalink

    Quoting our bigoted, blinkered AG: “…no one should be forced to choose between living out his or her faith and complying with the law.” Since my faith tradition is historic peace church, looks like I don’t have to pay at least half of my federal income tax since my faith does not support military spending.

    • Mark Joseph
      Posted October 12, 2017 at 9:34 pm | Permalink

      With all due respect to your substantial response, my rather snarkier response to him would have been, “Oh, really? And why the fuck not?”

      *Lots* of people can’t practice their faith without breaking the law. Polygamy is the first example that comes to mind, but FGM, illegal mind-altering substances, and the less savory (you know what I mean) actions of the KKK aren’t far behind, as are innumerable others. And this is a good thing.

      • Posted October 13, 2017 at 11:00 am | Permalink

        Yes, Mark, that would have been my snarky response as well. 🙂 It really is hard for me to explain to my Trumpist relatives that ultimately they are the ones being screwed by this administration. Besides, the AG and other minions speak out of both sides of their mouths. The AG spouts states rights – until it comes to marijuana, and then he deep ends about the evils thereof. Meanwhile, Pruitt proclaims “The war on coal is over, and no federal agency should ever use its authority to declare war on any sector of our economy.” Well, the legal marijuana industry in Colorado just passed $1 billion in revenue for this year, providing over $160 million in taxes for the state. Seems a pretty substantial sector, eh Messrs Pruitt and Sessions?

    • Blue
      Posted October 13, 2017 at 9:04 pm | Permalink

      Quaker – like, Mr Douglas E ?
      If so, still attending Silence ?


  22. Mark Joseph
    Posted October 12, 2017 at 9:35 pm | Permalink

    Great news!

  23. Diane G.
    Posted October 13, 2017 at 1:08 am | Permalink

    What an upper! Love the way Annie-Laurie, Dan, and their talented aides and legal staffers came up with an arrangement to secure “standing.”

  24. Posted October 13, 2017 at 3:47 am | Permalink

    Brilliant. *rump’s (Mnuchin’s) IRS could have granted the FFRF employees exemptions and avoided any dramatic changes. Basically they could have combined alternatives 4 and 5 as laid out by Crabb.

    So why didn’t they? Perhaps they really are that stupid. Or maybe they’re crazy like a fox. This will certainly rile up the fundamentalists and get them to the polls.

  25. arsenios
    Posted October 19, 2017 at 6:03 am | Permalink

    Quaker – like, Mr Douglas E ?
    So why didn’t they?

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