Wall Street Journal, Religious Groups, Atheists Clash Over Tax-Free Housing for Clergy:
A lawyer for religious groups on Wednesday defended in federal court a 64-year-old tax break that grants priests, rabbis and imams tax-free housing allowances—costing the Treasury of hundreds of millions of dollars a year.
A district judge in Wisconsin last year sided with a group that backs the separation of church and state, ruling that the law discriminates against other taxpayers and violates the Constitution “because a reasonable observer would view the statute as an endorsement of religion.”
On Wednesday, the two sides argued the case before the Seventh Circuit Court of Appeals in Chicago.
At stake is section 107(2) of the Internal Revenue Code, passed by Congress in 1954, allowing a “minister of the gospel” to exclude from his gross income the “rental allowance paid to him as part of his compensation.” The law has been interpreted to include rabbis, imams and other religious figures.
The tax break, commonly called the parsonage exemption, reduces federal revenue by $700 million a year, according to estimates from Congress’s Joint Committee on Taxation. ...
Some tax-law experts have also said the tax break for clergy is unconstitutional. Prof. Adam Chodorow of Arizona State University said the tax exclusion has received little pushback because of how costly it is to litigate a public-interest lawsuit.
Prof. Chodorow, who argued in court on Wednesday, said the benefit has been stretched to faculty at religiously affiliated schools. “I don’t think that the parsonage exemption is bankrupting America, but it’s money we could be using for other important purposes,” he said.
Prior TaxProf Blog coverage:
- District Court: § 107 Housing Allowance For 'Ministers Of The Gospel' Violates The Establishment Clause (Oct. 8, 2016)
- Clergy Ask Court To Reject Atheist Lawsuit Against § 107 Housing Allowances For 'Ministers Of The Gospel' (Dec. 18, 2016)
- Atheists Try Again To Strike § 107 Housing Allowance for 'Ministers of the Gospel' (Apr. 10, 2016)
- 7th Circuit Rejects Constitutional Challenge to § 107 Housing Allowance for 'Ministers of the Gospel' on Standing Grounds (Nov. 13, 2014)
- District Court Dismisses Atheists' Challenge to Tax Benefits for Churches and Clergy (May 22, 2014)
- Edward A. Zelinsky (Cardozo), The First Amendment and the Parsonage Allowance, 142 Tax Notes 413 (2014) (Jan. 30, 2014)
- DOJ Appeals Invalidation of § 107 Housing Allowance for 'Ministers of the Gospel' (Jan. 26, 2014)
- District Court: § 107 Housing Allowance for 'Ministers of the Gospel' Violates the Establishment Clause (Nov. 24, 2013)
- Edward Zelinsky (Cardozo), The Constitutionality of the § 107 Parsonage Allowance (Mar. 23, 2012)
- District Court Allows 1st Amendment Challenge to § 107 Parsonage Allowance to Proceed to Trial (May 24, 2010)
- John Dorocak (Western State), The Income Tax Exclusion of the Housing Allowance for Ministers of the Gospel Per I.R.C. § 107: First Amendment Establishment of Religion or Free Exercise Thereof -- Where Should the Warren Court Have Gone?, 54 S.D. L. Rev. 233 (2009) (June 20, 2009)