Major FFRF Legal Victory Eliminates Tax-Free Housing for Pastors

For years now, the Freedom From Religion Foundation has been in a legal battle to end the “parish exemption” that allows ministers to deduct the cost of rent for their church-owned houses from their taxable income. FFRF believes that this shows preferential treatment for religious leaders.

FFRF’s own board has even paid its co-presidents Dan Barker and Annie Laurie Gaylor $15,000 each as part of their housing allowance, but because they don’t qualify as “ministers of the gospel,” the law doesn’t apply to them. That’s one of the ways they’ve tried to prove the law is illegal.

A few months ago, the U.S. Department of Justice ridiculously argued that the exemption was legal and that FFRF’s leaders were eligible for the tax breaks… because atheism, they said, was a religion:

Non-theistic beliefs, including atheism, may qualify as “religious” beliefs in various contexts because they pertain to religion and fulfill a similar role in a person’s life:

Because [FFRF] can show no facts to suggest that the IRS will apply terms like “minister” and “religious organization” as if they turn on adherence to some theistic belief or other content, this Court should not presume that the IRS would act inconsistently with the governing law regarding whether atheism a religion for purposes of an atheist’s claim…

No thanks, says Gaylor.

“We are not ministers,” she said. “We are having to tell the government the obvious — we are not a church.”

Yesterday, in a very surprising (but legally sound) decision, U.S. District Judge Barbara B. Crabb ruled in favor of the FFRF, writing that the “parish exemption” was indeed unconstitutional:

Thanks to FFRF, he’s going to have to give some of that money back…

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.

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

Although it is undoubtedly true that taxes impose a burden on ministers, the same is true for all taxpayers. 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.

Crabb even laughed off the idea that Barker and Gaylor should be considered “ministers”:

Although defendants devote a substantial amount of their briefs to this argument, it is difficult to take it seriously. Under no remotely plausible interpretation of § 107 could plaintiffs Gaylor and Barker qualify as “ministers of the gospel.

Defendants cite no persuasive evidence that either Gaylor or Barker is ordained, that they perform “sacerdotal” functions or conduct “worship” services, that anyone in the foundation considers Gaylor and Barker to be “spiritual” leaders or that the foundation is under the authority of a “church.”

Which is just the judge’s polite way of saying:

A bit of history: This whole battle is over Internal Revenue Code section 107, which states:

In the case of a minister of the gospel, gross income does not include –

(1) the rental value of a home furnished to him as part of his compensation; or

(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.

That section was written by Congressman Peter Mack (D-IL) in 1953. As was the case with several pieces of legislation from that era, Mack introduced it to stand against those “godless Communists”:

Certainly, in these times when we are being threatened by a godless and anti-religious world movement we should correct this discrimination against certain ministers of the gospel who are carrying on such a courageous fight against this. Certainly this is not too much to do for these people who are caring for our spiritual welfare.

It has always been about advancing religion and keep down atheism.

And now, Judge Crabb has righted the wrong.

As you can imagine, FFRF was thrilled by the decision:

“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.

With the decision, Treasury Secretary Jacob Lew and IRS Acting Commissioner Daniel Werfel are not allowed to enforce the parsonage exemption — however, at Crabb’s request, as is typical in cases like this, the ruling won’t go into effect until the end of any possible appeals, which will undoubtedly be coming. (Pastor Rick Warren, in fact, has been a longtime defender of the parsonage exemption, as you might expect.)

This was absolutely the right decision. That it comes nearly 60 years after the law first went into effect is perhaps an optimistic sign that tradition alone isn’t a good reason to continue bad policy.

Pastors will argue that they deserve the exemption — they provide an important service for others and their salaries are (usually) very modest. But then again, teachers could say the same thing, and it’s not like they’re getting a tax break as nice as this.

I sometimes hear complaints from atheists that groups like FFRF are too litigious, that they fight battles that we’d be better off ignoring. But FFRF takes on these cases purely on principle. They know what the First Amendment says, even if lawmakers choose to ignore it, and they’ll go after violations of it big and small.

Make no mistake: This is a *huge* victory for proponents of church/state separation. It’ll be fought vigorously by the Religious Right who are probably in shock that a law they’ve relied on for decades may now be overturned. For now, though, FFRF deserves a lot of respect for their incredible victory.

On a related note, this isn’t the first time Judge Crabb has ruled in favor of church/state separationists.

In 2010, Crabb declared the National Day of Prayer unconstitutional:

“It goes beyond mere ‘acknowledgment’ of religion because its sole purpose is to encourage all citizens to engage in prayer, an inherently religious exercise that serves no secular function in this context. In this instance, the government has taken sides on a matter that must be left to individual conscience. When the government associates one set of religious beliefs with the state and identifies nonadherents as outsiders, it encroaches upon the individual’s decision about whether and how to worship.

(Image via Shutterstock)

About Hemant Mehta

Hemant Mehta is the editor of Friendly Atheist, appears on the Atheist Voice channel on YouTube, and co-hosts the uniquely-named Friendly Atheist Podcast. You can read much more about him here.

  • tubi11

    This is pretty awesome, actually. I am interested to see what grounds defenders of the exemption can come up with, given that Judge Crabb essentially repudiated everything they’ve claimed so far.

    • C Peterson

      They don’t need to come up with any grounds. The most effective legal strategy against secularism in recent years has come from simply denying standing, tossing cases and eliminating all opportunity for rational argument. That’s how Crabb’s ruling on the National Day of Prayer was overturned, and the same sort of nonsense could happen again here.

      • Brian Westley

        Yep, but it would be very difficult to argue lack of standing in this case; they both are paid a housing allowance that they can’t deduct from taxable income, which directly increases their tax burden. If the FFRF was a religious organization, they could deduct it.

  • Rain

    ministers of the gospel

    I guess I don’t blame them for trying to broaden the exemption, since they totally look like unconstitutional idiots if it only narrowly applies to one religion. (Ministers of the gospel.) Duh.

  • C Peterson

    This is a huge victory.

    I have a great deal of respect for FFRF, an organization that exemplifies what a group of (mostly) atheists can do without making atheism itself central to its identity.

    • Guest

      Respect for a hate group??? You must be a homosexual.

  • LarryCarron

    This is AWESOME. Stop privileging one profession above others: police officers, teachers, nurses, etc.

    • Dekker Van Wyk

      Honestly, I think professions that that place its practitioners in danger (police, military, etc.) or require them to make great personal sacrifices (doctor, nurse, etc.) should get tax breaks. a member of the clergy faces neither danger nor sacrifice.

      • trj

        I like the sentiment, but I prefer people’s worth to be reflected in their salary rather than in their allowable tax deductions. Much cleaner.

      • 3lemenope

        Lumberjack, deep sea fishing, and convenience store clerk become tax-free jobs. I’m OK with that in principle, but I think it might have some pretty big unintended consequences.

      • keddaw

        Racing driver?

        The problem with trying to use the tax code to enforce personal preferences is that you always end up with ridiculous examples of people fitting your tightly worded rules.

  • timberwraith

    Yeah, I can see how this part of the law favors religious figureheads over secular ones. However, this is making my jaw drop:

    FFRF’s own board has even paid its co-presidents Dan Barker and Annie Laurie Gaylor $15,000 each as part of their housing allowance…

    If I’m understanding this correctly, Dan Barker and Annie Laurie Gaylor, who are spouses, are collectively being paid $30,000 dollars for housing in addition to their salaries? Wow. Given that some families are having to survive on $15,000 alone, I’m having a hard time moving past those numbers.

    I’m hoping that covers the cost of lodging during their travels rather than just living quarters in Wisconsin.

    • Michael

      The first line says that this case has lasted years. So it depends how many years that $30,000 accounted for.

      I’m going to guess that they subtracted the cost of their rent from their salaries and paid it separately as a housing allowance to make this point.

      • Brian Westley

        Yep, if I remember they actually dropped an earlier case and re-filed after changing some of their salaries into a housing allowance.

      • timberwraith

        I found an article at the Huffington Post that indicates its a yearly allowance:

        The foundation board voted to give both Gaylor and Barker a housing allowance of $15,000 a year. But the couple says they can’t claim that as tax-free income since they are not clergy.

    • C Peterson

      It’s just earmarked income. Which if you’re not a church is a largely meaningless distinction. Which I believe was the point in the FFRF board creating it for them.

      If you’re concerned about the business practices of FFRF, the correct thing to look at is the salaries of its officers, not how those salaries are categorized.

      • timberwraith

        I’m still stunned over the income they are getting merely for housing alone. Folks in the secular community often critique religious leaders for the kind of income they pull in. So, I think its fair to treat that kind of concern with a balanced approach.

        But again, if this covers lodging, I can understand the figures involved. Hotel’s are not cheap and I assume that they travel a lot.

        • C Peterson

          You’re missing the point. They aren’t getting any income for housing. They’re just getting income. All that matters is the total.

          Everybody with an income also gets a housing allowance. It’s the part of your income you use to pay for your housing!

        • GubbaBumpkin

          “Your objections are noted, and stupid.”

        • tm17

          If you were to compare the IRS Form 990 financial disclosure forms that the FFRF is required to submit each year with the Form 990′s that churches have to file, you would be able to do a true apples to apples comparison. Unfortunately, churches don’t have to fill out a Form 990 each year (unlike secular non-profits). So, we got zero visibility into how their tax breaks & exemptions are being used.

          Quite a few of the mega-churches out there abuse these exemptions. It’s inevitable that a lack of transparency will lead to corruption – even in our corrupt churches.

  • timberwraith

    Couldn’t this housing deduction be replaced by a non-discriminatory law making the deduction available to all people who work in the administration of non-profit organizations?

    • primenumbers

      It could, but why should we? Most charities are just businesses run for the benefit of the directors or lobby groups or industry and any benefit the charity makes is often inconsequential to it’s primary (yet not openly announced) goal.

      • timberwraith

        I’m trying to find a more equitable alternative to a law that’s inherently discriminatory. Given the generally conservative bent of the supreme court, I wouldn’t count on this case turning into a win for non-religious people, especially given that the law might be interpreted by the court as applying to the leaders of secular community organizations. We do have atheist Sunday gatherings popping up now, do we not? If the leaders of those gatherings are covered by the law, then the case will most likely be lost.

        People can argue for hours over whether non-profits truly accomplish good in the world. As with so many organizations, both non and for profit, there are indeed charlatans, but there are many organizations who do great work, too.

        Besides, how tax money is distributed can be as contentious an issue between people as religion. Personally, I wish there was a way to diverting the portion of my federal taxes that is devoted to military expenditures to environmental programs, the social safety net, and education, but if wishes were horses, I suppose I’d be winning money down at the track.

        • primenumbers

          I can certainly see your point that extending the benefit would be an easier “sell”. I think you’re right, it would be. But on the other hand I could see that actually causing more societal damage than just accepting the priest exemption.

        • RLBaty

          Extending the IRC 107 benefit even further (i.e., isn’t the basketball coach at places like Pepperdine far enough) will not resolve the constitutional issue.

          Even if atheism is a religion and atheists “ministers”, the law is still UNconstitutionally limited to, ONLY FOR, “ministers”, those who pass that religious test.

    • C Peterson

      I’d prefer that we simply eliminate the category of non-profits, and require all corporations to pay income tax. Why should my taxes subsidize private organizations whose aims I may not agree with? Why should the government be placed in the position of deciding which organizations do or do not operate for the public welfare?

      • WallofSleep

        “Why should my taxes subsidize private organizations whose aims I may not agree with?”

        I guess that’s a “no”, then, when it comes to your support for getting my “Take A Wish Foundation” off the ground?

        • TheG

          I think he’s just saying that it shouldn’t be subsidized by the public, only private donations (meaning tax exemptions equal a subsidy). Make a Wish is fine, but some of us believe, at least in principle, that we should be able to decide for ourselves whether or not to contribute directly or indirectly.

          BTW, I have volunteered in Orlando for Make a Wish I’m the past. They get my direct donations.

          • C Peterson

            Read his comment more closely. I almost made the same mistake…

            • TheG

              Whoops! What a difference one letter has on meaning!

      • timberwraith

        See my reply to primenumbers.

        I’d love to slash the military expenditures of US and redirect those funds to dealing with the rapidly growing levels of poverty in this country, but again, if wishes were horses…

  • Jasper

    For a government that’s supposed to avoid unnecessary entanglement in the area of religion, they sure do seem to embrace it by dictating who is/isn’t a religion.

  • Terry Firma

    When my wife and I had a laywer draw up our wills some years ago, I designated part of my estate for the FFRF.

    The judicial ruling is welcome, just, and overdue. Go, FFRF!

  • Thomas Jackson

    Great, Huge Victory! Honestly, I always loved the housing exemption when I was clergy and it always gave me pause when I was complaining about being persecuted by the state. Now we will never hear the end of the persecution complaining.

  • Dekker Van Wyk

    This makes me proud to have become a dues paying member of the FFRF!

    This case will in all likelihood go all the way to the SCOTUS, but
    hopefully not before one or more of Scalia, Thomas and Alito have kicked
    the bucket and been replaced by Obama with more sympathetic justices.

  • $925105

    With any luck Justice Crabb could be put into the Supreme Court. At least we know she’s one justice who has read the Constitution.

    • Friendly_Autist

      I’m sure Scalia’s read it, he just doesn’t understand how government works.

  • Neko

    Well done, FFRF! This is an impressive win. I never knew of this exemption–yet another example of the exploitation of political hysteria to promote encroachment of religion on the state. Good to know.

  • infidel1000

    I’d lay odds that the circuit court of appeals overturns this decision. It may not be rational, but they’ll find some excuse.

    • Dekker Van Wyk

      Indeed, as I posted earlier, this will almost certainly end up being heard by the SCOTUS and the current bench has a liberal majority, which means they could very possibly side with the FFRF.

      • infidel1000

        Let’s see…Roberts, Scalia, Alito, Thomas. We know how they will vote. Kennedy, a conservative, leans right. Liberal majority? I don’t see one there.

  • David Chumney

    the time to read the entire ruling, which is extremely well-written.
    Sadly, this ruling would still allow ministers to avoid paying income
    taxes on the fair rental value of an actual parsonage because the tax
    code offers the same exemption for a range
    of non-religious instances (e.g., military personnel).

    At present, the
    tax code requires ministers to pay income tax and 15.3% self-employment tax
    (SECA) [i.e., "both halves" of FICA] on their salaries plus self-employment tax (SECA) on the fair
    rental value of a parsonage or a cash parsonage allowance. This ruling
    would only take away a minster’s ability to avoid paying income tax on the fair
    rental value of a cash parsonage allowance–an important victory, no
    doubt, but not the whole enchilada.

    Again, I would encourage everyone
    to read the entire ruling, because the judge clarifies how difficult it
    would be to take away property tax exemptions for churches on constitutional [i.e., First Amendment] grounds. Since many
    other secular non-profit organizations benefit as well, property tax exemptions are not a
    benefit solely for churches.

    FFRF is indeed to be congratulated on this
    important legal victory, but it will take a great deal more effort to undo all of the special tax privileges given to religious institutions in this country.

    • Guest

      FFRF is nothing more than a hate group you moron.

  • Shiori_hime

    “Pastors will argue that they deserve the exemption — they provide an
    important service for others and their salaries are (usually) very
    modest. But then again, teachers could say the same thing, and it’s not
    like they’re getting a tax break as nice as this.”

    And I would argue that teachers (as a group) actually deserve it more than pastors (as a group) because teachers actually influence the lives of pretty much everyone in a community by providing a service that is largely beneficial to everyone. Even a crappy education is better than no education at all.

    (I’m aware there are some really awful teachers out there who shouldn’t even be teaching, let alone getting any extra bonuses for doing so. Trust me, I had some of them as a kid. But if we’re going to talk about whether or not the group known as “pastors” should get this benefit we might as well talk about other potential recipients of the benefit as groups too.)

    • chicago dyke, TOWAN

      the whole tax code needs to be scrapped, and rewritten from scratch.

      taxes can and should be a very simple thing. if you’re a person, your taxes should increase on a curve, the more income (of any kind, not just salary or hourly pay) you have. if you’re a nongovernmental institution (corporation, religious business, nonprofit, hospital system) the same basic rules should apply. however much money passes thru your hands, you pay a certain percentage based on how much that is.

      our tax code could be about two pages long. and amazingly fair, and beneficial to all.

  • chicago dyke, TOWAN

    let me start by saying i am happy about this ruling and i agree with the judge.

    but let me also say, while the origin of this bill is horrifying, it did have some positive effects, while it was law. the sad thing about this ruling is that the grifter churches and rich churches will just find another way to funnel money to their grifter preachers. they always do. meanwhile, some poorly paid, dedicated folks in the churches who are actually helping the poor will take a hard financial blow at a time when donations are down. i’m thinking of the liberal church folks who work in really poor areas and do social justice work. believe me when i say those people are paid next to nothing.

    in the end, i’m a radical and i believe in strongly progressive taxation of anything that takes in money from people. i believe that people and institutions with great wealth should pay a very high rate of tax, which should then be used to provide the social and developmental programs that we badly need in this country. the vast majority of churches claim to be serving a social welfare function, but so few actually do. they were given a chance to turn this tax break into a social benefit, and mostly failed. hence, the justice behind this ruling.

    • mcc

      It would make sense to me if the struck-down rule could be implemented in a way which actually is compatible with the first amendment. For example, let’s say rather than applying to religious organizations, the rule applied to any nonprofit. If the rule was beneficial when applied to churches surely it would be just as beneficial if applied to other public-interest organizations as well.

  • wmdkitty

    *happy dance*

  • Susan Ruffaner Gahagan

    FFRF is too litigious? No. I wholeheartedly support each and every one of their legal battles. Way to go! Congratulations!

    • pRinzler

      Agreed. Judges are perfectly capable of throwing out lawsuits if they are frivolous. If they aren’t thrown out, then they are not frivolous (in general and in principle), so they *should* be brought.

      Saying that the FFRF is too litigious is just a backhand way of saying that one disagrees with them, without the courage necessary to come right out and engage the disagreement honestly.

      The FFRF is currently suing a town nearby me (Pismo Beach) for sectarian prayers before city council meetings, and one commenter on local radio complained about “political correctness,” which is another handy way of complaining without engaging the real issues.

  • sara

    Not sure if a link will work, but this was my old church. Wish I was joking.

  • beau_quilter

    The tax code includes a clause that exempts employees whose housing is provided by their employer, but only in cases where the housing is on the premises of the employment and the employee is required to live in on-site housing. An obvious example is a dormitory director on a university campus; he or she is required to live in an apartment provided in the dormitory, but this apartment is not considered a taxable benefit.

    This argument could be made for clergy who are required to reside on the premises of the church they serve.

    • mcc

      So let’s say you are self-employed or own a business, and you use a portion of your home for work purposes. You are allowed to deduct a percentage of your home costs on your taxes, according to the proportion of square footage of your home which is used for the business. I don’t remember the exact rules for this deduction, but my spouse and I have used it in the past.

      Could this existing deduction be used by pastors, in situations where their home is actively used for church business?

      • beau_quilter

        Yes. My father was a preacher. He wasn’t given a tax-deductible “housing allowance” by his church; he paid a mortgage out of his salary like most folks do. He did however maintain an office in our home for business purposes and used that space only as a tax deduction. His status as a minister had nothing to do with the deduction; he used the same forms every other taxpayer used.

  • CanadianNihilist

    Is this for real? this is enormous, I feel like this must be a joke or something.

  • Stevie

    Help me out here, I don’t know much about law . . . and I do know that regardless, this is a huge win, and Judge Crabb said incredible things “equality should never be mistaken for hostility”, but doesn’t this have to make it to the Supreme Court before anything happens?
    This was the United States
    District Court for The Western District Of Wisconsin . . . What does that even mean?

    • RLBaty

      It means after decades of talking about the problems with IRC 107 something has finally been done about it.

      The executive and legislative branch would not deal with it, and so the judicial branch has now taken the first step in resolving the issue judicially.

      It’s ripe for the Supreme Court, after the 7th Circuit Court of Appeals sustains Judge Crabb’s ruling, but, who knows, maybe Obama will call off his Justice Department and call for the repeal of IRC 107.

      That would moot the issue and be a good thing.

  • RLBaty

    “FFRF takes on these cases purely on principle.”

    Ever wonder how it was that the FFRF managed to get into that decades old controversy?