On October 6, 2017 the U.S. District Court Judge for the Western District of Wisconsin, Barbara Crabb, ruled in favor of a Freedom from Religion Foundation suit that challenged the constitutionality of the housing allowance exemption for ministers. In effect since 1954, the exemption has allowed a "minister of the gospel" to exempt from income tax the portion of compensation that can be designated as housing costs; however, the housing exemption does not apply to payment of Social Security tax which ministers incur at the self-employment rate (combined rate of employer and employee SS tax).

In the current case, the judge issued a ruling similar to the one she made in 2013 before the case was dismissed on appeal due to an issue of "standing" by the complainant. "I adhere to my earlier conclusion that [the minister's housing exclusion] violates the establishment clause" by providing an unfair benefit to religious persons.

It will likely be some time, in terms of years, before appeals of the decision are adjudicated.

A statement by CapinCrouse, one of the leading accounting firms for nonprofit organizations, advised: "It is expected that the case will be appealed to the Seventh Circuit Court of Appeals in Chicago. For now, there is no change in how churches or ministers should act."

Even if the ruling should prevail through appeals, it is not known how the outcome would be enacted or what transitional rules might be adopted by the Internal Revenue Service.

An adverse ruling could affect both active ministers and those drawing housing-allowance-designated retirement distributions that are unique to church retirement plans. In any event, the Retirement Plan of FCMM will continue to be a good choice for churches and church staff members as a tax-advantaged, simple to administer, flexible, and reasonable-cost benefit plan.