CFI Tells Federal Court: End Taxpayer Funding of Clergy Housing

June 24, 2014

If your employer provides you with housing at your place of work, and requires you to live in it, the value of this housing is not subject to federal income tax. “Ministers of the gospel,” however, receive a significantly more generous tax benefit. Members of the clergy, and only members of the clergy, can receive a cash allowance designated for housing free of taxes, and, if they use this cash to pay a mortgage, they can still claim a mortgage tax deduction. Moreover, there is no requirement that ministers even reside at their place of work; they can live in a beach house if they want.

This ministers-only benefit is unfair and blatantly unconstitutional. CFI recently filed an amicus brief in the United States Court of Appeals for the Seventh Circuit, supporting a challenge to what is known as “The Parsonage Exemption” – Internal Revenue Code § 107(2). Following a victory for the Freedom From Religion Foundation in the trial court, the government appealed the ruling, and was supported by hundreds of religious groups seeking to preserve their financial advantage.

We argue that the tax break is unconstitutional on its face. “Ministers of the gospel” receive a tax benefit valued at almost $4 billion every 5 years, a benefit based solely on religious grounds. The Constitution does not permit tax revenues to be used to pay clerical salaries. We point out that for every $1 in tax breaks a member of the clergy receives under this unfair exemption, an ordinary taxpayer has to shell out an extra $1 in taxes to allow the government to balance its books. American taxpayers, religious and nonreligious alike, are being forced to subsidize the salaries of religious employees.

We also note that the rationales advanced by the government and hundreds of religious amici are flawed. The Parsonage Exemption is alleged to level the playing field between churches rich enough to purchase housing, and poorer ones, which can only provide an allowance. But churches’ relative financial well-being is not the government’s business. Even if it was, the Parsonage Exemption has permitted mega-churches, such as that of Rick Warren, to   pay preachers high salaries entirely in the form of tax-exempt housing payments. Far from benefiting small churches, the exemption has only lined the pockets of the wealthiest churches in the country.

CFI believes that the tax code should neither favor nor disadvantage religious groups. Where relevant, ministers of the gospel should apply for housing-based tax exemptions like every other employee in any other part of society. The Court of Appeals should uphold the ruling that the Parsonage Exemption is unconstitutional and violates the Establishment Clause.

You can download a PDF of the complete amicus brief here.