Parsonage Exemption Ruled Unconstitutional

-Submitted by David Drumm (Nal), Guest Blogger

USDistrictCourtSealThe “parsonage exemption” is found in 26 U.S. Code § 107 and states that a “minister of the gospel” does not have to include in his gross income, either the rental value of a home furnished to him or the rental allowance paid to him. Judge Barbara Crabb of the U.S. District Court for the Western District of Wisconsin has held that the “parsonage exemption” is unconstitutional. Crabb wrote in the decision that the tax 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.”

The suit was brought by the Freedom From Religion Foundation (FFRF) on behalf of plaintiffs Annie Laurie Gaylor and Dan Barker, both officers at FFRF. The defendants in the case were the Secretary of the Treasury and the (acting) Commissioner for the IRS.

This case is interesting from a “standing” point of view. In order for a plaintiff to have standing to bring suit in federal court, it must be shown:

1) An injury has been suffered in fact,

2) The injury is due to the defendants’ conduct, and

3) The relief sought in the complaint would address the injury.

To address 1), the clever scamps at FFRF started paying the two plaintiffs housing allowances. The injury suffered would be their non-entitlement to the exemption to the tax break, and the injury is certainly due to defendant’s conduct.

The government argued that the plaintiffs did not actually file a claim with the IRS and until that claim is denied, the plaintiffs have not suffered an injury. The Court found:

… that there is no plausible argument that the individual plaintiffs could qualify for an exemption as “ministers of the gospel,” so it would serve no legitimate purpose to require plaintiffs to claim the exemption and wait for the inevitable denial of the claim.

Bullet point 3) is where the Catch-22 comes into play. Even if the Court was to render a favorable decision and declare the exemption unconstitutional, the plaintiffs still could not receive the exemption and their injury would not be redressed.

However, the Court noted that “a discriminatory tax exemption may be redressed by eliminating the exemption for everyone.” In Heckler v. Mathews (1984), J. Brennan wrote in the opinion for a unanimous Supreme Court:

Consistent with Justice Brandeis’ explanation of the appropriate relief for a denial of equal treatment, we have often recognized that the victims of a discriminatory government program may be remedied by an end to preferential treatment for others.

Crabb also wrote:

Some might view a rule against preferential treatment as exhibiting hostility toward religion, but equality should never be mistaken for hostility.

It has been estimated that the “parsonage exemption” has cost the government $2.3 billion over a five year period. Plaintiff Gaylor observed: “When you’re dealing with some of these mega-church pastors with huge mansions, they can be paid an enormous amount in housing allowances.”

The judge stayed the implementation of the ruling during the appeal process.

H/T: Mano Singham, Peter J. Reilly, Doug Erickson, Jerry A. Coyne.

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26 thoughts on “Parsonage Exemption Ruled Unconstitutional”

  1. As every Christian knows: God will provide. Get this tho – It is one 501(c3) taking another 501(c3) to court over Tax Exclusion income. This 19,000 member Freedom From Religion Foundation made up of the upper 1% of wealth is put off by a spiritual god but the FFRP receives the same benefits without spiritual involvement or crossing an Ocean to develop a land for religious freedom. See this is why I hate this idea of tax exclusion income since the only one paying the bill on both sides is the taxpayers. Of course,
    there should be no winners except the one keeping the 501(c3) exclusion & of course one other …. I just don’t see a distinction between a tax exclusion parsonage & tax exclusion perquisites.

  2. Judge Crabb is the darling of the Freedom From Religion crowd. Judge Crabb ruled a few years ago in favor of Freedom From Religion that the National Prayer Day was unconstitutional. The 7th Circuit quickly and unanimously overruled her fundamentally flawed ruling. The same scenario is playing out here. Madison is disconnected from reality.

  3. I have not attended church for twenty years since the pastor we liked retired, but it seemed to me that the parsonage exemption was fair. He and his wife were expected to house and feed visiting missionaries as well as people who had traveled here to speak, present, or sing at special programs for the church. Yes, it was their home, but they didn’t own it and the church certainly made use of it as well as the pastor’s wife’s unpaid labor. The pastor was underpaid and had no pension (we were unaware of this and protested when we found out and left the church).

  4. Rev Fritz Mellburg, church owned property was historically exempt from taxation in England and the US colonies carried on that tradition. The purpose of the 1954 legislation exempting the housing allowance as well was to eliminate the disparity between clergy who resided on church owned property and those who did not.

  5. 1), the clever scamps at FFRF started paying the two plaintiffs housing allowances. The injury suffered would be their non-entitlement to the exemption to the tax break, and the injury is certainly due to defendant’s conduct.
    Wow…….that STINKS of entrapment.

    When all those clever sorts stop fearfully abusing the clergy maybe they could turn their damaging vision to the inequality regarding the hoops the Medicare Healthcare deliverers have to jump through vs. the ever greased, ever sparkling, ever self-serving and ever widening road the for profits have to saunter down….because there is some real harm being done to societies fabric when healthcare is delivered in such a fashion that those that need have to wait while those who have get more and more….and meanwhile the profits are siphoned while the caregivers are saddled with seriously redundant paperwork requirements.


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