The Western District of Wisconsin has become the focal point of the debate as to whether the parsonage exemption granted to clergy members is constitutional. In October 2017, Judge Barbara Crabb ruled that the exemption violates the Establishment Clause of the U.S. Constitution.
On December 13, 2017, Judge Crabb issued a supplemental order addressing the remedy in the case. Most significantly, she issued an injunction that prevents the IRS from continuing to grant the parsonage exemption. However, in the same breath, Judge Crabb recognized the difficulty in enforcing such a drastic change in tax policy and delayed the effective date of the injunction for “180 days after the final resolution of all appeals.”
In other words: Nothing has changed. Despite the finding that the parsonage exemption is unconstitutional, clergy will continue to be able to take advantage of the tax benefit until six months after the parties have had a chance to exhaust their appeals and the courts make a final decision. At the very least, this case will likely make its way to the Seventh Circuit Court of Appeals and could potentially end up at the Supreme Court.