Parsonage Exemption Imperiled Again
On Friday, October 6, Judge Barbara Crabb of the United States District Court for the District of Washington, issued a ruling holding that the parsonage exemption to the tax code violates the U.S. Constitution. The tax exemption treats religious clergy’s housing expenses as tax free income, something that Judge Crabb believes gives preferential treatment to individuals and entities based on their religious status. Thus, according to the judge, the exemption violates the Establishment Clause of the Constitution.
Judge Crabb issued a similar ruling in 2013, but the Seventh Circuit Court of Appeals overruled the decision because it found that the plaintiffs did not have standing to sue. It is likely that this decision will also be appealed, but standing will not be an issue this time around because the plaintiffs actually applied for the exemption and were denied by the IRS. It remains to be seen what the Seventh Circuit will do, but whatever the outcome, we are one step closer to possibly seeing this issue come before the Supreme Court.