WISCONSIN, USA, November 24, 2013 (RNS): HPI Note: This ruling, if it stands, could impact any Hindu priests who receive a cash housing allowance as part of their compensation and which they have been claiming as tax-exempt. It specifically does not change the tax situation for priests who live in temple-provided housing, however we advise consultation with the temple’s accountant on this point.
Religion News Service article:
A federal judge has ruled that an Internal Revenue Service exemption that allows clergy to shield a portion of their salary from federal income taxes is unconstitutional. The clergy housing exemption applies to an estimated 44,000 ministers, priests, rabbis, imams and others. If the ruling stands, some clergy members could experience an estimated 5 to 10 percent cut in take-home pay.
The suit was filed by the Wisconsin-based Freedom From Religion Foundation on grounds that the housing allowance violates the separation of church and state and the constitutional guarantee of equal protection. The group’s founders have said that if tax-exempt religious groups are allowed a housing subsidy, other tax-exempt groups, such as FFRF, should get one, too.
U.S. District Court Judge Barbara Crabb on Friday (Nov. 22) ruled in their favor, saying the exemption “provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.”
The case, decided in the District Court for the Western District Of Wisconsin, will likely be appealed to the the Chicago-based 7th U.S. Circuit Court of Appeals, which covers the states of Wisconsin, Illinois and Indiana. The housing allowances of pastors in Wisconsin remain unaffected after Crabb stayed the ruling until all appeals are exhausted. Crabb also ruled in 2010 that the National Day of Prayer was unconstitutional.
The exemption is worth about $700 million per year, according to the Joint Committee on Taxation Estimate of Federal Tax Expenditure.