At issue: Parsonage allowance – taxable or not?

Monday, April 30, 2018
Chris Woodward (

cross on church steepleShould the government continue to offer a housing allowance for clergy? That's a decision coming up on federal appeal.

Gaylor v. Mnuchin is currently before the U.S. Court of Appeals for the Seventh Circuit. Brought by Annie Laurie Gaylor and Dan Barker of Freedom From Religion Foundation (FFRF), the lawsuit challenges the clergy housing allowance, which permits clergy to be paid partly through a housing allowance which is subtracted from taxable income.

"Ever since the tax code was first created for incomes back in the early 1900s, from the very outset lawmakers understood that the power to tax is the power to destroy. So the Constitution does not allow the federal government to be taxing churches," says attorney Ken Klukowski of First Liberty Institute, which has filed a brief on behalf of 16 members of Congress.

In this legal matter, says Klukowski, First Liberty's argument is that the housing is essentially part of the church.

"Pastors still have to pay income taxes on their income," he explains, "but ever since the creation of the tax code, if a church would own a house a parsonage, if they would own a house right there next to the church building, pastors could live there tax-free – because of course, many essential ministry duties like counseling and showing hospitality and having guest preachers or missionaries or church members who have lost their home, many of those ministry activities can only be done through the home."


According to Klukowski, that changed somewhat in the 1950s.

"Congress realized that big churches, large denominations, wealthy churches, those were the only ones that could really afford to have houses, but that small congregations and inner-city churches and newer congregations many times didn't have the extra cash to actually buy an outright house," he continues. "They could just pay their pastor a little extra each month to handle their mortgage or rent payment, and Congress realized that it's not fair to understand that you can't tax churches but yet you could tax the means by which a pastor could have a house to do his ministry duties in. So this parsonage exemption was to put rich churches and lower-income churches on equal footing, understanding that the Congress just does not allow churches to be taxed by the government in that fashion."

FFRF got a ruling in its favor from a federal district judge. That decision was appealed to the U.S. Court of Appeals for the Seventh Circuit. Klukowski continues:

"Congress wanted to weigh in on this, and Congress is the body of the federal government that under our constitutional system is the only body that has the authority to formulate taxes, to craft taxing legislation. And so we thought it would be appropriate to give those senators and congressman a voice before the court, to explain to the court that This is what we intended to do in this provision, this is why we believe it's important and this is why we believe it needs to continue," says Klukowski. "So we were just becoming a voice for Congress versus the U.S. government, the Treasury and the IRS."

Those departments or agencies are being represented by the Justice Department.

"There are certain churches being recognized by an allied organization of ours, these were lawmakers themselves, the ones who actually impose the taxes, saying we too want to add our voice to the inform the court as they consider this case, and we were honored to have the opportunity to represent more than a dozen members of the House and Senate in this important case before the Seventh Circuit Appeals Court."

Related OneNewsNow stories:

Becket: No, pastors aren't privileged just equal
Court ruling could toss out parsonage allowance


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