This Week, an Appeals Court Heard Arguments to Reinstate Tax-Free Housing for Pastors September 12, 2014

This Week, an Appeals Court Heard Arguments to Reinstate Tax-Free Housing for Pastors

For years now, the Freedom From Religion Foundation has been in a legal battle to end the “Parsonage Exemption” that allows ministers to deduct the cost of rent for their church-owned houses from their taxable income. FFRF believes that this shows preferential treatment by the government for religious leaders.

FFRF’s own board has even paid its co-presidents Dan Barker and Annie Laurie Gaylor $15,000 each as part of their housing allowance, but because they don’t qualify as “ministers of the gospel,” the law doesn’t apply to them. That’s one of the ways they’ve tried to prove the law is illegal.

Last November, U.S. District Judge Barbara B. Crabb ruled in favor of the FFRF, writing that the exemption was indeed unconstitutional.

Thanks to FFRF, he’s going to have to give some of that money back…

You can read much more about Crabb’s decision here.

That case was (to no one’s surprise) appealed by the U.S. Justice Department, and oral arguments took place this week in Chicago. Tom Cara, the President of the Freedom From Religion Foundation’s Metropolitan Chicago Chapter, was in the courtroom and offers his take on the situation below:

On Tuesday, the Seventh Circuit Court of Appeals, which encompasses Wisconsin, Illinois and Indiana, heard oral arguments that could overturn the FFRF’s claim that the Parsonage Exemption, in force since 1954, violates the Establishment Clause of the First Amendment.

In its brief, the FFRF stated that Section 107(2) of the Internal Revenue Service code “undeniably confers a significant tax benefit upon religious clergy that is not available to non-clergy taxpayers.” FFRF attorney Richard Bolton argued that benefits solely based on religion are unconstitutional.

I consulted with FFRF staff attorney Sam Grover, who was in attendance with many other FFRF attorneys, regarding this issue. He told me: “The real problem with 107(2) is that it elevates churches above similarly-situated secular organizations by granting a benefit only to religious leaders. This goes beyond the two ways the courts have said the government can permissibly benefit religious organizations: 1) it can create a neutral, generally applicable law that incidentally benefits religious organizations (like a tax break to all nonprofits, which would include religious nonprofits), or 2) it can alleviate a government-imposed burden on religion (like when the government moves soldiers abroad and then provides them with chaplains, since they aren’t near their own churches).”

Neither is the case here.

During the oral arguments, Justice Department attorney Judith Hagley submitted that FFRF could have claimed the ministerial exemption in its tax return but did not. She argued that if they had done this in the first place and were denied the credit, they could have then gone through the tax courts to claim that section 107(2) discriminates on the basis of religion. Bolton later pointed out the language in section 107(2) discriminates against FFRF on its face, since FFRF is not a church and Dan Barker and Annie Laurie Gaylor are certainly not “ministers of the gospel” (or ministers of any other religious doctrine). Actually claiming the exemption just to be denied would have been an exercise in frivolity.

The government next argued that an atheist church “minister” could be eligible for the tax exemption, as the IRS code defines this exemption as applying to any organization that follows a doctrine of belief, claiming even atheist organizations can be interpreted as a “church.” Of course, FFRF and other prominent atheist organizations have rationally and consistently maintained that atheism is not a religion. It is an absence of religion. And when pressed by the judges, attorney Hagley could not name a single “atheist megachurch,” though she maintained they do exist, a claim that’s been refuted before.

Hagley also argued taxpayers do not have the right to litigate the tax liabilities of others. Since this is a tax issue that does not apply to the plaintiffs, she argued they should not even have standing for this case. (That seems to be the crux of the issue, based on the judges’ remarks.)

But as stated by Sam Grover: “Basically, the counter-argument [to this] is that if a statute is under-inclusive and only people who benefit from the statute can challenge it, then the statute will never be challenged. It would be like granting a tax break only to white people and then claiming that a black person could not challenge the tax break as unconstitutional.”

It may be months before a decision is reached in this appeal. If the ruling is overturned, will FFRF take this to the Supreme Court? It’s hard to say in light of the current conservative majority controlling the Court and its recent decisions such as Town of Greece v. Galloway and Burwell v. Hobby Lobby Stores, Inc.

Let us hope (but skip praying) the Seventh Circuit Court upholds Judge Crabb’s decision and doesn’t just dismiss it on standing.

If you’re interested, you can listen to the oral arguments right here.

(Image via Shutterstock)

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