The Freedom From Religion Foundation filed a brief in early June before the 7th Circuit U.S. Court of Appeals in Chicago, defending its major November victory in federal district court overturning the housing allowance exclusion uniquely benefiting “ministers of the gospel.”
“Even the Bible commands citizens to ‘render unto Caesar the things which are Caesar’s,’ ” the state/church watchdog notes in its 47-page brief. Yet the tax code and the clergy who benefit from it at the expense of all other taxpayers ignore “basic principles of neutrality and fairness when it comes to clergy taxation.”
“Just about every church denomination in the country has mobilized to fight our victory and flout the ‘Render unto Caesar’ injunction,” said Annie Laurie Gaylor. She and her husband, Dan Barker, are FFRF co-presidents and co-plaintiffs in the nationally watched lawsuit.
“The rest of us pay more taxes because ministers don’t pay their fair share. Ministers and churches are unabashed in demanding special treatment. We like to call it our ‘David versus Goliath’ IRS battle,” she added, “and you know who won that!”
The “parsonage allowance” law enacted in 1954 favors ministers by allowing churches to pay them through a housing allowance that is then excluded (up to the fair rental value of a home) from taxable income.
U.S. District Judge Barbara Crabb of Madison, Wis., agreed that this major tax benefit — expressly awarded to clergy for fighting “godlessness,” according to bill sponsor U.S. Rep. Peter Mack, D-Ill. — is an unconstitutional preference for religion over nonreligion. Crabb noted that “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.”
“It’s more than disappointing that FFRF is under assault not just by conservative churches but by liberal ones, including the American Baptists, traditionally our allies for separation of church and state,” noted Barker. “Even Unitarian Universalists, Jewish and Islamic groups have joined literally hundreds of Christian denominations and nondenominational congregations in signing onto seven amicus briefs filed against FFRF by theocratic legal aid societies.”
As a former ordained minister, Barker previously benefited from the preferential treatment of clergy by the IRS. But he and Gaylor, as directors of an atheist/agnostic group, may not deduct from their taxable income the portion of their salaries now designated by FFRF as a “housing allowance.” That discriminatory treatment gave the couple standing to sue.
Richard L. Bolton, serving as FFRF’s litigation attorney, laid out the discriminatory treatment of Gaylor and Barker as similarly situated taxpayers. Section 107(2) of the tax code violates the Establishment Clause of the First Amendment because it is not neutral — providing significant tax benefits exclusively to ministers of the gospel, and providing greater benefits to ministers than to nonclergy taxpayers.
Ministers derive an enormous financial benefit by being paid in tax-exempt dollars, FFRF’s brief notes. So do churches, which may pay clergy less because tax-free dollars go further. There’s no requirement that the housing allowance be used for the convenience of the employer. Even retired ministers are eligible to claim the allowance.
The IRS has determined that teachers at parochial schools, even athletic coaches, may be paid through a housing allowance if they’re ordained. FFRF documents the substantial entanglement between church and state that results from intrusive IRS standards about what constitutes an eligible church and minister.
“While all taxpayers would like to have exclusions and deductions to cover their housing costs, the reality is that only ministers of the clergy now get this break,” FFRF’s brief concludes. “Section 107(2) therefore violates the Establishment Clause in a most obvious way by conditioning tax benefits on religious affiliation.”
FFRF is the nation’s largest association of atheists and agnostics, with more than 20,000 members, and is based in Madison, Wis. FFRF has two other challenges of the IRS’ preferential treatment of religion. Its challenge of lack of IRS enforcement of anti-electioneering laws by tax-exempt churches is in district court, as is its challenge of the IRS exemption of churches from mandatory reporting laws applying to all other 501(c)(3) entities.
The case is Freedom From Religion Foundation, Annie Laurie Gaylor and Dan Barker v. Jacob J. Lew and John A. Koskinen.
