Tax the Church! A new federal lawsuit is challenging an unconstitutional tax exemption that allows clergy to avoid paying income tax.

In a statement issued earlier this week, the Freedom From Religion Foundation (FFRF) announced that it is challenging a housing allowance in the tax code that uniquely privileges clergy.

According to the statement, FFRF filed the federal lawsuit in the Western District of Wisconsin, naming as defendants Jacob Lew, U.S. Secretary of the Treasury, and John Koskinen, IRS Commissioner.

FFRF reports the clergy allowance is not a tax deduction but an exemption—allowing housing allowances paid as part of clergy salary to be subtracted from taxable income, noting:

The benefit of the tax exemption to the clergy is huge. The congressional Joint Committee on Taxation has reported that the exemption amounts to $700 million a year in lost revenue. Religious News Service calculated the allowance reduces the take-home pay of some pastors by up to 10 percent. This is because churches benefit, since tax-free salaries lower their overhead. Christianity Today found that 84 percent of senior pastors receive a housing allowance of $20,000 to $38,000 in added (but not reported) compensation to their base salary.

Speaking with Forbes magazine in 2013, William Thornton, a Georgia pastor and blogger, said:

The manner in which our housing allowance has been used borders on clergy malpractice. A growing subset of ministers who are very highly paid and who live in multimillion dollar mansions are able to exclude hundreds of thousands of dollars from income taxation.

The unconstitutional tax exemption, passed by Congress in 1954, allows a clergy member to use untaxed income to purchase a home, and then, in a practice known as “double dipping,” deduct interest paid on the mortgage and property taxes.

FFRF reports the 1954 bill’s sponsor, Rep. Peter Mack, made the constitutionally obnoxious argument that ministers should be rewarded for “carrying on such a courageous fight against this (godless and anti-religious world movement).”

Previously the FFRF challenged the religious income tax exemption and won. In 2013, U.S. District Judge Barbara B. Crabb for the Western District of Wisconsin issued a strong, 43-page decision declaring unconstitutional the 1954 “parish exemption” that allows “a minister of the gospel” to not pay income tax on a specific portion of their compensation.

About her 2013 decision Judge Crabb wrote:

Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility. It is important to remember that the establishment clause protects the religious and nonreligious alike.

Yet the secular victory was short lived. In November 2014, the 7th U.S. Circuit Court of Appeals threw out that victory—not on the merits of the case, but on the question of standing.

Writing for Forbes, Peter J. Reilly comments on the tax exemption that allows clergy to avoid paying income tax, noting:

The so called parsonage allowance Code Section 107(2) is probably one of the most constitutionally dubious parts of the Internal Revenue Code…

In the new lawsuit, FFRF is asking the court to rule unconstitutional IRS 26 U.S.C. §107 as administered by the IRS and the Treasury Department because it provides preferential and discriminatory tax benefits to ministers of the gospel, and “directly benefits ministers and churches, most significantly by lowering a minister’s tax burden, while discriminating against … leaders of a nonreligious organization…”

The Freedom From Religion Foundation is a national state/church watchdog based in Madison, Wisconsin.

Bottom line: Tax the church! That $700 million a year in lost revenue could be put to good use benefiting all tax payers instead of lining the pockets of snake oil salesmen hustling the gullible.