U.S. District Judge William B. Shubb, Eastern District of California in Sacramento, denied a local pastor the right to intervene in the Freedom From Religion Foundation’s challenge of tax benefits for “ministers of the gospel,” commonly known as “the parsonage exemption.”
In a memorandum and order signed on Dec. 1, Judge Shubb turned away a request to intervene by Pastor Michael Rodgers and 100 local “Doe” ministers.
Among Rev. Rodgers’ claim was that the government could not represent his interests adequately because the IRS and California Franchise Tax board stand to gain “a staggering windfall” of tax revenues if the statutes are struck down.
Shubb said this “cynical view of the United States government” did not take into account that the government “has consistently enforced the revenue statutes,” and said there is a “very strong presumption that the federal defendants will adequately represent pastors’ interests.”
Under a statute adopted by Congress in 1954 adopted because clergy were “carrying on such a courageous fight against this foe [a godless and irreligious world movement],” the IRS grants ministers the right to deduct mortgage interest and property tax payments.
The Foundation lawsuit was filed on Friday, Oct. 16. Attorney Richard Bolton, Madison, Wis., with local counsel Michael Newdow, Sacramento, represent the Foundation and its 21 Northern California plaintiff members.
The Foundation seeks a declaration that, on their face and as administered, provisions of tax benefits for “ministers of the gospel” provided for by the IRS and Treasury Department violate the Establishment Clause of the First Amendment to the U.S. Constitution. FFRF requests that the Court enjoin any allowance or grant of tax benefits for ministers of the gospel under §§107 and 265(a)(6). Similarly, it seeks to overturn Sections 17131.6 and 17280(d)(2) of the California Revenue and Taxation Code, which correspond to the IRS codes, and “have the same constitutional defects and infirmities.”
Defendants are Timothy Geithner, Secretary of Treasury, Douglas Shulman, Commissioner of the Internal Revenue Service, and Selvi Stanislaus, executive officer of the California Franchise Tax Board, who are providing tax benefits to “ministers of the gospel” which nonclergy taxpayers do not receive, including members of the Freedom From Religion Foundation.
Section 107(2) means ministers may not have to pay taxes on some or all of their salary by declaring it a “housing allowance.” The privilege also permits churches to save money on clergy salaries. Most notorious, clergy may “double-dip”: deduct their mortgage payments and real estate taxes from income tax, even though they paid for these with tax-exempt dollars, amounting to a government subsidy solely for clergy. In 2002, Congress acted to protect the exemption, after the IRS sued over an abusive housing allowance taken by Rev. Rick Warrens, by limiting deductions in future to “reasonable rental value.”
