The IRS has now appealed this Tax Court decision to the U.S. Court of Appeals for the Ninth Circuit.

During their Fall 2000 meeting the NACBA Board of Directors voted to file an Amicus Curiae (“friend of the court”) brief in support of the Warrens. Joining NACBA in this brief are the Presbytery of New Covenant of the Presbyterian Church (USA) in Houston, Texas, and Eagle Mountain International Church of Newark, Texas. Frank Sommerville of Hammar & Sommerville filed the brief on behalf of the Amicus Curiae. The brief is available on our website at www.nacba.net.

Prior to the decision of the Tax Court, the nontaxable portion of a minister's housing allowance was limited to the lesser of 1) the amount designated by the church as housing allowance, 2) the actual amount spent for housing-related expenses, and 3) the annual fair market rental value of the minister’s home furnished, including utilities. Item number 3, the fair market rental value test, was adopted by the IRS in 1971.

With this repeal of the rental value test many ministers are now eligible to file amended returns for tax years 1997 through 1999. This is only available to those ministers who were limited in their housing allowance exclusion by the fair market rental value test.

The housing allowance is excludable for federal income tax purposes only and not for the computation of the self-employment tax (social security).