22 Tax Profs File Amicus Brief: The Section 107 Housing Allowance For 'Ministers Of The Gospel' Violates The First Amendment's Establishment Clause

Ellen Aprill (Loyola-L.A.), Reuven Avi-Yonnah (Michigan), Linda Beale (Wayne State), Samuel Brunson (Loyola-Chicago), Neil Buchanan (George Washington), Patricia Cain (Santa Clara), Adam Chodorow (Arizona State), Mark Cochran (St. Mary's), Bridget Crawford (Pace), Jonathan Forman (Oregon), Gregory Germaine (Syracuse), David Herzig (Valparaiso), Benjamin Leff (American), William Lyons (Nebraska), Roberta Mann (Oregon), Lori McMillan (Washburn), Joel Newman (Wake Forest), Henry Ordower (St. Louis), Katherine Pratt (Loyola-L.A.), Daniel Schaffa (Richmond), Erin Scharff (Arizona State) & Theodore Seto (Loyola-L.A.), Amicus Curiae Brief of Tax Law Professors in Support of Appellees (Gaylor v. Mnuchin, Nos. 18-1277 & 18-1280, 7th Cir. :

Section 107 allows “ministers of the gospel” to exclude the value of housing benefits from income, whether provided in-kind or as a cash allowance, at a cost of approximately $9.3 billion in forgone taxes over a ten-year window. The trial court dismissed the challenge to Section 107(1), which excludes in-kind housing, on standing grounds, but that section remains relevant to the analysis of Section 107(2). Supporters argue that Section 107(2), which excludes cash allowances, comports with the First Amendment’s Establishment Clause because (1) it is part of a broad policy expressed in a number of provisions that exempts housing provided for the convenience of the employer and (2) tax exemptions do not subsidize religious actors. Alternately, they argue that Section 107(2) is permitted as an accommodation for religion because it equalizes treatment of different religious groups and avoids church/state entanglement. Finally, they claim that eliminating Section 107(2) would imperil other exemptions.

Section 107 is a tax provision, and understanding how it functions within the Tax Code and differs from other facially similar provisions is critical to the constitutional analysis. Amici make four points. First, Section 107(2) differs significantly from other tax provisions that exempt housing from income and is not part of a broad housing policy that naturally includes ministers. Second, Section 107(2) subsidizes ministers, as reflected in both court decisions and the government’s own admissions. Third, Section 107(2) is not an appropriate accommodation for religion because it (1) disregards important differences in ministerial income that warrant different tax treatment, and (2) creates significantly more church/state entanglement than would the generally applicable rule. Finally, finding Section 107(2) unconstitutional would not imperil other exemptions.