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Why the Ministerial Housing Tax Exemption Is Worth Saving

Why the Ministerial Housing Tax Exemption Is Worth Saving

The Freedom From Religion Foundation has targeted the ministerial housing tax exemption. But it's something that is worth saving.

Last October, a federal district court judge in Wisconsin ruled that the tax exemption for ministerial housing allowances is an unconstitutional establishment of religion.

The ruling came in response to a challenge by, you guessed it, the Freedom From Religion Foundation.

Now the dollar amount involved is pretty small (about $800 million), but the impact of ending the exemption would be significant, not only for clergy, but for the entire country.

Here's the deal. The Internal Revenue Code (26 U.S.C. § 107) exempts the value of housing provided to what it calls "ministers of the Gospel" from gross income for purposes of income tax.This exemption also covers non-Christian clergy, and it covers both the rental value of the home if provided by a congregation or an allowance paid to the minister in lieu of providing housing.

The exemption predates the Internal Revenue Code, which was enacted in 1954. In fact, its origins had little to do with religion. It grew out of what is known as "the convenience of the employer" doctrine. This doctrine applied to "employees who had very little say in the place of their residence or where they ate meals." Beside ministers, the doctrine has benefited, among others, ranch hands, innkeepers, military personnel, even the President of the United States.

By allowing ministers to take the housing allowance exemption, Congress wasn't "establishing religion" at all. It was ending a kind of discrimination against religion. It was putting pastors on the same footing as other similarly-situated employees. And it's important to note that the exemption only applies to "income tax." The ministerial housing allowance isn't exempt from the self-employment taxes ministers pay, like Social Security and Medicare.

And, we should note, many ministers, unlike the rest of us, pay both the employee and employer share of these taxes. In other words, they're already being taxed 15.3 percent on their housing allowance. Overturning Section 107 without taking into account the self-employment tax issue would recreate the problem that Congress tried to fix with the housing allowance in the first place. Namely, ministers would be uniquely disadvantaged tax-wise.

Imposing an additional financial burden on ministry would be especially devastating to smaller and poorer churches (which are the majority of churches in America) where the housing allowance might even be the bulk of the minister's compensation.

In other words, the Wisconsin judge's ruling would "remedy" a non-existent establishment of religion problem by creating a real-world free exercise problem.

And that's probably what the people who are challenging the exemption want in the first place. To create a world "free from religion" requires denying and diminishing the impact of faith on our society.

I don't mean just the intangible benefits, as important as those are; but the material and social benefits. The economic contribution of religious bodies to the American economy has been estimated at over $1 trillion. Substantial portions of the care delivered to poorer and needier Americans come from religious people working through their congregations and other ministries. Think about schools, hospitals, shelters, food banks, and on and on and on.

Those who want churches out of the public square are out of their minds if they think the government can provide all the services that churches and religious organizations perform.

For now, the ruling has not taken effect and is being appealed to the Seventh Circuit Court of Appeals. And that's where I and our friends at Alliance Defending Freedom are asking you to jump in.

Alert your pastor or ministers. Tell them to go to and sign on to a "friend of the court brief." Let the court know how important the ministerial housing allowance really is.

Please don't wait. We need ministers to make their voices heard by April 23rd. Again, tell them to go to

Originally posted at Breakpoint.

From BreakPoint. Reprinted with the permission of the Colson Center for Christian Worldview. All rights reserved. May not be reproduced or distributed without the express written permission the Colson Center for Christian Worldview. "BreakPoint®" and "The Colson Center for Christian Worldview®" are registered trademarks of The Colson Center for Christian Worldview.

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