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September 11, 2012
Judge Revives Atheist Challenge To Clergy Housing Allowance
Freedom From Religion Foundation now has legal standing to sue after restructuring its compensation.
An atheist-led challenge to the longstanding parsonage tax break enjoyed by ministers will now move forward -- again -- after a Wisconsin federal judge recently ruled that the group has new legal standing for its lawsuit.
District judge Barbara Crabb ruled Aug. 29 that plaintiffs from the Freedom from Religion Foundation (FFRF) can challenge an IRS tax exemption for "minister[s] of the gospel" for certain housing-related compensation because the FFRF recently changed its salary structure to include such a housing allowance.
The federal government attempted to dismiss the case, arguing that “plaintiffs cannot file a federal lawsuit until they claim an exemption on their tax returns and the IRS denies the claim.” But Crabb ruled that the statute clearly denies the exemption to FFRF employees.
“I see no reason to make their standing contingent on the futile exercise of making a formal claim with the IRS,” she stated.
Last year, FFRF dropped a similar lawsuit after the U.S. Supreme Court ruled that individuals who wish to sue the government must prove injury as a direct result of the law—instead of suing just because they pay taxes. FFRF recently adjusted its salary structure to include housing allowances, which “do not qualify for the parish exemption as they (FFRF employees) are not ‘ministers of the gospel.’”
FFRF contends that the IRS code violates its employees’ rights under the establishment clause of the First Amendment and the equal protection component of the Fifth Amendment.
CT previously covered the Supreme Court's ruling in the related tax-break case in 2011 and the dismissal of the previous FFRF case. CT has also examined whether or not Congress should change pastors' housing allowances.
Comments
How long do you expect this to take to move through the courts?
Posted By: N. Hull | September 11, 2012 12:33 PM
Does anyone know if the tax rules cover clergy other than Christian -- does it cover rabbis & imams, e.g.? As stated, it seems restricted to Christians.
Posted By: Arthur | September 11, 2012 12:43 PM
It applies to more professions than just Christian ministers or other religions, e.g. railroad employees that live in housing on railroad property.
Posted By: Baron | September 11, 2012 1:30 PM
It also applies to military personnel who live off-post.
Posted By: jarrod | September 11, 2012 1:49 PM
The law the FFRF is challenging ONLY APPLIES TO MINISTERS.
Others who have some kind of tax-exempt housing benefits do so because of other laws that don't tread on the 1st Amendment Establish Clause.
I hope it now moves quickly through the courts. A telephone conference with all involved is scheduled next week and is for the purposes of planning the course the case will now take before Judge Crabb.
I am hopeful that the case can quickly be resolved by summary judgment in favor of the FFRF.
Not only is it NOT restricted to Christians (rabbis, cantors, imams, etc. are covered), it is not restricted to the guy in the pulpit at the local church on Sunday. Even "basketball coaches" at places like Pepperdine can sign up as "ministers" and claim the benefits (see paragraph #38, or thereabouts of the FFRF Complaint).
It's time to fix what ails IRC 107, and the FFRF appears to be the only one willing to step up to the task; the religious community has chosen to try and protect and preserve what is wrong with the statute.
Posted By: Robert Baty | September 11, 2012 2:22 PM
The candidates and their campaigns and their parties have been talkin' up "God" in recent days.
Yet, they have yet to speak to this important public issue and the future of IRC 107 in light of their tax policies and thinking about the U.S. Constitution.
Yesterday, the Justice Department asked for a few more days to file a response to the FFRF amended Complaint. Therein, the Justice Department stated, in relevant part:
> In light of the allegations and the important constitutional
> issues raised by both the Amended Complaint and the
> Opinion and Order, as well as the need to coordinate the
> efforts of various stakeholders within the Internal Revenue
> Service and the Department of Justice, the United States
> requires additional time to prepare and file its response to
> the Amended Complaint.
WiIl Obama's Justice Department continue to try and defend the offensive IRC 107?
What would Romney and his Justice Department do?
Posted By: Robert Baty | September 11, 2012 4:14 PM
I hope the US Government investigates this tax exemption in reference to ministers, and in particular, how it is being abused by some who not only claim one home but also vacation homes. It is estimated that the abuse of this exemption is costing taxpayers over $1 billion annually. Collecting these taxes would surely help our deficit!
Posted By: CPMRKSJ | September 11, 2012 5:55 PM
CPMRKSJ,
The last estimate I saw someone refer to was $1.2 Billion a year. That may be low if you figure in all the "basketball ministers".
Speaking of those "vacation homes", perhaps you are referring to folks like the horn-playin', tax-cheatin' Phil Driscoll. He filed a petition for certiorari last month over his "vacation (second) home" claim. The Supreme Court may announce later this month or early next month whether they will review the denial of the second home claim. That, issue, however, is separate and apart from the constitutional issue over whether even one home should be allowed.
I suppose if you think a "minister" ought to get a million dollar benefit tax free, it doesn't really matter whether he spends it on one big home or two not-so-big homes. I hear that some legal authorities claim there are a lot of "ministers" with two homes they want to continue to use for the benefit and so support the Driscoll effort to get the Supreme Court to overturn the Appeals Court denial of the second home claim. I think Driscoll's attorney even set up some sort of organization to raise funds to finance his continuing litigation regarding such things.
May Driscoll's effort fail and the FFRF effort prevail.
If SCOTUS agrees to hear the Driscoll case, look for the FFRF and/or others to file amicus briefs in support of denying Driscoll his claim.
Posted By: Robert Baty | September 11, 2012 8:30 PM
Ministers are not required to pay income tax on the amount of income it costs for their home. Some ministers have a parsonage furnished by their employer, of course, but if the minister is buying their home, they still can deduct the interest and taxes, even though it's the same dollars. It's a ripoff (and some ministers still claim to be poor, quoting only the amount of their salary).
I am very glad this is going through the courts. I've been upset about it since I was finance director for UUSBHC in 1995!
www.irs.gov/taxtopics/tc417.html
Posted By: Ruth Walker | September 11, 2012 8:40 PM
Ruth,
I've been crying in the wilderness over the "basketball ministers" for about 30 years; believing that the special ruling allowing them as a result of IRS arm-twisting by George H.W. Bush and Omar Burleson was contrary to the facts and the law.
Administrative rulings, however, I concluded were impervious to attack if there was no political will within the IRS or Congress or the Presidency to do anything about it.
I then realized that, on a more fundamental matter, many tax and legal scholars had been writing on the constitutional issue in the law behind the ruling and that the law itself should be subjected to a judicial, constitutional test.
Alas, no one had ventured there before; perhaps because of some perceived lack of "standing".
The FFRF has overcome that problem, for now.
The religious community has certainly had decades to deal with what ails IRC 107 and its administration and it would not.
Obama and Romney, given all the "God" talk and tax talk going on in their campaigns and by them, should be compelled to deal with this issue BEFORE the election.
Posted By: Robert Baty | September 11, 2012 9:17 PM
Ruth,
Were UUSBHC "ministers" claiming the income tax free benefit under IRC 107?
It seems to me that the IRS would be obliged to allow them to do so.
Posted By: Robert Baty | September 11, 2012 9:26 PM
If we truly want separation between church and state then those earning income from the church shouldn't pay ANY income tax. That would be separate.
Posted By: Ron Jones | March 1, 2013 1:46 PM
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