In 2017, a Wisconsin judge ruled the “longstanding tax code exemption for religious housing” under I.R.C. Section 107(2) unconstitutional pending decisions of higher courts.  Any updates on that?


Idaho Bible College and Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

The Controller at IBCS called us last week to get an update on the “Minister’s Housing Allowance” case that has been in U.S. courts for a few years.  “I remember hearing that the Appeals Court had heard arguments about the housing allowance last fall, but have they issued a decision yet?”  He asked.

“As a matter of fact they have,” we gladly tell them.  “The Seventh Circuit has ruled that the clergy housing allowance is constitutional, overturning the 2017 decision of a Wisconsin U.S. District Court.”

“In the Seventh Circuit opinion, they found that the minister’s housing allowance is just one of many examples over the years whereby Congress has chosen to exempt religious organizations and/or their resources from taxation.  The Seventh Circuit found (among other things) that I.R.C. Section 107(2) serves as a preventative against excessive entanglement with religion.”

“So, will the Supreme Court of the United States agree to hear this case if appealed?” asks IBCS’ Controller.

“We will likely know in the next 90 days or so whether the Supreme Court will hear the appeal.”



From Seventh Circuit ruling in Gaylor v. Mnuchin (3/15/19):

“We conclude § 107(2) has a secular legislative purpose, its principal effect is neither to endorse nor to inhibit religion, and it does not cause excessive government entanglement. Here, “[t]here is no genuine nexus between tax exemption and establishment of religion.” Walz, 397 U.S. at 675. Section 107(2), then, does not violate the Establishment Clause under the Lemon test.” (page 25)

“FFRF claims § 107(2) renders unto God that which is Caesar’s. But this tax provision falls into the play between the joints of the Free Exercise Clause and the Establishment Clause: neither commanded by the former, nor proscribed by the latter. We conclude §107(2) is constitutional. The judgment of the district court is REVERSED.” (pages 28-29, underline added)



  • The “Minister’s Housing Allowance” is set forth in Internal Revenue Code Section 107(2).
  • Over the past few years, we have sounded an alarm that this law has been under fire in the courts and has twice been ruled unconstitutional by a Wisconsin district court.
  • Oral arguments were heard on October 24, 2018 before the U.S. Court of Appeals for the Seventh Circuit.
  • On March 15, 2019, the Seventh Circuit ruled, “We conclude §107(2) is constitutional. The judgment of the district court is REVERSED.”

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

© 2019 Christian College Resources, Inc.