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Minister housing break in jeopardy

The parsonage (or manse) allowance may soon disappear from ministers’ tax breaks, and the financial implications for clergy will be huge. Church legal expert Richard Hammar reports in the January 2011, edition of Church Law and Tax Report that a California court case threatens to eliminate the parsonage exemption tax break that dates to 1954.

Many churches give their pastors an allowance to help ease housing-related expenses, such as utility bills, repairs, and yard work costs. The parsonage exemption allows ministers to receive this money free of any federal taxes.

However, a lawsuit filed in 2009 by Freedom from Religion Foundation, expected to go to trial in fall 2011, threatens the constitutionality of sections 107 and 265(1)(6) of the federal tax code, which establishes the housing allowance for ministers. The group asserts the unique benefit set aside especially for “ministers of the gospel” is a violation of separation of church and state.

The FFRF cites the 1989 U.S. Supreme Court case Texas Monthly, Inc. v. Bullock to assert that tax benefits given only to religious institutions violate the Constitution’s Establishment Clause.

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