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.
… 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.
… Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility.
Although it is undoubtedly true that taxes impose a burden on ministers, the same is true for all taxpayers. Defendants do not identify any reason why a requirement on ministers to pay taxes on a housing allowance is more burdensome for them than for the many millions of others who must pay taxes on income used for housing expenses.
Crabb even laughed off the idea that Barker and Gaylor should be considered “ministers”:
Although defendants devote a substantial amount of their briefs to this argument, it is difficult to take it seriously. Under no remotely plausible interpretation of § 107 could plaintiffs Gaylor and Barker qualify as “ministers of the gospel.”
Defendants cite no persuasive evidence that either Gaylor or Barker is ordained, that they perform “sacerdotal” functions or conduct “worship” services, that anyone in the foundation considers Gaylor and Barker to be “spiritual” leaders or that the foundation is under the authority of a “church.”
Which was just the judge’s polite way of saying:
A bit of history: This whole battle has been over Internal Revenue Code section 107, which states:
In the case of a minister of the gospel, gross income does not include —
(1) the rental value of a home furnished to him as part of his compensation; or
(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.
That section was written by Congressman Peter Mack (D-IL) in 1953. As was the case with several pieces of legislation from that era, Mack introduced it to stand against those “godless Communists”:
Certainly, in these times when we are being threatened by a godless and anti-religious world movement we should correct this discrimination against certain ministers of the gospel who are carrying on such a courageous fight against this. Certainly this is not too much to do for these people who are caring for our spiritual welfare.
It has always been about advancing religion and keep down atheism.
And last year, Judge Crabb righted that wrong. That it came nearly 60 years after the law first went into effect was perhaps a sign that tradition alone isn’t a good reason to continue bad policy.
Pastors, of course, will argue that they deserve the exemption — they provide an important service for others and their salaries are (usually) very modest. But then again, teachers could say the same thing, and it’s not like they’re getting a tax break as nice as this.
Not surprisingly, there was an appeal. In September, the Seventh Circuit Court of Appeals heard arguments that could overturn Crabb’s ruling, but according to people present that day, the focus was really on whether FFRF had standing to sue:
[Justice Department attorney Judith] 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.
In other words, even if the pastors were getting an unfair tax break, who the hell are you people to complain about it? (Then again, if FFRF can’t fight this battle, could anyone?)
Today, we learned the outcome of that discussion.
The Appeals Court has ruled against FFRF, leaving the Parsonage Exemption in place. It’s hardly a silver lining, but the ruling was based entirely on standing, not the merits of their argument:
… the plaintiffs here are members of a group (in this case, the non-religious) that is allegedly suffering illegal discrimination. But the mere fact that discrimination is occurring is not enough to establish standing, absent being “personally denied equal treatment”… Allowing members of discriminated-against groups who have not suffered a particularized injury to bring suit would not only be unconstitutional, it would also create practical difficulties by opening the door to constitutional challenges to any tax exemption that a given individual suspects he may not be entitled to — without first giving the IRS and the Tax Court the opportunity to determine the proper construction and application of the law.
In essence, the Court ruled that if FFRF wants to change the Parsonage Exemption, they should speak with a member of Congress and get a new law passed, because suing isn’t a viable option.
FFRF also has the option of applying for the tax credit themselves, getting rejected, and then suing all over again. I don’t believe they have any intention of doing that because it would require calling themselves “ministers” of atheism, so to speak, a title they strongly disavow.
A few other tidbits:
Forbes points out that there’s a desire to strengthen the exemption so it’s not challenged in the future:
Congressman Bill Cassidy, who is now in a hotly contested runoff for a Senate seat for Louisiana, has introduced legislation to extend “minister of the gospel” status to duly recognized official of religious, spiritual, moral or ethical organizations to protect the dubious constitutionality of the parsonage exclusion.
The Becket Fund for Religious Liberty, which loved the ruling, had an interesting take on FFRF’s challenge:
“This is a great victory for fair treatment of churches,” said Luke Goodrich, deputy general counsel for the Becket Fund for Religious Liberty…
“When a group of atheists tries to cajole the IRS into raising taxes on churches, it’s bound to raise some eyebrows,” he said. “The court was right to send them packing.”
How’s that for spin? FFRF didn’t want to “raise” taxes on churches; they wanted to remove an unfair tax break that church leaders get. It may amount to the same thing financially, but the motives are very different. This wasn’t about spite. It was about equal treatment in the eyes of the government.
FFRF now says they plan to regroup. They can always appeal to the full Seventh Circuit, but there’s no guarantee all the judges will want to reopen this case. They can appeal directly to the Supreme Court, but there’s virtually no chance they’ll get heard there (or win).
Gaylor and Barker took issue with the appeals court’s cavalier assessment that they have suffered no concrete injury, since they must pay taxes on their housing allowance, while ministers are rewarded, simply for being religious leaders, with a unique and substantial tax benefit. The parish allowance is not a tax deduction but an exemption — housing allowances are subtracted from taxable income.
“We will continue to challenge this indefensible favoritism for religion in other forums until the issue cannot be circumvented,” Barker said.
Barker, by the way, is a former minister who was rewarded with this subsidy when he was “Reverend Barker,” a believer, and is now penalized as “Mr. Barker,” serving as a freethought leader.
It’s certainly a disappointing ruling, but I have to say it’s not a surprising one. We’re so used to privileging religion in this country that it’s hard to imagine how any court was going to remove one of the biggest perks of pastoring.
(Image via Shutterstock. Large portions of this article were published earlier)