FFRF once again fights government over unconstitutional housing allowance for ministers

June 19, 2018 • 1:00 pm

For years the Freedom from Religion Foundation (FFRF) has been fighting a no-brainer legal battle against the U.S. government, which by law makes all ministers’ housing allowances completely tax-exempt. This means that if a minister is given, say, $10,000 per year by his church to subsidize housing, that money is completely tax free. It is, in effect, a gift.

This is unique for religious organizations and doesn’t apply to nonprofits like the FFRF or charitable organizations.  It’s also patently unconstitutional because it privileges religion over non-religion. The FFRF, or any nonprofit atheist organization, may give housing allowances to its employees or heads, but those are taxable. (According to FFRF lawyer Andrew Seidel’s description of the case on Patheos’s Freethought Now! website, the exemption is for “ministers of the gospel.” I suppose that means all pastors, rabbis, imams, and the like, but only Christians really preach the gospel!”) Annie Laurie Gaylor and Dan Barker, married co-Presidents of the FFRF, also get a housing allowance, but must pay taxes on it.

As the FFRF notes in an email bulletin, it’s not just the cost of housing (rent or mortgage) that is subsidized:

Clergy are permitted to use the housing allowance not just for rent or mortgage, but also for home improvements, including maintenance, home improvements and repairs, dishwashers, cable TV and phone fees, paint, towels, bedding, home décor, even personal computers and bank fees. They may be exempt from taxable income up to the fair market rental value of their home, particularly helping well-heeled pastors. The subsidy extends to churches, which can pay clergy less, as tax-free salaries go further.

This tax break given to ministers costs the government (i.e., the taxpayers) about $700 million per year! There is no rationale for keeping it unless similar exemptions are given to people, regardless of religion, in similar situations, i.e. nonprofit organizations. And the FFRF’s efforts to overturn a palpably illegal law have been stymied by the government over technicalities.

An original suit filed in 2011 was victorious; Judge Barbara Crabb for the Western District of Wisconsin ruled in 2013 (here) that the religious exemption violated the Establishment Clause (the First Amendment) by privileging religion. This was a major victory for the FFRF—and for secularism. It was also a shock to the government, and to the many churches and ministers who benefit from this illegal arrangement.

The government appealed. They won in 2014, but only on a technicality. The three judges on the Seventh Circuit court of appeals ruled (decision here) that the plaintiffs lacked the “standing” (legal requirement) to sue. That was because Gaylor and Barker had never asked the Internal Revenue Service for a refund of their taxes on the housing allowance. This was a way for the government to dismiss the case without having to face the First Amendment issues involved.

With standing, the plaintiffs went back to court. And they won in October of last year. And once again the government, determined to privilege religion, appealed to the Federal District Court of Appeals. Yesterday the FFRF filed yet another brief before the Seventh Circuit Court of Appeals (Annie Laurie Gaylor et al. v. Stephen Mnuchin [Treasury Secretary] et al., pdf here). As an email I got from the FFRF noted:

The 7th Circuit threw FFRF’s original suit out on standing, arguing that Barker and Gaylor hadn’t gone through the motions of asking for a refund of their housing allowance from the IRS. Accordingly, they sought the refunds, and when denied refunds for the year 2012, went back to court.

Also named as a plaintiff is Ian Gaylor, representing the estate of FFRF President Emerita Anne Nicol Gaylor, who died in 2015 but whose retirement was paid in part as a housing allowance she was not allowed to claim in her lifetime.

As FFRF’s brief puts it, “Only ministers can exclude cash housing allowances, a result that is patently unfair.” Even the bible, the brief cryptically notes, commands citizens to “render unto Caesar the things which are Caesar’s.” The government “ignores basic principles of neutrality and fairness when it comes to clergy taxation,” charges FFRF.

The brief takes digs at the numerous friends of the court briefs filed against FFRF, representing outraged ministers and denominations as varied as Unitarian Universalists, Jewish, Muslim, mainstream Protestant and evangelical Christian groups, and some 8,000 individuals. “The silence of the amici is particularly noteworthy as none even suggests that expanding the cash housing allowance exemption to non-clergy might be fair. They confirm the value of the exemption, while seeking to confine it to themselves,” contends the brief.

As Andrew Seidel notes in his Patheos post, the government’s brief consists largely of a list of religious organizations favoring the exemption, so their argument is basically not a Constitutional one, but simply “a lot of us do it and want that tax break.” If the courts are really determined to keep the ministerial privilege, they’ll have to do some fast tap-dancing this time. And of course if the government loses, they can keep appealing—all the way up to the Supreme Court.  Yet the tax break is really so palpably unconstitutional that I can’t imagine what the courts could do to keep it, unless they give similar tax breaks to atheist nonprofit organizations or any comparable nonprofit.

If you want links to the judicial history of the case, here are some:

Appeal Documents

Dan and Annie Laurie (and the whole apparatus of the FFRF) are formidable and tenacious foes, and of course I hope they win. Here they are with their new brief:

I’m a member of the FFRF (it’s only $40 a year, and you get a cool and long monthly newspaper), and am also on the honorary board of directors. If you can spare $40, I’d urge you to throw it their way, as they use the money to actually get stuff done—and to keep this country secular, the way its Founders intended.


32 thoughts on “FFRF once again fights government over unconstitutional housing allowance for ministers

  1. Thank you so much for this information. I contribute annually to FFRF, it is such a worthwhile cause. And for those who, like me, prefer not to get their newspaper in physical form, it can be delivered digitally.

  2. Just for the sake of clarity, when you say employers can pay employees for housing, etc. and that it is taxable, you mean the employee must consider it as income from the employer and pay taxes on it, right? We’re not talking about the employer getting taxed on these amounts.

  3. in re ” If you can spare $40,
    I’d urge you
    to throw it their way, ”
    please, please DO this, All.

    It makes a smashing Solstice gift !
    Or for .any. gifting occasion !


  4. I do like the idea of the cost being a burden on the members of the church. I am a little torn with regard to putting a direct burden on clergy since I think (optimistically) that a growing number of them do not believe in God and have no where to turn and have made their lives into social workers under the guise of theology.

    Tax exemptions for all churches should go away, but we should, as a society learn how to make transitions for the people who are in the church and find it difficult to leave due to the financial burden.

  5. The $40 dollars I send to FFRF is probably the charitable contribution I’m most pleased with. As far as bang for your buck goes, you can’t beat it. And the paper is a good read, and this year we got a nifty Freethinker pin as well.

    1. It is a good lineup. I’m skipping this year having attended last year and the two before that. Those also had great lineups.

  6. Card-carrying member here: Please give to FFRF, they really elevate sentiments here to another level.

  7. Well, I am a life-time member although it may be in my wife’s name. Have followed this saga concerning the tax free money going to the religious for a long time. It has been a long fight that should not have been necessary in the first place. The only tax free housing allowance that should be tax exempt are for military or civilian govt. workers in overseas location. As a govt. civilian overseas I got this for one 5 year stretch in Okinawa. As I say this is the only place this should be done.

    To give it to the clergy is a double whammy. Notice, if they gave them the money as income it would be tax deductible so they call it a housing allowance because they have this deal with the IRS. It is a true rip off.

  8. I was disappointed to read that Unitarian Universalists, just about the most liberal church there is, were against FFRF. Long ago I was a member and believe they would not oppose the suit. This sounds out of character for them. The fellowship(40 or 50 members) my family belonged to actually sent in $1.00 in taxes as a protest against the current policy. But, Unitarians are very diverse and so perhaps I should not be surprised that some fellowship somewhere would like to keep the tax break.

    1. I was disappointed, too, and I used to be a member, too. For a long time the UUs were the only home available for atheists. Our local UU fellowship has an atheist for a minister, and they are mostly simpatico with our local atheist organization.

  9. The identical tax break is given for any employment that is:

    1) provided for the convenience of the employer (because employee must be physically near place of employment)
    2) required as condition of employment (same idea- the employee would not be able to perform the service without the lodging)
    3) Housing is on business premises.

    This occasionally includes college campus lodging.
    In particular, the military, the Peace Corps, and members of the Foreign Service all get tax-free housing allowances on the basis of these stipulations.

    However, the U.S. government expanded the privileges given to ministers in 1954. At the time, the Senate said that this was to “eliminate the disparity in the tax code between ministers who lived in a church-owned parsonage and those who were given a stipend with which to secure housing.” Essentially, the Senate was allowing this for “church start-ups”.

    So I think the FFRF has its work cut out for it.

    I wish the FFRF well on fighting Bible classes in public schools, and other stuff, but I’m not convinced on this one.

    1. It is a convenience alright but not one that should apply to the clergy. Just look at the huge tax exemption already provided to the church. No one else gets such a thing or comes close, except maybe the modern day corporations with the corruption in congress. The reason for military getting this is obvious. They have always had lower pay that will not allow them to live in the many different parts of the nation and world and afford the housing. A E-4 sergeant living in Oklahoma makes the same money as the same grade living in California. They must have this allowance to even exist. And this does not apply to the clergy. They can be compensated just like any civilian according to location. The military live in a condition of mobility. I do not believe this applies to the clergy.

      You can paint it up anyway you like but I do not see the FFRF as fighting a battle that should not be won.

    2. You make an excellent point, and it occurred to me after I wrote my comment below that, even if this law is struck down (and, based on what you’ve written, I’m not convinced it should be), an employee reimbursement structure could be a viable workaround.

      This link has some good information regarding how employee reimbursements for housing can avoid being taxed: https://www.thebalancesmb.com/when-is-employee-housing-taxable-to-the-employee-4158182

      It seems to me that churches can easily meet these criteria and, unless there are other laws that would interfere in some way regarding the particularities of clergy housing, this would make the point ultimately moot (beyond being a victory in nullifying government support of religion in this case, which would still be symbolically significant).

    3. That 1954 privilege you mention is the law at stake here (referred to as 26 U.S.C. § 107(2)). The court found that it failed the Lemon test. In the October 6th Opinion and Order, Judge Crabb addressed the “Secular purpose” arm of the Lemon test.

      She wrote;

      “At a hearing on the bill, its sponsor in the House, Peter Mack, made the following statement:

      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.

      …. I concluded that both the statement and the report showed that the purpose of § 107(2) was to assist a group of religious persons, which is not a secular purpose.”

      So it doesn’t seem to me to matter that congress wanted to end that disparity between different kinds of religious people as the law fails the Lemon test.

  10. I hope they win! I agree, it seems like they certainly should.

    I do have to disagree, though, about the government winning the previous appeal:

    “The government appealed. They won in 2014, but only on a technicality…That was because Gaylor and Barker had never asked the Internal Revenue Service for a refund of their taxes on the housing allowance. This was a way for the government to dismiss the case without having to face the First Amendment issues involved.”

    I don’t think the Court was trying to avoid deciding the Constitutional issue (if that’s what you were implying with the sentence in bold, though I’m not entirely sure if you were). I agree with the decision that they did not have standing in the case.

    1. “I don’t think the Court was trying to avoid deciding the Constitutional issue… I agree with the decision that they did not have standing in the case.”

      Well, it sure seems like the Court was trying as hard as they could to avoid it. You can’t come much closer to establishing standing than they did. Barker and Gaylor were employed by a non-profit organization and portions of their salaries were designated as a housing allowance. They appear to be identically situated to ministers, except that their non-profit was not a church, but the Seventh Circuit concluded that since they did not claim the exemption, they did not suffer an actual injury. They had to claim a non-existent (for them) exemption and be rejected in order to have standing. Yeah, that makes a lot of sense.

      1. I think that’s a fair counterpoint and am inclined to agree. It would take excellent legal foresight to first apply for the benefit, with the knowledge that they would be rejected, just so their standing would be without question.

      2. In general you want courts deciding cases on narrow grounds. The standing decision was what we should want to see for that reason.

        BJ is wrong too. Standing is the first issue in any lawsuit.

        1. Firstly disclaimer – not an American; not a lawyer. But I am fascinated in this standing issue. Surely, if the matter is constitutional, then any citizen has standing, since the constitution is designed to protect citizens and the orderly running of society. A breach of the Constitution, whether it directly affects a person or not, should be a concern to every American since letting it stand means that other breaches might similarly be let stand.

          If an American citizen doesn’t have standing to challenge any Constitutional issue, then I think there is a fundamental issue with the operation of the Constitution.

          1. I am not either an American or a lawyer either, but these sorts of topics come up a lot in concerns of mine. I have been told repeatedly that your plausible argument (which I have used myself) would be rejected by a court.

            What I would like to hear more of is who can issue a “writ of mandamus”, which is basically an order to enforce the law. This is how the infamous “Sheriff Joe” was nailed, IIRC.

            That way one could get justice without the expense of a suit …

  11. FFRF is a great organization. With a fairly small budget, they manage to be the most effective group fighting for separation of church and state in the USA. I’ve been a member for the last 15 years and recently became a lifetime member for $1,000. It’s well worth the cost to support their important work.

  12. Prediction: If the FFRF wins, Drumpf will go off on a rant about heathen atheist terrorist sympathisers trying to destroy American values and he and the Rethuglicans will promptly pass a law restoring tax-free privileges to all, errm, spiritually oriented non-profit organisations (nudge nudge, wink wink, take that, atheists!) and dare the Democrats to oppose it…


  13. Ministers are dual-status employees. For income tax purposes, ministers are considered church employees. For social security purposes, ministers are considered self-employed. The housing allowance, which must be designated annually by the church, is exempt from income tax. Ministers, however, must pay social security tax on their housing allowance unless they have filed for exemption. Form 4361, I believe.

    Years ago, ministers receiving a large housing allowance and having children received a huge tax benefit. Since the housing allowance was not counted as income, this often meant they were eligible for the Earned Income Credit. After paying out millions of dollars to ministers,the IRS changed the law. Ministers are now required to count their housing allowance as income.

    Ministers also benefit from church exemption from sales tax. Pastors can run all their business “expenses” through their churches, including vehicle purchases. Ministers buying new cars this way can save thousands of dollars.

    And here’s the kicker….anyone can start a church, gather up a few people, get ordained, and BINGO all these tax benefits can be yours.

  14. I should add that FFRF had to file for their tax exemption. Churches, on the other hand, are considered, by default, tax exempt. A church is a church because it says it is. The government wants nothing to do with defining what a church is, so virtually any group can be considered a church. Churches do not have to apply for 501c3 status in order to be tax exempt.

    Other not for profits have to file annual returns. Not churches. They are exempt.

  15. I’ll definitely become give up a magazine subscription and become a member soon. I hope we get more organizations like them that defend atheists soon, because it’s never good to have all your eggs, or all your lawyers in one basket because in time any organization can become misguided like the SPLC.

    It’s frustrating that the judicial branch is staffed with aging religious conservatives who will twist the law to protect their evangelical agenda and their persecution complex. It’s vexing to have so little political power and to feel that the less religious younger folk have to wait another 30 years for the older generation to die out before we can even begin to root out institutional corruption and illegal religious patronage in the government.

  16. “Amen, brother” to PCCE’s advocacy for FFRF. It amazes me that they do so much good work with relatively puny income. They are an effective, persistent, and fearless crew. Anyone that says he/she cares anything about church-state separation, especially in the Age of Drumph, who is not a member, and can afford the miserly membership fee, is not being true to themselves.

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