In an expected but unfortunate development, the Freedom From Religion Foundation filed a new lawsuit on April 6, 2016, challenging the constitutionality of the ministerial housing allowance under section 107 of the Internal Revenue Code. This lawsuit follows a similar lawsuit, filed in the same federal court in the Western District of Wisconsin, where the judge ruled that the housing allowance (not the parsonage provision) was unconstitutional. Fortunately, the earlier decision was overturned by the Seventh Circuit Court of Appeals in November 2014 on a technicality.
As a part of the Seventh Circuit’s decision, the opinion went on for page after page telling the plaintiffs how they would have to refile their case and the steps they would need to take to keep from having their case dismissed in the future. It seems as though the Freedom From Religion Foundation, and their officers, have taken that advice to heart and have done exactly what the court suggested they would have to do to have a viable case.
While the previous case only held that the ministerial housing allowance was unconstitutional, the new lawsuit requests that both the housing allowance and the tax-free use of parsonages be declared unconstitutional. Further, based upon the new filing and the court’s previous decision, the Freedom From Religion Foundation also has requested immediate injunctive relief, as well as a declaratory judgment, that the housing and parsonage provisions, found in Section 107 of the Tax Code, are unconstitutional on their face.
In an unexpected twist to this case, in September 2016 the Justice Department lawyers, who are representing the Internal Revenue Service and supposedly working in support of the housing allowance, abruptly conceded that the plaintiffs had standing (or the legal right to bring the suit) against the ministerial housing allowance – but not against the parsonage allowance. On October 24, 2016, Judge Barbara Crabb agreed and granted the government’s motion to dismiss the plaintiff’s challenge to Section 107(1) of the Tax Code, which allows churches to provide ministers with tax-exempt “in kind” housing, i.e., a parsonage.
However, Judge Crabb allowed the challenge to Section 107(2) of the Tax Code, which permits churches to provide ministers with tax-exempt cash for housing, to proceed. The government did not seek dismissal of the plaintiff’s challenge to Section 107(2), presumably because as noted above the government believes that the plaintiffs have standing to sue under that Code section.
Once the “standing” issue was resolved, it has been expected that the District Court would move quickly to address the legality of the cash housing allowance – and on November 17, 2016, Judge Crabb set a deadline of March 8, 2017 for all dispositive motions in the case to be filed.
Since the case is before the same judge that ruled against the ministerial housing allowance previously, we are concerned that the judge’s decision will be to strike down the housing allowance once all motions are filed. However, as more information is known, we will keep you updated on this case.
The lawsuit, known as Gaylor, et al vs. Lew, et al, was filed in the United States District Court for the Western District of Wisconsin and has been assigned Case No. 16-CV-215.
Church of God Benefits Board, Inc. 