Seventh Circuit: Housing Allowance is Constitutional

In a much anticipated decision, the U.S. Court of Appeals for the Seventh Circuit ruled Friday afternoon that a law giving ministers tax-free housing allowance is constitutional.

The Seventh Circuit’s unanimous decision in the case Gaylor v. Mnuchin overturns a lower court ruling in 2017 in favor of the Freedom From Religion Foundation (FFRF). As previously reported, Judge Crabb of the Federal District Court of the Western District of Wisconsin held that the cash clergy housing allowance under Internal Revenue Code Section 107(2) is unconstitutional, as an impermissible preferential treatment of religion under the Establishment Clause of the Constitution.

Seventh Circuit Decision

Judge Michael Brennan, who authored the opinion of the three-judge panel, wrote in his opinion Friday that “Congress has enacted federal tax exemptions for religious organizations as far back as 1802.” “We conclude § 107(2) has a secular legislative purpose, its principal effect is neither to endorse nor to inhibit religion, and it does not cause excessive government entanglement,” he wrote.

Judge Brennan dismissed FFRF’s claim the minister’s housing allowance violated the Establishment Clause. “FFRF claims § 107(2) renders unto God that which is Caesar’s. But this tax provision falls into the play between the joints of the Free Exercise Clause and the Establishment Clause: neither commanded by the former, nor proscribed by the latter. We conclude § 107(2) is constitutional. The judgment of the district court is REVERSED,” Brennan concluded in his opinion. (You can read the full ruling here.)

What This Means To You

The FFRF, among many options, could ask for the full panel of the Seventh Circuit to review the case or appeal the decision to the Supreme Court. The Free Will Baptist Board of Retirement expects continuing challenges to the Minister’s Housing Allowance, as it has been for the past several years. Churches and ministers should be prepared and make plans were the benefit to ever go away.

For now, the minister housing allowance remains intact. Churches designating a housing allowance can continue to do so as before until further notice.

The Board of Retirement will continue to monitor future cases and will update our Free Will Baptist family of any future developments.