Appeals court dismisses clergy housing lawsuit

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By SCOTT BAUER
Associated Press

MADISON, Wis. (AP) — A federal appeals court on Thursday dismissed a challenge to the law that gives clergy tax-free housing allowances, saying the leaders of an anti-religion group in Wisconsin didn’t have the standing to bring the lawsuit.

The 7th U.S. Circuit Court of Appeals reversed U.S. District Judge Barbara Crabb’s ruling from last year striking down the law that benefits clergy. The three-judge panel on the appeals court said the co-presidents of the Madison-based Freedom From Religion Foundation did not have standing to challenge the law because they’ve never suffered because of it.

“The plaintiffs here have never been denied the parsonage exemption because they have never requested it,” the court said. “Therefore, they have suffered no injury.”

Annie Laurie Gaylor, one of the foundation co-presidents, called the ruling cowardly, given that the court dismissed it without ruling on the merits.

“If they wanted to get rid of it, if they considered it a hot potato, this is what they would do,” Gaylor said in a telephone interview. She said those challenging the law will be “regrouping” to determine what to do next.

“We will continue to challenge this indefensible favoritism for religion in other forums until the issue cannot be circumvented,” she said in a statement.

Diana Erbsen, an attorney for the U.S. Department of Justice, which is defending U.S. Treasury Secretary Jacob Lew and IRS commissioner John Koskinen in the lawsuit, said in a statement that the department was pleased with the ruling.

The attorney for Alliance Defending Freedom, a Christian advocacy group, was more effusive, hailing the ruling as a victory for clergy and churches.

“The allowance many churches provide to pastors is church money, not government money,” the group’s attorney Erik Stanley said in a statement. “It is constitutional and should continue to be respected and protected.”

Under the federal law passed in 1954, ministers don’t pay income taxes on compensation that is designated part of a housing allowance.

The Freedom From Religion Foundation argued that a clergy member can use the untaxed income to purchase a home, and then, in a practice known as “double dipping,” deduct interest paid on the mortgage and property taxes.

Crabb ruled that the exemption provides an unconstitutional benefit to religious persons and no one else. She said the magnitude of the benefit, which was estimated to save clergy members more than $2 billion in taxes between 2002 and 2007, only underscored what is wrong with the law. Her decision had been on hold pending the conclusion of appeals. Follow @sbauerAP