Monday, October 09, 2017

Court Says Tax Code's Parsonage Allowance Is Unconstitutional

In Gaylor v. Mnuchin, (WD WI, Oct. 6, 2017), a Wisconsin federal district court held that the parsonage allowance provision in Sec. 107(2) of the Internal Revenue Code violates the Establishment Clause. That section allows clergy to exclude from income the rental allowance they receive that is used to rent or provide a home.  In a 2013 decision, the same court reached a similar conclusion, but was reversed on appeal on standing grounds.  Plaintiffs cured those standing issues in the present case. The court summarized it holding:
any reasonable observer would conclude that the purpose and effect of § 107(2) is to provide financial assistance to one group of religious employees without any consideration to the secular employees who are similarly situated to ministers. Under current law, that type of provision violates the establishment clause.
As a remedy, however, the court issued only a declaratory judgment, and gave the parties the opportunity to file supplemental briefs on additional remedies such as a tax refund to plaintiffs who were taxed on their housing allowances from their employer (the Freedom From Religion Foundation), or an injunction of some sort.  FFRF issued a press release announcing the decision. [Thanks to Bob Ritter for the lead.]