Federal Court Reverses Ruling That Stripped Tax Exemption From Ministers

Federalist:

Last week, an appeals court protected a Chicago-based pastor and other religious leaders around the country from losing their parsonage allowances, which would have required them and their congregations to pay nearly $1 billion per year in new taxes. In October 2018, attorneys on behalf of Pastor Chris Butler of the Chicago Embassy Church argued that IRS Code Section 107 (2)—which allows churches, mosques, and synagogues to provide faith leaders a tax-free housing allowance to help them live in the communities they serve—did not violate the Establishment Clause.

This came nearly three years in the making after an atheist group, Freedom From Religion Foundation (FFRF), sued the IRS in 2016 claiming the federal tax provision violated the Establishment Clause. In 2017, a district court agreed and Butler appealed.

Religious leaders have eagerly anticipated the ruling of the Chicago-based U.S. Court of Appeals for the Seventh Circuit, which unanimously rejected the atheists’ challenge, ruling that the tax exemption is constitutional. This ruling protects religious freedom and separation of church and state for religious organizations who were at risk of losing this small but essential provision that benefits so many people doing faith-based work.

Many Congregations Depend on This Allowance

The Seventh Circuit ruled that the parsonage allowance “is simply one of many per serules” that “allow hundreds of thousands of employees (including ministers) to receive tax-exempt housing every year,” and that it is consistent with the nation’s “lengthy tradition of tax exemptions for religion, particularly for church-owned properties.”

Butler was the religious leader at the center of this lawsuit, although several other religious organizations (and the U.S. Treasury Department) intervened as well. In court, they pleaded with the judges to reinstate the exemption, “asserting that the survival of many congregations hangs in the balance.”

Butler heads a predominantly African-American congregation and has devoted his life to mentoring at-risk youth, decreasing neighborhood crime, and caring for the homeless in Chicago’s poorest neighborhoods. Likes many houses of worship, which are funded solely through gifts from their congregations, his church can’t afford to pay him a full salary, so it offered him a small housing allowance. This way Butler can afford to live near his church and the community he has dedicated his life to serving. This is not an uncommon arrangement among ministers of faith.  more here