An appellate court recently issued a favorable ruling for religious employers in a closely watched case relating to the ability of religious employers to provide tax-fee housing allowances to ministers. The court overturned a district court decision declaring unconstitutional Internal Revenue Code Section 107(2), which excludes from gross income a rental allowance paid to a “minister of the gospel” as part of his or her compensation, because the plaintiffs-appellees lacked standing to challenge the provision’s constitutionality. Religious institutions offering such allowances should continue to monitor developments in this area and consider alternative compensation strategies.

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