The Freedom From Religion Foundation and its co-presidents Annie Laurie Gaylor and Dan Barker have won a significant ruling with far-reaching ramifications declaring unconstitutional the 1954 “parish exemption” uniquely benefiting “ministers of the gospel.”
“May we say hallelujah! This decision agrees with us that Congress may not reward ministers for fighting a ‘godless and anti-religious’ movement by letting them pay less income tax. The rest of us should not pay more because clergy pay less,” Gaylor and Barker commented.
U.S. District Judge Barbara B. Crabb for the Western District of Wisconsin issued a strong, 43-page decision Friday declaring unconstitutional 26 U.S. C. § 107(2), passed by Congress in 1954. Quoting the Supreme Court, Crabb noted, “Every tax exemption constitutes subsidy.” The law allowed “ministers of the gospel” paid through a housing allowance to exclude that allowance from taxable income. Ministers may, for instance, use the untaxed income to purchase a home, and, in a practice known as “double dipping,” may then deduct interest paid on the mortgage and property taxes.
“The Court’s decision does not evince hostility to religion — nor should it even seem controversial,” commented Richard L. Bolton, FFRF’s attorney in the case. “The Court has simply recognized the reality that a tax free housing allowance available only to ministers is a significant benefit from the government unconstitutionally provided on the basis of religion.”
Crabb wrote: “Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility. It is important to remember that the establishment clause protects the religious and nonreligious alike.”
The benefit to clergy is huge — saving an estimated $2.3 billion in taxes in the years 2002-2007 alone, according to a statement by Congressman Jim Ramstad in 2002. Clergy are permitted to use the housing allowance not just for rent or mortgage, but for home improvements including swimming pools, maintenance and repairs. They may exempt from taxable income up to the fair market rental value of their home, particularly benefiting well-heeled pastors. The benefit extends to churches, which can pay clergy less, as tax-free salaries go further.
The 1954 bill’s sponsor, Rep. Peter Mack, argued ministers should be rewarded for “carrying on such a courageous fight against this [godless and anti-religious world movement].”
“I agree with plaintiffs that §107(2) does not have a secular purpose or effect,” wrote Crabb, adding that a reasonable observer would view it “as an endorsement of religion.”
Crabb wrote 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.”
All taxpayers are burdened by taxes, Crabb noted. “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 invoked the Supreme Court’s 1989 case, Texas Monthly, Inc. v. Bullock, calling exemptions for religious publishers from having to collect state sales tax “unjustifiable awards of assistance to religious organizations.”
“If a statute imposed a tax solely against ministers (or granted an exemption to everyone except ministers) without a secular reason for doing so, that law would violate the Constitution just as §107(2) does.” Crabb reasoned.
Crabb’s decision dismissed as implausible the government’s strange argument — attempting to deny them standing to sue — that atheists Gaylor and Barker could “conceivably” qualify as “ministers of the gospel.” Gaylor and Barker, as directors of an educational organization advocating atheism and freethought, have not been entitled to claim the housing allowance FFRF designates for them, while any “minister of the gospel” may do so for promoting religion.
Crabb rejected the claim that the 1954 bill was necessary to eliminate “discrimination” against ministers not living in parsonages. “A desire to assist disadvantaged churches and ministers is not a secular purpose and it does not produce a secular effect when similarly disadvantaged seculars organizations and employees are excluded from the benefit.”
Crabb added: “Under defendants’ view, there would be no limit to the amount of support the government could provide to religious groups over secular ones.”
Crabb’s decision notes that the Treasury Secretary in 1984 wrote a memorandum advising repeal of § 107 because there “is no evidence that the financial circumstances of ministers justify special tax treatment.” Ministerial compensation may be low compared to other professions, but “not compared to taxpayers in general.” The recommendation was withdrawn after clergy protests.
In 1921, Congress passed a law allowing ministers of the gospel to exclude from gross income the rental value of housing, such as a parsonage, received as part of compensation, saying it was for the convenience of the employer. Since FFRF does not provide Gaylor and Barker with a house, FFRF voluntarily dropped that portion of its challenge.
While enjoining Treasury Secretary Jacob Lew and IRS Acting Commissioner Daniel Werfel from enforcing the tax break, Crabb stayed her ruling until the conclusion of any appeals, as is typical in significant cases.
The far-ranging ruling makes interesting reading, even working in Robert Ingersoll’s maxim, “With soap, baptism is a good thing” (quoting from FFRF’s “De-Baptism Certificate”).