A demand from atheists that the IRS bill churches and other religious organizations a total of some $1 billion would violate freedom of worship and destroy many congregations, a new court brief contends.
In a case now at the Seventh U.S. Circuit Court of Appeals, churches are seeking to overturn a stunning district court decision by Judge Barbara Crabb.
At issue is the tax exemption provided for employees whose housing is determined by their employer.
That includes pastors of Christians churches and leaders of congregations of other faiths, often referred to as the parsonage allowance.
It provides that a housing allowance is not considered taxable income when the house is for the convenience of the employer. While pastors do benefit, the tax deduction also is available for workers who live overseas, employees of educational institutes, any member or former member of the uniformed services, government workers living overseas, any American citizen living abroad and others.
Crabb’s verdict in the case brought against Treasury Secretary Steve Mnuchin and others by the Freedom From Religion Foundation found that while the exemption is valid for secular employees, it should not be available for Christian pastors, setting up a discriminatory standard for the benefit.
The case is on appeal at the Seventh Circuit, and arguments and a decision are expected later this year.
See a description of the issue:
A brief in the case filed by the Becket Fund on behalf of Chris Butler, a pastor from the South Side of Chicago, contends ending the housing allowance “would discriminate against religious groups by treating them worse than many other secular employees who receive similar tax treatment.”
Butler is the leader of a predominantly African-American congregation whose ministry includes mentoring at-risk youth, decreasing neighborhood crime and caring for the homeless in Chicago’s neediest neighborhoods, Becket explained.
“For the majority of churches, the pastors are like me and experience at some level the same problems that we’re trying to face in the community,” said Butler of Chicago Embassy Church. “If you take away even a little bit, it can become a lot of trouble quickly.”
The federal tax code for 64 years has allowed pastors, rabbis, imams and other faith leaders to receive tax-free housing allowances under the same tax principle that allows teachers, business leaders, military service members and hundreds of thousands of other workers to receive tax-free housing for their jobs, Becket explained.
Then came the atheist FFRF in 2011 with its demand that the IRS end the exemption for faith leaders.
“But the IRS would be discriminating against religious groups if it ended their housing allowance when so many secular businesses and organizations receive similar tax treatment,” Becket explained.
“The same group of atheists claimed it was unconstitutional to put Mother Teresa on a postage stamp, so it’s no surprise they’re trying to sic the IRS on churches,” explained Luke Goodrich, deputy general counsel at Becket. “Treating ministers like other professionals isn’t an establishment of religion; it’s fair tax treatment.”
Becket is intervening in the case on behalf of Butler and a long list of additional ministers.
The group explains Butler’s work through his church includes the Chicago Peace Campaign, a program to mentor at-risk youth, a homeless ministry.
“Pastor Chris lives only minutes away from his church in order to better serve his community. He is able to do this because of the parsonage allowance, a tax law that allows religious employees to live nearby their work,” Becket explained.
“The parsonage allowance is crucial for ministers like Pastor Chris who rely on it for housing near the congregations and communities they serve,” the group said.
The FFRF demand would “explicitly discriminate against religious groups when so many secular businesses and organizations receive similar tax treatment.”
Along with Butler, the Becket brief argues on behalf of Eastern Orthodox, Hindu and Muslim group.
“For over 100 years, Congress and the IRS have recognized the convenience-of-the-employer doctrine, which allows employees to exclude housing benefits from their income if the benefits are provided for ‘the convenience of the employer’ rather than the personal benefit of the employee,” the brief states.
“Congress has applied this doctrine to hundreds of thousands of nonreligious employees at a value of over $10 billion every year. It has also applied the doctrine to ministers.”
The brief notes the doctrine “says that if an employer provides an employee with housing for the personal benefit of an employee, it should be treated as income; but if the housing is provided for the ‘convenience of the employer’; — that is, as ‘part of the maintenance of the [employer’s] general enterprise’ – it is not income.”
Who is eligible for the housing allowance?
“A dizzying array … hotel managers, nurses, fishermen, construction workers, apartment caretakers, museum directors, oil executives, non-profit presidents, teachers, school superintendents, diplomats, peace corps volunteers, state governors, prison wardens, soldiers and many more.”
The atheists want pastors to be treated differently, even though they used their homes to “counsel grieving parishioners, prepare sermons, host Bible studies … hear confessions, host missionaries, welcome new members.”
“It is where they make themselves available at all hours of the day or night. And for congregations that lack their own church building – like several intervenors – the minister’s home is often the only placed where the congregation can meet.”
The provision has “served the country well,” allowing the IRS to not become “entangled in religious questions or discrimination among religious groups,” the filing states.
Crabb’s decision, however, “misapplies basic Establishment Clause precedent,” the brief charges.
Her decision, the filing argues, “would also have a devastating practical effect on ministers and their communities across the country.”
“For over a century, churches and ministers have relied on these rules to start ministries, purchase property, and help the communities they serve. The decision below threatens to impose a massive new tax burden on churches and ministers, forcing them to curtail their ministries, relocate, and in some cases shut down. The hardest hit would be the communities most in need, especially inner-city communities.
“Fortunately, the Establishment Clause does not require this result.”