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. Good. Now we can tax Congressmen and women for that free medical coverage that they get on our dime. Same strokes for similar folks. They preach but cant teach. Steal but cant heal. Lame with no brain.

  2. As a retired pastor,I received a housing allowance for the last twenty years when I did not live in a parsonage. I was always told that we received the perk because the military received housing allowances. That doesn’t make much sense, so what is the history of the benefit for clergy?

    By the way, all churches I served paid taxes on any portion of a building or rented building that was not used for religious purposes. We had to figure out what portion of our building used for a day caste we rented space for.

  3. lol this doesnt bode well for scientology and other rackets of this con… this is definitely good news

  4. People will be crabbing about that Judge’s decision for a long time. She has all eight legs on the ground.

  5. nick spinelli 1, November 30, 2013 at 10:08 am

    Help please. WordPress is cranky this morning.
    I don’t know why Nick, you are a very reasonable parson.

  6. Great article Nal. Keep us updated as this case progresses in the appeal process. There is no need for a parsonage exemption when other workers do not get one.

  7. Let’s hope this rational thinking brings to light one of worst violations of equality in our country. That of religious entities paying no property taxes.

  8. I forgot to add: he wasn’t paid a salary or received any income from the local church. However, he did sign ‘paperwork’ in the event of his death, the church would pay for his funeral and burial and to take up a ‘collection plate’ for his wife and children.

  9. Interesting article Nal,


    Agree. If I am ‘tithing’ to any church, then I want to see the chuch’s budget? A few years ago, the St. Louis Post-Dispatch devoted a full section on the Joyce-Meyer Ministry, only to reveal that her church was giving her more than $900k per year, while the church took in annual revenues of more than $110 million a year. The Fenton, MO mega church also gave her husband a 6 figure salary, as well. Finally, after ‘exposing’ this info, including buying 6 homes, worth over $200k each, on the church’s tab, for ‘her relatives’, Joyce Meyer decided to reduce her salary to half. However to make up for the ‘income loss’, Joyce Meyer now receives income from her books (instead of it going to the church), pushing her annual salary well over $1 million, according to her spokesman.

    Do you really need to take a 6 figure salary from any church? When I was growing up in the church, the pastor worked a full-time job as a public school teacher, and taught on Wednesday evenings and 2 services on Sunday morning.

  10. A creative but perfectly legitimate manner in which to establish standing. I am impressed.

    Religion is really facing a loss of political power which is why Rand Paul and others have chosen The War on Christianity as one of their campaign highlights.

    The ’14 and ’16 election cycles are going to be wild rhetoric rides with lots of foaming at the mouth and spittle flying across the rooms.

  11. The decision only concerned the rental allowance, and did not extend to the value of provided housing. It is common for churches to determine an overall compensation amount for the minister, and then designate a portion of that equal to the actual housing expense as housing allowance. Unfortunately, there are many ministers close to retirement with minimal incomes who have done their financial planning based on this provision who will be very negatively impacted. Agreeing with the legal analysis won’t lessen the pain of a significant drop in income.

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

    Hostility toward equality is what has driven activists to call for civil rights for all, and the activists have tended to win the argument.

    Next up: wealth inequality.

  13. Thanks nal…. I read this Tuesday….. It’s a wonderful decision…… There are way too many exempt properties owned by religious organizations…..

  14. My minister gets a very nice salary and,although she has a beautiful house, she still gets a housing allowance despite the church not providing housing for a very long time. We always hear in service and the bulletin and newsletter about the need for more funds from the congregation. Maybe if the minister wasn’t so well paid, and also gets a housing allowance, they would not need to constantly make the appeal.

  15. Excellent and ingenious. Why should a pastor of a religion be given preferential treatment?

  16. You write regarding standing that “the clever scamps at FFRF started paying the two DEFENDANTS housing allowances”. I believe you mean that FFRF paid the allowance to the individual plaintiffs, not defendants.

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