On November 13, 2014, the U.S. Court of Appeals for the Seventh Circuit reversed the decision of the U.S. District Court for the Western District of Wisconsin in the case Freedom from Religion Foundation (FFRF) v. Lew. The Court of Appeals remanded the case to the District Court with instructions to dismiss the case for lack of standing.
The District Court had ruled that the tax exclusion of cash housing allowance for clergy under Section 107(2) of the Internal Revenue Code (Code) is unconstitutional under the Establishment Clause, although the District Court also held that the FFRF did not have standing to challenge the exclusion of in-kind housing (parsonage) under Section 107(1) of the Code.
In today’s ruling, the Court of Appeals stated that the FFRF had not asked the Internal Revenue Service (IRS) to exclude the housing allowance that its directors received from taxation. Importantly, because the challenge was resolved on standing grounds, the Court of Appeals noted in its opinion: “We therefore do not reach the issue of the constitutionality of the parsonage exemption.”