In November 2013, a federal judge in the Western District of Wisconsin ruled that the clergy housing allowance exclusion of Section 107(2) of the tax code was an unconstitutional violation of the Establishment Clause (click here for ECFA’s prior coverage of the case).
In a notice filed today in the Western District of Wisconsin, the Department of Justice has indicated that the federal government will appeal the district court’s decision to the U.S. Court of Appeals for the Seventh Circuit.
Since the challenge to the clergy housing exclusion was brought by the Freedom From Religion Foundation (FFRF), the government has defended the constitutionality of the law and argued that the federal courts are barred from hearing FFRF’s claim on standing, sovereign immunity, ripeness, and other threshold grounds.
Because of the government’s decision to appeal the case, the district court’s ruling will have no immediate impact on clergy who receive a housing allowance. Churches and other qualifying religious employers should faithfully continue to designate housing allowances, and clergy should continue to take the income tax housing exclusion, subject to the limitations, as they have done in the past until advised to do otherwise by their tax advisors.
Source: Freedom From Religion Foundation v. Lew, No. 11-CV-626 (W.D. Wis. Jan. 24, 2014)