Atheists give up $1B church tax lawsuit Churches successfully protect longstanding tax exemption for ministers

WASHINGTON, D.C. – An atheist group last night gave up its lawsuit threatening low-income churches and their communities nationwide. In Gaylor v. Mnuchin, the atheist group Freedom From Religion Foundation (FFRF) sued the IRS to end the parsonage allowance, a federal tax provision that allows churches, mosques, and synagogues to provide faith leaders a tax-free housing allowance to help them live in the communities they serve (Learn more in this 3 min. video). The U.S. Court of Appeals for the Seventh Circuit recently rejected the atheists’ challenge and unanimously upheld the tax exemption as constitutional, and last night the atheist group declined to appeal to the Supreme Court, ending the lawsuit.

In 2016, the atheist group Freedom From Religion Foundation (FFRF) sued the IRS, demanding that it end the parsonage allowance and begin imposing nearly $1 billion in new taxes per year on churches nationwide. Represented by Becket, Pastor Chris Butler of Chicago Embassy Church and several other religious leaders intervened in the case to defend the parsonage allowance. The Seventh Circuit agreed with the churches, ensuring that they will remain free to continue using the parsonage allowance and serving their communities as they have for decades.

“This is a victory for all houses of worship that serve needy communities across the country,” said Pastor Chris Butler of Chicago Embassy Church. “I am grateful that my church can still be a home for South Side Chicago’s at-risk youth, single mothers, unemployed, homeless, addicted, victims of gang violence and others on the streets.”

Pastor Chris leads a predominantly African-American congregation that ministers to Chicago’s poorest neighborhoods. His church can’t afford to pay him a full salary, but it offers him a small housing allowance so he can afford to live near his church and the community he serves. For over 60 years, federal law has recognized that ministers’ housing allowances shouldn’t be taxed as income under the same tax principle that exempts housing allowances for hundreds of thousands of secular workers—including teachers, business leaders, military service members, and many more. This tax exemption also keeps the IRS from becoming entangled in religious matters.

“The tax code has long exempted housing allowances for ministers under the same principle that it exempts housing for soldiers, diplomats, peace corps workers, prison wardens, non-profit presidents, oil executives, school superintendents, teachers, nurses, fisherman, and many more,” said Luke Goodrich, vice president and senior counsel at Becket. “The court rightly recognized that providing this kind of equal treatment to churches is perfectly constitutional, and churches should be allowed to serve the neediest members of their communities without the tax man breathing down their neck.”

Becket represented Pastor Chris Butler and Bishop Edward Peecher of Chicago Embassy Church, Father Patrick Malone of Holy Cross Anglican Church, and the Diocese of Chicago and Mid-America of the Russian Orthodox Church Outside of Russia in this case.

For more information or to arrange an interview with a Becket attorney, contact Ryan Colby at media@becketlaw.org or 202-349-7224. Interviews can be arranged in English, Chinese, French, German, Portuguese, Russian, and Spanish.