The Church Alliance—a coalition of the chief executive officers of 38 denominational benefit programs, which includes Pensions and Benefits USA—has filed an amicus curiae brief in the Seventh Circuit U.S. Court of Appeals (Chicago), in the case challenging the constitutionality of the cash housing allowance exclusion for clergy. The brief was submitted 26 April 2018.

The clergy housing allowance, also known as the “clergy housing exclusion,” stems from IRS Code Section 107(2), which excludes the value of clergy-owned housing from income taxation. In the case, which was brought against the government by Annie L. Gaylor/Freedom From Religion Foundation, the federal district court for the Western District of Wisconsin declared the tax-free housing allowance for clergy under Code 107(2) unconstitutional. On 13 December 2017, the district court entered its final order in the case, which directs the government to cease enforcing Code 107(2). However, the district court delayed the effect of the order until 180 days after the conclusion of all appeals. The government appealed to the Seventh Circuit in February.

“The favorable tax treatment of clergy housing in the USA has enabled churches and ministers to focus limited resources more efficiently,” said Don Walter, director of Pensions and Benefits USA for the Church of the Nazarene. “The loss of this longstanding accommodation would not only hurt the clergy directly affected, it would also limit the resources available to them and their churches in the spiritual and compassionate efforts they undertake in nearly every community in the country.”

The Church Alliance brief adds a perspective that is not duplicated in the government’s appeal, focusing on the legal history of permitted legislative accommodations of religion. The brief argues that Code 107(2) is a constitutionally permitted accommodation of religion when viewed in the context of Code 107(1) (the exclusion for in-kind clergy housing, e.g., parsonage or manse) and Code 119, which excludes employer-provided housing from employees’ incomes in numerous secular circumstances.

The brief also brings to the court’s attention particularly strong reliance interests that would be affected by changes in the law, such as the fact that “ministers have arranged their affairs (buying property, establishing and funding pensions) in accordance with the tax rules established by Congress,” so that eliminating section 107(2) would “find their circumstances severely straitened, and their hopes for an adequate retirement jeopardized.”

In addition to the members of the Church Alliance, a broad ecumenical array of other religious organizations joined the brief, including among others, The United Methodist Church’s General Council on Finance and Administration, the U.S. Conference of Catholic Bishops, The Church of Jesus Christ of Latter Day Saints, the Salvation Army, the Southern Baptist Ethics and Religious Liberty Commission, and numerous organizations affiliated with the Jewish Conservative Movement or the Jewish Reform Movement.

--Pensions & Benefits USA