On August 29, 2012, a federal district judge in the Western District of Wisconsin determined that the Freedom from Religion Foundation (FFRF) and several members of its key leadership have standing to challenge the constitutionality of Internal Revenue Code Section 107, which allows ministers of the gospel to exclude a limited amount from their taxable income each year for qualified housing expenses. The long-standing housing exclusion is a vital tax benefit for the countless members of clergy across America who serve small congregations, are modestly compensated, and use the exclusion to make ends meet.
The Wisconsin case is the latest in a series of challenges brought by FFRF to the ministers’ housing exclusion. After unsuccessful attempts in the past, including obstacles based on standing, FFRF altered the compensation structures of its leadership to include a housing allowance. To have the required standing to challenge the housing exclusion, FFRF and its leaders needed to show that they “suffered an injury in fact that is fairly traceable to the [government’s] action and capable of being redressed by a favorable decision from the court.” Because FFRF is a non-theistic organization, its leaders are not “ministers of the gospel” and therefore cannot qualify for Section 107's housing exclusion. FFRF claims this treatment under the Code is unconstitutional and discriminatory.
Overcoming the standing hurdle only clears the way for FFRF to have its challenge heard in federal court. The case will soon be scheduled for a hearing on the merits where the district court must decide if Section 107 violates the U.S. Constitution. Whatever the result, it is likely that the case will not end in the district court and will be subject to further litigation and appeal.
Dan Busby is a CPA and president of the Evangelical Council for Financial Accountability (ECFA).