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Breaking: Federal District Court Declares A Religious Income Tax Exemption Unconstitutional

by David Badash on November 22, 2013

in News,Politics,Religion

Post image for Breaking: Federal District Court Declares A Religious Income Tax Exemption Unconstitutional

A federal district court judge has declared “unconstitutional” a portion of U.S. law that allows “a minister of the gospel” to not pay income tax on a specific portion of their compensation.

U.S. District Court Judge Barbara B. Crabb of the Western District of Wisconsin ruled that the so-called “parish exemption,” which allows religious ministers to avoid paying taxes on the value of their housing granted to them by their religious employers, “violates the establishment clause” of the U.S. Constitution and must be discontinued.

The law, 26 U.S. C. § 107(2), has been on the books since 1954.

The tax exemption was estimated to cost U.S. taxpayers $2.3 billion from 2002-2007 alone, likely more in the years since.

Heralding it as a “major federal court victory,” the Freedom From Religion Foundation, which brought the lawsuit along with their co-presidents, Annie Laurie Gaylor and Dan Barker, offered an explanation of yesterday’s ruling.

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 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.”

One study has estimated that in total, combined religious tax exemptions cost American taxpayers $71 billion each year.

The Foundation sued Jacob Lew, Secretary of the Treasury Department, and Acting Commissioner of the Internal Revenue Service, Daniel Werfel.

The ruling, which you can read in full, below, notes:

It is DECLARED that 26 U.S.C. § 107(2) violates the establishment clause of the First Amendment to the United States Constitution.

Defendants [the government] are ENJOINED from enforcing § 107(2). The injunction shall take effect at the conclusion of any appeals filed by defendants or the expiration of defendants’ deadline for filing an appeal, whichever is later.

In other words, the ruling right now is on hold until the appeals process is complete.

It is not known if the government will appeal, but expect a full-throated attack from the religious right demanding the law be re-written to comply with the Constitution.

FFRF v Geithner – Parsonage Exemption

Image by via Flickr

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bgryphon November 22, 2013 at 5:15 pm

Hard to say; I think there are plenty of good, rational, constitutionally-sound reasons for the federal government not to appeal. And at first glance it would seem the only reason to appeal would be political; to not appear to be "anti-religious" while hoping the appeal is quashed. Somehow I don't think the rational arguments (constitutional as well as budgetary) will be well-received by the right-wing.

Of course if this makes it to The Supremes who can say for sure how that will go? They have managed to avoid removing religious trappings from the Pledge and our currency; and even those who agree with it may well be loathe to touch it.

Emily Smith November 23, 2013 at 12:36 am

I think the judge made the right call. I too doubt the government will appeal the decision.

I also don't think the supreme court be keen on ruling on this.

Alex_Parrish November 22, 2013 at 7:53 pm

…and the religious right will go ballistic in …3…2…1…

StarrGazerr615 November 23, 2013 at 9:15 am

I'm not sure why the article says "re-written to comply with the Constitution." The First Amendment clearly provides that "Congress shall make no law respecting an establishment of religion." In fact, that's the first provision of the First Amendment. Granting tax exemptions to any organization based solely on the fact that the organization is a religious institution is blatantly "respecting an establishment of religion." It also seems to be a violation of the Fourteenth Amendment, which prevents "deny[ing] to any person within its jurisdiction the equal protection of the laws." Since the Supreme Court believes that corporations are people, granting tax exemptions to religious organizations and not to non-religious corporations is per se unequal protection of the law.

DenguyFL November 23, 2013 at 2:50 pm

Don't you mean re-write the constitution to comply with them? They are already demanding that with the marriage amendment.

attilatheblond November 23, 2013 at 7:11 pm

Now if we could just do something about the special tax loopholes the Hoarder Class religion has paid for establishing.

RRuinsky November 24, 2013 at 12:52 pm

Excellent ruling that will be vilified as anti religion. Everyday religious institutions and their leaders and minions attempt to put their footprints on public policy.
Time for them to pay their taxes.

CenterAisle2 November 24, 2013 at 1:13 pm

Good ruling because it was too exclusive, but this has the appearance of just another stab at religious groups. This judge's only other notable ruling was against the national day of prayer that really harms no one. Let's see Crabb disallow farm subsidies to billion dollar commodity crop growers. Oh right, they are not the easy targets that clergy are. Still, I think it might make sense for a new tax incentive that is open to officers in any charitable non-profit (not not-for-profit clubs), subject to total income limitations, to allow a housing stipend that is tax-exempt.

ghostcans December 5, 2013 at 3:25 am

> "Judge Barbara B. Crabb of the Western District of Wisconsin…"

Good job, Wisconsin! With all the religion you have there, it's refreshing to hear about this common sense ruling. ^_^

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