TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, January 14, 2018

Zelinsky: Taxation And Religion In 2018 — The Parsonage Allowance And The Johnson Amendment

Edward A. Zelinsky (Cardozo), Taxation and Religion in 2018:

2018 will be an interesting year for those concerned about the intersection of taxation and religion. Two important issues – the constitutionality of the parsonage allowance and the future of the Johnson Amendment – are primed for further controversy in the year ahead.

As to the parsonage allowance, Judge Barbara B. Crabb, of the US District Court for the Western District of Wisconsin, has teed up for appellate review of Gaylor v. Mnuchin.  In that case, Freedom from Religion Foundation, Inc. (FFRF) challenges the constitutionally of Internal Revenue Code Section 107(2). Section 107(2) excludes from clerical incomes cash housing stipends, colloquially characterized as parsonage allowances.

Several months ago, Judge Crabb agreed with the FFRF that Section 107(2) is unconstitutional. ... I disagree with Judge Crabb on the merits and conclude that Section 107(2) is a constitutionally reasonable (though not compelled) choice to manage the inevitable entanglement which occurs whether the state taxes or exempts churches and other religious personnel. ...

The final version of the Tax Cuts and Jobs Act passed by Congress did not contain the House provision modifying the Johnson Amendment. Procedurally, the opponents of the Johnson Amendment must now restart their efforts. However, in tactical terms, those opponents have now demonstrated that a majority of representatives support their efforts. In 2018 the challenge for the critics of the Johnson Amendment will be to obtain enough Democratic support in the Senate for proposed modification of the Johnson Amendment to pass that body.

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