A tax break for clergy has survived in a US federal court ruling that overturns a previous judgment, reports Baptist Press.

A 1954 law permits ministers to exclude for federal income tax purposes a portion or all of their gross income as a housing allowance. The law was challenged by an atheist organisation which said it violated the US constitutions prohibition on government establishment of religion.

A three-judge panel did not rule on the allowance's constitutionality, but said that the Freedom From Religion Foundation (FFRF) lacked the legal right to challenge the law.

Russell D Moore, president of the Southern Baptist Ethics and Religious Liberty Commission, told Baptist Press that the "ministerial housing allowance is just and fair, and an equitable recognition of the unique employment situation of clergy".

O S Hawkins, president of the Southern Baptist Convention's GuideStone Financial Resources body, said of the decision, "This is indeed good news for ministers.

"Throughout the decades, there has been a recognition that the minister's housing allowance is a vital benefit that is consistent with our constitution. We are thankful for the government's defense of the housing allowance ... and thankful to the appeals court for its decision in this matter."

The decision "is a great victory for separation of church and state," said Luke Goodrich, deputy general counsel of the Becket Fund for Religious Liberty.

"For 60 years, the parsonage allowance has kept the taxman from mucking around in complex religious questions. Nobody wants the IRS taxing churches at the whim of atheists with no skin in the game."

The tax break is particularly helpful for ministers of smaller churches, who generally receive lower salaries. Its overall value to clergy is huge: an estimate in 2002 was that it would save ministers $2.3 billion in taxes during the following five years.

FFRF co-presidents Dan Barker and Annie Laurie Gaylor expressed disappointment that the court was unwilling to confront "this blatant preference for ministers and churches".

"We will continue to challenge this indefensible favoritism for religion in other forums until the issue cannot be circumvented," Barker said.