Challenge To Clergy Tax Break Gets Green Light -- Next Stop, Scientology?

[cbayer]

http://www.forbes.com/sites/peterjreilly/2012/08/30/freedom-from-religion-foundation-has-standing-to-challenge-clergy-tax-break-next-stop-scientology/


Peter J Reilly, Contributor
8/30/2012 @ 6:59AM



The Freedom From Religion Foundation has won a round in litigation on the tax free housing allowances of “ministers of the gospel”. Although the fight over the exemption has not been followed that closely by the media, I believe that the fallout from this case has the potential for creating a constitutional crisis. There are quite a few people who could be affected by the outcome of this case and in the aggregate they are a pretty influential group. According to the Hartford Institute for Relgion Research, there are 600,000 clergy serving various denominations in the United States. Not all of them receive tax free housing allowances, but the effect goes beyond the individual clergy. The average salary and housing package of a Protestant minister serving a small congregation – the prototypical “minister of the gospel” that was probably in the mind of Congress when they enacted the provision – is around $31,000. Having much, often virtually all, of that be income tax free probably affects the viability of some small parishes.

The law that FFRF is challenging is Internal Revenue Code Section 107 which provides:

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.

You can tell from the lack of gender neutrality and the Christian religious language that the provision has been around for a while. The law has been interpreted broadly and applies inter alia to women ministers, rabbis and basketball coaches at certain colleges.

The Freedom From Religion Foundation argues that the provision is unconstitutional. Up until now, the Government has been successful in keeping this question away from the courts. Richard Warren had excluded an $80,000 housing allowance, which the IRS had found to be in excess of the rental value of his home. The question of whether there was such a limitation went to the Ninth Circuit. The Ninth Circuit surprised everybody by asking the parties to start briefing on whether Code Section 107 was constitutional and appointing an amicus, Professor Erwin Chemerinsky, to make the argument that it was not. Congress passed the Clergy Housing Allowance Clarification Act of 2002 and Warren and the IRS agreed to withdraw the case. Professor Chemerinsky wanted to continue but it was determined that he had no independent right to intervene.

more at link

[RLBaty]

1. The FFRF IRC 107 Challenge Gets Green Light!

Remember me?

I used to post here quite a bit and on this very subject!

After all this time, Judge Barbara Crabb has granted the FFRF "standing" to have the case decided on its merits.

I have already posted some comments at Forbes following the above article and so will not attempt to duplicate my efforts here.

I have contributed one or more recent columns to Forbes dealing with the issue as well, and have commented on those columns as well as a number of related columns.

Some may wish to visit the Forbes site and comment there.

You are also welcome to visit my own discussion list for comments on this issue or other issues that you may wish to discuss there.

Here's the address to my place: http://groups.yahoo.com/group/Maury_and_Baty/

See y'all there, or not!

HOORAY!

(P.S. I figure this case might ultimately and appropriately wind up before the Supreme Court of the United States; it's been a sleeper for way too long.)

[cbayer]

2. Welcome back, RLBaty.

I had thought there would be more interest in this, so am surprised at the overall lack of response.

You might want to check in from time to time in case members have questions.

[RLBaty]

3. Re: Welcome back, RLBaty!

Thanks for the comments!

I have always been disappointed that this issue that has been "sleeping" in modern times ever since the Rick Warren tax case where he managed to get the Congress and President to pass a law to get him off the hook and preserve the housing allowance law and all of its abuses and excesses.

Maybe now that "standing" has been granted, and with an election looming, there will be an upswelling of attention to the issue which truly is historic.

We might expect that amici may start coming out of the woodwork to help the Government defend the law. The Pacific Justice Institute has already pledged to do so. Maybe more will follow.

Let the games begin!

[cbayer]

4. I grew up in parsonages, so I have very mixed feelings about this.

Seeing the abuse of this provision concerns me a great deal, but I worry for the smaller congregations with limited funds.

[RLBaty]

5. Re: Mixed Feelings!

I don't think smaller congregations with limited funds are going to be affected that much by the loss of the benefit, if it is lost.

Congress and the President could have/could easily act to resolve the constitutional issue but they have not. Rick Warren's tax case was a wake-up call, but nobody woke up; Senator Grassley led that effort to preserve the law and its abuses.

And even now, Grassley has kicked the can down the road again; allowing his private, religious friends to take up the issue after Grassley's commission failed to act on the matter. They are going to think about it for a few years and get back to him; if he survives that long.

My own hobby on the issue involves the offense in the administration of the law that allows "basketball coaches" and other such employees at private schools like Pepperdine to claim the benefit. And that's because George Bush, Sr. and his Texas sidekick Omar Burleson put the squeeze on the IRS for a special, administrative decision that would allow it. That gimmick has been used increasingly now for over 40 years.

Of course, don't we all know about the million dollar benefits that goes to the high-flyin' preachers that seem to be everywhere these days.

Please, don't try to use the "local, small congregation preacher" as a martyr for the cause of preserving the benefit.

If Congress and the President want to allow a housing benefit to all sorts of "little people", including preachers for small churches, they can easily do it without raising a constitutional issue.

IRC 107 has got to go!
Support the FFRF challenge!

[cbayer]

6. I am generally in support of the FFRF challenge to this and appreciate

the work you have done on it.

I didn't know that this was being used in educational institutions to provide housing allowances for people like coaches. That makes no sense at all. I certainly do know about the megachurches and how they have grossly abuse this.

I'm not being a martyr to anything. I'm just not sure how my family would have lived without the parsonage. I am sure that there are other solutions, but I would ask that you understand that my perspective is a personal one.

The parsonage basically belonged to the congregation. To me that meant that it was an open house for those in need, which was an important part of my overall social education. I'm not clear how this would not impact on small churches, other than that they will force them to redistribute their resources away from some of the good things they do.

But I am very open to learning more about it.

[RLBaty]

7. Re: Cbayer's personal perspective!

Cbayer,

In the case of homes owned by churches, on or adjacent to the church building, preachers who live therein as a condition of their employment could probably make the case to exclude the value of the benefit under IRC 119.

In simple terms, IRC 107 used to allow that, but was changed many years ago to allow unlimited cash payments to "ministers" regardless of where they chose to live.

As your comments further substantiate, it is my experience that few people realize just how widespread the allowance of the benefit has become; yes, even to allowing it to the basketball minister at places like Pepperdine if they choose to register as a "minister".

I welcome your interest in the issue, cbayer.

Feel free to ask if you think I might have somewhat to offer; here, my place, or Forbes.

There's certainly a lot to deal with if one is inclined to dig into the details.

By the way, Peter J. Reilly has posted a comment to his article acknowledging your posting this reference here and reminding me of the IRC 119 option for certain "ministers".

Between the three of us, maybe we can get the fire started!

[cbayer]

9. It's been my pleasure talking with you. I hope you will check in to see other comments

or questions.

[RLBaty]

10. I'll try to keep up with the action here!

CBayer,

Again, thanks for giving some attention to Peter's latest Forbes article on the issue and the historic development yesterday whereby the Federal District Court of Judge Barbara Crabb granted "standing" for some of our citizens to constitutionally test the merits of IRC 107.

I will try to follow any further interest in the issue here.

[JDPriestly]

31. Open house to those in need.

I remember a Saturday night. Must have been very late. I was about nine, lying upstairs trying to sleep but actually worrying about the shadows on the walls.

Well, there was a knock on the door. I heard voices -- muffled.

Then the door shut. My father said to my mother, "I don't know. I'm not supposed to marry divorced people, but if I don't they will just live in sin."

After a bit, the door opened again. My father performed the marriage ceremony. I'll never forget that. Marriages were occasionally performed right in our living room.

[cbayer]

33. I didn't know you were a PK, JDPriestly.

It's a unique experience, that's for sure, but one I am (retrospectively) very grateful for.

We got exposed to alot. There were marriages in the living room, but there were also divorces, weren't there?

[JDPriestly]

38. Yes. I learned to keep other people's secrets at a very early age.

I learned to just let gossip go in one ear and out the other.

I learned that people can be very vicious, jealous and hateful but also very loving and giving and compassionate and kind. PKs get a very broad view of human behavior early in their childhood.

You hear discussions over the dinner table about things -- human things -- that a lot of adults never hear. It is a special kind of education in compassion.

And of course, Priestly was a Unitarian minister. Although my father was not Unitarian.

[JDPriestly]

30. Actually, as another minister's child, it will hurt small congregations a lot.

They will not be able to afford a pastor. This will be especially true in rural areas. The law seems like an anachronism today.

But most pastors will be able to deduct for the use of an office in their home just like other businesses.

I remember many a wedding held between the church and our parsonage located next to the church. Many a meal was baked in my mother's kitchen for the poor or for some church event like a wedding. Real pastors of real churches do use their homes to benefit the church. Or at least they used to.

Increasingly, pastors with long affiliations with a sole church buy their own homes. It is a wise investment and insures more of a sense of privacy.

This will have a bad impact on small congregations -- especially in rural areas. But they are not very common any more. And it is rather absurd for the pastor of a mega-church like Rick Warren or someone like Pat Robertson to benefit from this. You know they aren't preparing the sacraments for Sunday communion on the same kitchen table where their kids just ate breakfast. That happens in some parsonages. At least it used to.

[RLBaty]

11. The IRC 107 Issue and the Presidential Election!

Forbes has now published a column from a guest columnist regarding the prospects that the issue should be one that Obama and Romney should address in their campaigns.

Here's the link:

http://www.forbes.com/sites/peterjreilly/2012/09/01/where-do-romney-and-obama-stand-on-special-tax-status-for-ministers/

[cbayer]

12. Thanks for this. I remain surprised at the lack of interest in this thread, as the issue

of tax exemption for churches has been a hot topic in the past.

[skepticscott]

13. It's unlikely that either will address this

Even if Romney thought it was a bad idea (and I expect that his position is just the opposite), he'd be foolish to be seen as attacking traditional Christianity in any way. As far as Obama, there's nothing to be gained by campaigning on this issue, or even mentioning it. It's a minor issue that doesn't even appear on most people's radar, and the voters who do care about it are 99+% sure to vote for him anyway. Both candidates have more to lose than to gain by bringing this up.

[RLBaty]

14. Don't wait for the candidates to bring it up!

I think it is the case that if not properly handled, both candidates do indeed have more to lose than gain by bringing it up.

That's why I have this fantasy about the media and public picking up on it and compelling the candidates to address it.

When Rick Warren was on the hot seat, Congress and the President had no problem in acting with remarkable speed and interest to help him out.

The shoe is now on the other foot and it really is rather historic that Judge Crabb has granted "standing" to the FFRF to move the case forward.

Obama's Justice Department is currently defending the law.
Will it continue to do so?

Will the PJI show up to try and intervene in the case as it earlier pledged?
Will other wannabe amici attempt to help out the Justice Deparment?

I hope things pick up and there is a firestorm of interest in the case and that the candidates will be FORCED to deal with it.

[skepticscott]

19. The media can't even compel

candidates who claim that they will cut taxes and also balance the budget to say specifically what spending cuts they will make to reach that goal, and that's a much bigger and more important issue. Like it or not, this has no traction. Even among people who know and care about it, it's not that high on their list of priorities, as issues go. Either candidate's taking the kind of stand you advocate on this issue would immediately be re-broadcast by the right wing noise machine as "Obama/Romney threatens to eliminate tax exemption for churches", and that would be the last we'd hear of it. Or them.

[JDPriestly]

32. Can Mormon bishops claim this tax advantage?

[RLBaty]

34. The Mormon exploitation of IRC 107 has yet to be determined!

At least from where I stand.

The Mormon Machine moves a lot of money into the hands of its employees through various means and subsidiary organizations.

They claim local church leaders are not compensated, so they, allegedly, don't have to worry about the issue.

However, there is no doubt in my mind but what higher up the Mormon food chain their employees are compensated and, if considered "ministers" in the Mormon system, they would qualify for the income tax free benefit.

There is no doubt in my mind that the Mormon organizations and its employees are exploiting the benefit just as do other religious organizations.

If the basketball minister at Pepperdine University qualifies for the benefit, why not many a Mormon throughout the Mormon organizations?

Maybe with a Mormon running for high office, someone will get around to pressing the candidate to provide information on that as well as publicly provide his position on the FFRF IRC 107 Challenge.

[RLBaty]

39. Re: The Mormon exploitation of IRC 107...

To get more specific, try finding out how many employees at those Mormon private schools (e.g., Brigham Young University, et al) are registered as Mormon "ministers" and are receiving income tax free housing allowances based on IRC 107 and the Government's recognition that those private schools are "integral agencies" of that church Joseph Smith is charged with founding.

[RLBaty]

8. Regarding those basketball ministers, et al!

Here's a link to an article out of Pepperdine that explains, in limited part, how Pepperdine employees have been known to exploit the housing allowance:

http://graphic.pepperdine.edu/news/2003/2003-10-30-minister.htm

That's all based on that special deal squeezed out of the IRS by Bush and Burleson back when Nixon was allegedly using the IRS to do his bidding.

[pinto]

20. Thanks for the link. Didn't realize that Pepperdine was affiliated with the Church of Christ.

Nor that the church's definition of "minister" was so broad, basically to include any member as a minister.

[RLBaty]

24. Part of the back story!

What makes that situation so egregious is that George Pepperdine is on record of wanting to design and create a school that was NOT, NOT, NOT an "integral agency" of the church. . . . .and he did so!

Then Bush and Burleson came a long and put the squeeze on the IRS and was able to get that administrative rule set in place that allows and requires the Government to officially recognize Pepperdine and similar schools as "integral agencies" of the church so that the basketball ministers and others can claim the income tax free housing benefit.

In my experience, most folks are like you and haven't been aware of such expansion of the income tax free benefit.

The issue is mentioned in one of the paragraphs in the FFRF Complaint. If the case does go to trial, the history of the basketball minister matter may be one case study used to convince the Court that IRC 107 requires the Government to UNconstitutionally involve itself in matters of religion.

As much as I would like to see it go to trial, the waiting for trial will be frustrating. Perhaps we will get a relatively quick summary judgment in favor of the FFRF which could speed the case on towards a meeting with those 9 judges in Washington, D.C.

[formercia]

26. Time to put on my Pasta Strainer

and file an Amicus Brief with the Court.

Ramen

[cleanhippie]

15. Why is Scientology being singled out?

[RLBaty]

18. Re: Why is Scientology being singled out?

That has to do with some special interests in Scientology and how the FFRF IRC 107 Challenge might tie in to developing those interests.

Officially, the Scientology agreement with the IRS has been secret for years.

In part, the agreement allows Scientologists to deduct the cost of their "auditing" as a charitable contribution.

There are other issues as well.

UNofficial texts of the agreement were leaked, but they remain UNofficial.

You can browse the Forbes archives for recent related columns on all of that.

Otherwise, there is plenty to find on the Internet about all of that.

[Fortinbras Armstrong]

16. Minister of the Gospel?

Does that exclude rabbis and imams?

[RLBaty]

17. Re: Minister of the Gospel!

No, over time the term "minister" of the gospel has been extended to such as "rabbis", "cantors" and "imams".

However, part of the problem is that some religions have a "clergy/laity" system that excludes some from being considered "ministers" while others don't.

As a result, the Court denied "minister" status to a career synogogue administrator (Oscar Haimowitz) but the IRS allowed the "basketball minister" (Jerry Jobe) at Oklahoma Christian University to have the benefit.

The administration of IRC 107 presents its own constitutional issue because of such things.

The Government should not be picking and choosing who is a "minister" for such a benefit.

[pinto]

21. Setting aside the larger issue of tax-exemptions for churches in general,

perhaps a reasonable compromise could be a limitation on housing exemption based on family size and local housing costs. Another Federal operation, HUD's Section 8 housing assistance program, already has localized support limits in place.

[cbayer]

22. I would like to see those kinds of restrictions, as opposed to complete elimination.

[RLBaty]

23. An easy fix to IRC 107!

I and others have noted a number of easy fixes to what constitutionally ails IRC 107.

However, the political will has not been sufficient to accomplish the task.

It would be quite easy to limit the amount to a reasonable level, say $5,000.00 a year, and allow a broad classification of do-gooders to qualify instead of just "ministers".

Congress and the President appear UNinclined to fix it, and so it may be lost altogether when the dust settles; and that may be what Congress and the President prefer. Let the judiciary appropriately do away with it and take the blame. Congress and the President can lament the loss, while secretly being quite thankful, and move on.

[RLBaty]

25. A Southern Baptist Preacher/Blogger Speaks to the Issue!

Peter J. Reilly has posted a followup column, one of his own, with emphasis on the interests of the Southern Baptist preacher William Thornton in the issue.

Here's the link to Peter's column today:

http://www.forbes.com/sites/peterjreilly/2012/09/02/southern-baptists-against-clergy-tax-abuse/3/

I've posted a comment there, which you may need to "expand" in order to read until Peter "calls it out". Y'all might want to consider posting your own comments there.

[longship]

27. Glad to support this thread

The colloquy here is very informative. It's one of the best things about DU. It is like going to school because there's always somebody who knows more than you do.

Thanks to both of you for this.

My position is that this law has to go. cbayer and I have discussed this before and I appreciate her position. But the excesses are a bit frightening. (The Crouches in particular, although they look like their empire may be crumbling from within by family fighting over -- guess what? -- the parsonages. It must be the $100,000 dog house.)

Again, thanks for taking us interested DUers to school... er, to church (according to your preference).

[RLBaty]

28. Thanks for the thanks!

I appreciate the feedback from folks out there who recognize the problem.

It is quite frustrating and disappointing, given all the media find time to cover in tedious detail, that the mainstream media hasn't yet picked up on this story and its historical developments of last week and the prospects for the future.

I've written to both presidential campaigns asking for a statement on the issue.

Maybe I'll get a response, maybe not!

[JDPriestly]

29. Back when Methodists were a big religious population, pastors were moved

by the bishops every few years. They had no ability to buy homes or settle down. They were required by their employers to live in church-owned housing. That has changed. But that is why the law was enacted. It is kind of an anachronism in this day and age when everyone moves around a lot and a much smaller percentage of society lives on farms for years and years and years or in homes that have been in their families and are owned outright.

[cbayer]

35. We (Disciples of Christ) were moved frequently as well.

I think even having a lease would have been problematic. The parsonages were simple, but adequate. And as we both noted above, were different than other homes.

There were meetings of political activists, rival street gangs, anarchists. It served as a refuge for those in crisis. We often had abused or abandoned teenagers or young adults living there for a time. On one occasion, someone just released from a psychiatric unit set himself on fire and hung himself in our home. I'm not sure how to solve this problem, but not all parsonages are the same, that's for sure.

[JDPriestly]

36. Yes. My dad was a social worker and pastor, and my mom was by nature a shelterer,

maternity, compassion combined. I am very proud of my parents. They are and were true Christians living their faith through their good works. I feel so blessed to be their child and to have grown up in the parsonages with them.

What I see in the Christian churches, especially the mega-churches, today turns me off. My parents were about sacrifice. Protestant pastors don't take the vow of poverty. Most of them at least back then just lived it.

We were poor in money, but we lived well because we had love and a very modest lifestyle. No alcohol, no tobacco, no extravagances, used clothes, hand-me-downs and homemade, old cars, and lots of joy and generosity.

If more pastors today lived and worked the way my dad did, there would be no movement to do away with this tax perk for them. But when I think about the crass, materialistic preachers in the mega-churches and on TV, I understand why this movement exists.

[cbayer]

37. This so mirrors my story. It is my pleasure to make your acquaintance.

[RLBaty]

40. A defense of IRC 107!

Peter J. Reilly at Forbes has now added a new column to the continuing discussion of IRC 107; from Frank Sommerville:

http://www.forbes.com/sites/peterjreilly/2012/09/06/in-defense-of-special-tax-treatment-for-clergy/

I've added my comments following that article. Y'all should consider commenting as well.

Sincerely,
Robert Baty

[RLBaty]

41. Forbes posts another column dealing with the issue!

Peter J. Reilly at Forbes has posted another column on the issue. This time dealing with the recently filed petition to the U.S. Supreme Court by Phil Driscoll, the horn-playin, tax-cheatin' "minister" wanting the exclusion based on having two homes.

Here's the link:

http://www.forbes.com/sites/peterjreilly/2012/09/07/phil-driscoll-petitions-supreme-court-on-housing-allowance-for-second-home/

Readers' comments are welcome there.
I offered some.
Maybe y'all will too!

[RLBaty]

42. Today's development in the FFRF IRC 107 Challenge litigation!

Here's a late-breaking note that also goes to the importance of the issue.

Following are excerpts from an unopposed motion filed in the FFRF IRC 107 Challenge case which undoubtably will allow the Government a few more days to file its reply to the amended Complaint filed by the FFRF.

Maybe it's just "boiler plate" language, but it says what it says about the importance of the issue and what the Justice Department claims it needs to do in order to reply.

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WISCONSIN

FREEDOM FROM RELIGION FOUNDATION, INC.;
ANNIE LAURIE GAYLOR;
ANNE NICOL GAYLOR; and
DAN BARKER,

Plaintiffs,

v. Case No. 11-CV-626

UNITED STATES OF AMERICA;
TIMOTHY GEITHNER, in his official capacity; and )
DOUGLAS SHULMAN, in his official capacity,

Defendants.

UNOPPOSED MOTION TO EXTEND TIME FOR THE UNITED STATES
TO ANSWER THE AMENDED COMPLAINT

(excerpts)

7.

In light of the allegations and the important constitutional
issues raised by both the Amended Complaint and the Opinion
and Order, as well as the need to coordinate the efforts of
various stakeholders within the Internal Revenue Service
and the Department of Justice, the United States requires
additional time to prepare and file its response to the
Amended Complaint.

8.

Counsel for Plaintiffs have agreed to allow the United States
to file its answer or other response to the Complaint on or
before September 21, 2012.

A proposed order granting the relief requested is attached
to this motion.

Dated: September 10, 2012

Respectfully submitted,
JOHN W. VAUDREUIL
United States Attorney

/s/ Richard A. Schwartz
RICHARD A. SCHWARTZ
U.S. Department of Justice,
Tax Division
Post Office Box 683
Washington, D.C. 20044

Attorneys for Defendant
United States of America

[cbayer]

43. Thanks for the update, RLBaty.

[RLBaty]

44. Living the fantasy!

cbayer,

There's less than two months left, and I think it would really be neat if "we" managed to get a little fire started and the candidates, even Jill Stein, were to be compelled to publicly address this important public issue as part of their efforts to tell us something about themselves, their constitutional ideas, and the future of IRC 107.

Maybe it will happen, maybe not!

Sincerely,
Robert Baty

P.S.

Did I mention that I just posted some comments on the issue on "loophole" stories on the Huffington Post and Washington Post:

http://www.huffingtonpost.com/2012/09/09/mitt-romney-paul-ryan-tax-loopholes_n_1868444.html

and

http://www.washingtonpost.com/blogs/the-fix/wp/2012/09/09/paul-ryan-says-plan-to-tax-loopholes-not-a-secret-but-he-is-short-on-specifics/

[RLBaty]

45. Christianity Today revisits the FFRF IRC 107 Challenge!

See:

http://blog.christianitytoday.com/ctliveblog/archives/2012/09/judge-revives-ffrf-atheist-challenge-clergy-housing-allowance.html

Go to link for article and readers' comments.

Sincerely,
Robert Baty