Tax-Free Housing for Religious Leaders May Be Legal, But It’s Still Problematic May 16, 2019

Tax-Free Housing for Religious Leaders May Be Legal, But It’s Still Problematic

In March, the Freedom From Religion Foundation lost a major legal battle in its effort to stop the government from giving religious leaders a huge unconstitutional tax break.

You can read all the details of that case right here, but here’s the gist of it: As it stands, the U.S. government allows religious leaders to deduct the cost of rent of their church-owned houses from their taxable income. It’s a benefit worth more than $800 million in lost tax revenue each year.

But that “Parsonage Exemption” — technically, IRS Section Code 107, which applies to a “minister of the gospel” — does not apply to leaders of explicitly non-religious groups. That’s why FFRF sued.

Now, in a forthcoming paper for the University of Pennsylvania Journal of Constitutional Law Online, professors Bridget J. Crawford and Emily Gold Waldman of the Pace University School of Law take a deeper dive into the ruling by the Seventh Circuit Court of Appeals — the ruling that overturned FFRF’s initial victory and preserved the religious perk.

The paper sheds light on the hypocrisies in that ruling and confirms that FFRF actually raised a lot of valid concerns.

For example, can we say leaders of an atheist organization count as a “minister of the gospel”? The authors say we can since the rule has generally been applied to people who don’t fit that description at all. There’s no government definition of what a “minister” is and that means the word can definition just about anything within reason.

Imagine, for example, that an individual has been ordained as a minister in a particular faith. That person then returns to school and becomes a doctor. The religious organization or congregation decides that it would be convenient to have this doctor routinely attend congregational services and functions, in the event of any medical emergencies. The religious organization has housing that it is willing to make available to the doctor at no cost, and the doctor moves in. Based on a reading of the statute alone, it is not clear that the doctor would be required to include the value of the housing in gross income.

As for the Seventh Circuit’s unanimous judgment against FFRF, the authors say there was ample reason to rule in the atheists’ favor:

… the very fact that the Treasury Department and religious organizations claimed in their amicus briefs that “the survival of many congregations hangs in the balance” of the validity of the parsonage exemption is further proof that § 107 functions as an active subsidy of religion.

The problem isn’t just the Establishment Clause, though. There’s a sex discrimination angle here, too, since many religious organizations don’t ordain women at all. By subsidizing priests with the Parsonage Exemption, it amplifies the gender imbalance within religious leadership. That doesn’t make the Parsonage Exemption illegal, say the authors, but it’s yet another reason we should get rid of it.

… it is unlikely that the parsonage exemption could be struck down as a form of sex discrimination. Nevertheless, the exemption’s disparate impact as to sex does raise further questions — beyond those already discussed in the Establishment Clause context — about its continued wisdom.

In short, there’s a law that benefits organized religion and hurts women. But an appellate court has said it’s legal and it’s not like Congress is going to change the rules anytime soon. So the problems remain in place with no possible resolution, all because too many religious groups benefit from the special privilege.

(Image via Shutterstock)

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