The Housing Allowance Court Ruling

The Sky is NOT falling ...Yet

Another Secular Battle in the Spiritual Warfare on the Local Church

William OConnell, CPA/CGMA

(Note this article was written in November of 2013, but the FFRF took this case back to court and won...again! See the update below...)

It seems that every month brings a new attack on the Christian church in the United States.  

The November 2013 attack comes from courts in Wisconsin.  

Earlier this month, the District Court for the Western District Court of Wisconsin ruled that the clergy housing allowance is an unconstitutional preference for religion.  

The short-term implications are these.

1. Clergy compensation and tax filing postures are unchanged for a season.  The court enjoined the IRS and the Treasury Department from enforcing the ruling while the ruling is appealed.  The appeals process is expected to take up to a year.
2. The ruling applies only to the Housing Allowance – the income tax status of the value of a Parsonage is specifically excluded from this ruling. See how to figure your Fair Rental Value.
3. According to Richard Hammer, this ruling will not apply outside Wisconsin until it is affirmed by the Seventh Circuit in Chicago.  It will only apply to the entire US after it is affirmed by the US Supreme Court – which Dr Hammer views as an unlikely event.

In my view, the longer view for clergy and churches remains cloudy.  This is yet another event in which the Federal Government is imposing itself into the governance of local Christian Churches.  And each intrusion brings additional expense to the church.  

Consider:

• Obamacare has mandated that all Americans must have healthcare coverage acceptable to the regulations written around the Affordable Care Act.   The impact is proving costly to both individuals and organizations as they seek to comply with the ACA requirements.
• This Wisconsin ruling attacks the income tax status of the Clergy Housing Allowance.  If this ruling is allowed to stand across America, it will be costly to Pastors as their income taxes will increase.  It would also jeopardize Pastors who have purchased homes with the financial assumption of having an income tax free Housing Allowance.

Church leaders are advised to anticipate that these expensive intrusions will continue.  Seen through the lens of Spiritual Warfare, these are simply attacks on the local Christian Churches of America.  They constitute diversions of time and effort from the mission of the church to reacting to secular issues. 

Building adequate compensation plans for clergy will become increasingly important so that the Shepherds of the flock can continue to focus on Job #1 – the promulgation of the Gospel and Spiritual growth of His disciples.