Fed Judge Rules Parsonage Tax Exemption Unconstitutional

The Freedom From Religion Foundation prevailed in their challenge:

The Freedom From Religion Foundation and its co-presidents Annie Laurie Gaylor and Dan Barker have won a significant ruling with far-reaching ramifications declaring unconstitutional the 1954 “parish exemption” uniquely benefiting “ministers of the gospel.”

“May we say hallelujah! This decision agrees with us that Congress may not reward ministers for fighting a ‘godless and anti-religious’ movement by letting them pay less income tax. The rest of us should not pay more because clergy pay less,” Gaylor and Barker commented.

U.S. District Judge Barbara B. Crabb for the Western District of Wisconsin issued a strong, 43-page decision Friday declaring unconstitutional 26 U.S. C. § 107(2), passed by Congress in 1954. Quoting the Supreme Court, Crabb noted, “Every tax exemption constitutes subsidy.” The law allowed “ministers of the gospel” paid through a housing allowance to exclude that allowance from taxable income. 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 benefit to clergy is huge — saving an estimated $2.3 billion in taxes in the years 2002-2007 alone, according to a statement by Congressman Jim Ramstad in 2002. Clergy are permitted to use the housing allowance not just for rent or mortgage, but for home improvements including swimming pools, maintenance and repairs. They may exempt from taxable income up to the fair market rental value of their home, particularly benefiting well-heeled pastors. The benefit extends to churches, which can pay clergy less, as tax-free salaries go further.

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.”

Given the decades of Republican court stacking, I would expect this to be overturned on appeal, but I hope that it isn't.

I do not know about the general makeup of the 7^th circuit court of appeals, but if it does not get shut down at that level, it will be by the Supreme court.

H/t Cthulhu at the Stellar Parthenon BBS.