Oral Arguments In 7th Circuit Challenge To Parsonage Allowance

Yesterday the U.S. 7th Circuit Court of Appeals heard oral arguments in Gaylor v. Peecher. (Audio recording of full oral arguments.) In the case, a Wisconsin federal district court held that the parsonage allowance provision in Sec. 107(2) of the Internal Revenue Code violates the Establishment Clause. (See prior posting.)  Courthouse News Service reports on the oral arguments.

Unusual Brief Filed In Appeal of Parsonage Allowance Case

As previously reported, last October in Gaylor v. Mnuchin a Wisconsin federal district court held that the parsonage allowance provision in Sec. 107(2) of the Internal Revenue Code violates the Establishment Clause.  The case has been appealed to the U.S. 7th Circuit Court of Appeals.  Yesterday an unusual amicus brief (full text) was filed by ADF on behalf of 8,899 Christian pastors from all 50 states.  The brief's 12-pages of legal arguments in favor of the constitutionality of the exemption are followed by a 200-page list of the pastors and churches on whose behalf the brief was filed.

Unordained Music Minister May Claim NJ Parsonage Exemption

In Clover Hill Reformed Church v. Township of Hillsborough, (NJ Tax Ct., March 23, 2018), the New Jersey Tax court held that, even though he is not ordained, a church's Minister of Music qualifies as an "officiating clergyman" so that he may claim the parsonage exemption from state property tax for the home furnished to him by the church. The court said in part:

Where adherents to a faith have a sincerely held belief that a person is a leader in providing worship services to a congregation, and that belief is corroborated by objective evidence of that person's training, experience, and responsibilities, the courts should hesitate to discount those beliefs because of the absence of an act, such as ordination, the court believes is necessary to impart the status of clergyman. It is not for the judiciary to impose on a religious congregation its view of who is or is not a clergyman in that congregation. The court's only role is to determine whether the legislative objectives expressed in the exemption statute have been met. 

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.]

Suit Challenges Constitutionality of Tax Code Parsonage Allowance

In a lawsuit filed this week, the Freedom From Religion Foundation is again challenging the constitutionality of the Internal Revenue Code's parsonage allowance.  The complaint (full text) in Gaylor v. Lew, (WD WI, filed 4/6/ 2016), contends that Section 107 of the Internal Revenue Code--which allows clergy to exclude from taxable income a housing allowance paid as part of their compensation-- violates the Establishment Clause.  The suit was brought by two FFRF officers who also received housing allowances.  One of the plaintiffs is an ordained minister who in prior years when employed by a church was able to claim the allowance.  In 2014, the 7th Circuit dismissed a similar suit on standing grounds because plaintiffs had not sought to exclude their FFRF allowances on their federal income tax returns or claim a tax refund. (See prior posting.) This time plaintiffs did file amended returns seeking a refund of taxes paid on their housing allowances. FFRF issued a press release announcing the filing of the lawsuit. [Thanks to Steven H. Sholk for the lead.]

7th Circuit Hears Oral Arguments In Parsonage Allowance Challenge

The U.S. 7th Circuit Court of Appeals yesterday heard oral arguments (audio of full arguments) in Freedom From Religion Foundation v. Lew. In the case, a Wisconsin federal district court held that the tax code provision that excludes a minister's parsonage allowance from gross income violates the Establishment Clause. Courthouse News Service reports on the oral arguments which focused both on standing and Establishment Clause issues.

Bill Would Eliminate Constitutional Problems With Parsonage Allowance

As previously reported, an appeal has been taken to the 7th Circuit in Freedom From Religion Foundation v. Lew, in which a Wisconsin federal district court held that the tax code provision excluding a minister's parsonage allowance from gross income violates the Establishment Clause because it benefits religious persons but not others. The appeal has drawn a number of amicus briefs from religious organizations across the spectrum. (Links to briefs and other documents.) On Monday, Louisiana Representative Bill Cassidy introduced a bill into Congress which, if enacted, would presumably remove the constitutional problems with the parsonage allowance. (Cassidy press release.)  H.R. 4493 provides that Section 107 of the Internal Revenue Code that grants the parsonage allowance to any "minister of the gospel"-- a term already interpreted by the courts to include non-Christian clergy as well-- is amended to add:

For purposes of this section, the term `minister of the gospel' includes any duly recognized official of a religious, spiritual, moral, or ethical organization (whether theistic or not).

So far, the bill has no co-sponsors and hearings on it have not been scheduled.  The progress (if any) of the bill through Congress can be followed here. [Thanks to Robert Baty for the lead.]

U.S. Appeals To 7th Circuit On Tax Code's Parsonage Allowance

According to ABP, the Justice Department last week filed a notice of appeal with the U.S. 7th Circuit Court of Appeals in Freedom From Religion Foundation v. Lew. In the case, a federal district court held unconstitutional the provision in the Internal Revenue Code that for tax purposes excludes from income a minister's parsonage allowance. (See prior posting.) [Thanks to Steven H. Sholk for the lead.]

Court Holds That Tax Code's Parsonage Allowance Violates Establishment Clause

In Freedom From Religion Foundation, Inc. v. Lew, (WD WI, Nov. 22, 2013), a Wisconsin federal district court held unconstitutional Internal Revenue Code Sec. 107(2) that excludes from gross income a minister's parsonage allowance. The court held that the exclusion "violates the establishment clause under the [U.S. Supreme Court's] holding in Texas Monthly, Inc. v. Bullock... because the exemption provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise."

An important issue in the case was plaintiffs' standing to bring the challenge.  FFRF co-presidents who were plaintiffs ultimately were found to have standing because of the non-excludable housing allowance they received as part of their compensation from FFRF. The court rejected the argument that plaintiffs should be seen as being entitled to claim the parsonage allowance as atheist ministers. The complaint in the case originally also challenged Sec. 107(1) that allows ministers who are furnished a home instead of a housing allowance to exclude the rental value of the home from income. Plaintiffs essentially conceded they lacked standing to pursue that challenge, and the court dismissed that aspect of their complaint. [Thanks to several readers who alerted me to the decision.]