FFRF loses a slam-dunk case in Federal appellate court

If ever a First Amendment case looked like a winner, it was this one: the U.S. government keeps giving a tax exemption to ministers so that their housing allowances provided by the church—allowances that could be substantial, and include house renovations—remain tax free. No other people save “ministers of the gospel” (I assume that includes non-gospel-adhering rabbis) get this benefit.

This is blatantly unconstitutional, for it violates the First Amendment by privileging ministers of religion over anybody else.

As I wrote two years ago, here’s the relevant section from the U.S. Tax Code:

A licensed, commissioned, or ordained minister may be able to exclude from income the fair rental value of a home (a parsonage) or a housing allowance provided as compensation for ministerial services performed as an employee. A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded can’t be more than reasonable compensation for the minister’s services.

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it’s used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded can’t be more than the reasonable compensation for the minister’s services.

Note that this includes utilities, repairs, as well as other stuff not listed above but included by the law and the courts: cable television fees, towels, bedding home decor, and computers.

The loss to the government from this unconstitutional stipulation is about $700 million per year.  As the FFRF notes in the report below, “84 percent of senior pastors receive a housing allowance of $20,000 to $38,000 in added (but not reported) compensation to their base salary.”

The Freedom from Religion Foundation (FFRF) went after this, and the 6-year battle has been tortuous:

  • In 2013, the FFRF sued the government in Federal District Court, and won
  • That verdict was overruled on appeal, as the appellate court ruled that Annie Laurie Gaylor and Dan Barker (co-Presidents of the FFRF), who had sued, didn’t have standing, and couldn’t prove they’d been injured by the law (“standing” is often a way for courts to get rid of distasteful cases without having to rule on the law)
  • Annie Laurie and Dan then made themselves “injured” by claiming a refund of housing allowances on their own taxes, which of course was denied. That was the requisite injury. They went back to court
  • On October 2016, the Western District Court of Wisconsin ruled that the law violated the First Amendment. A big win for the FFRF!
  • But of course, as I reported here, the government appealed, and so the case went to the Seventh Circuit Court, headquartered in Chicago.  The Seventh Circuit is notably conservative (read FFRF lawyer Andrew Seidel’s assessment of the case at this stage).

And a ruling has just come down from the court, as reported in this FFRF bulletin (click on the screenshot). Sadly, the 3-0 ruling was in favor of the government, affirming that clergy indeed have a right to tax-free housing expenses, computer fees, costs of bedding, cable television, and so on. Read and weep (click on the screenshot):

You can see the court’s unanimous decision here.  They weaseled out of the First Amendment by relying on the “historical significance test”, which simply claims that favoring religion (like putting “In God We Trust” on money) loses its significance as a religious trope over time as it slowly elides into “history”. Here’s part of the ruling, and you can see how weaselly it is:

As the FFRF reports further:

While Crabb (in the original pro-FFRF judgement) ruled that “the plain language of the statute, its legislative history and its operation in practice all demonstrate a preference for ministers over secular employees,” the appeals court panel disagreed, applying what they called “the historic significance test.”

Wrote Brennan: “FFRF claims §107(2) renders unto God that which is Caesar’s. But this tax provision falls into the play between the joints of the Free Exercise Clause and the Establishment Clause: neither commanded by the former, nor proscribed by latter. We conclude §107(2) is constitutional. The judgment of the district court is reversed.”

This shows that ministers are not entitled to the benefit, therefore Congress could repeal it. “It’s an injustice not just to us, but to taxpayers who have to pay more than their share, because clergy pay less,” Gaylor says.

Nor did the appeals court decision address the problem that the financial benefits apply even to wealthy ministers. “The manner in which our housing allowance has been used borders on clergy malpractice,” William Thornton, a Georgia pastor and blogger, told Forbes magazine in 2013. “A growing subset of ministers who are very highly paid and who live in multi-million dollar mansions are able to exclude hundreds of thousands of dollars from income taxation.”

You can see the way the courts get around something that’s palpably unconstitutional but whose elimination would piss off a lot of religious people. “Religion” simply becomes “American history.”

What’s next? I suppose the FFRF is weighing an appeal, but you know where that would go: to the U.S. Supreme Court. With that court stacked with conservative, god-fearing Justices, the prospects don’t look good. And so a chink has appeared in the wall between church and state. Jefferson would be appalled.


  1. GBJames
    Posted March 16, 2019 at 2:14 pm | Permalink

    This was a terrible decision by the appellate court. Unconscionable.

    • Heather Hastie
      Posted March 16, 2019 at 8:29 pm | Permalink

      I agree. We have the same situation in NZ. When the current government came in (Nov 2017) they did a review of the tax code and NZers were asked to write in with their ideas. Mine was to get rid of clause that says churches, temples, mosques etc and also religious orgnisations don’t have to pay any taxes. I thought I’d done a pretty good job with my submission, but it was completely ignored.

  2. Randall Schenck
    Posted March 16, 2019 at 2:35 pm | Permalink

    And if you think this is not bad enough, I will offer you this from last night’s Maddow show on how they are stopping women and girls from getting abortions.

    • Mark R.
      Posted March 16, 2019 at 3:22 pm | Permalink

      Thanks for the link.

      This is another example of the myriad ways the Trump administration is undermining the rule of law. There is so much damage being done to our democracy by this administration, it’s almost unfathomable; the MSM barely scratches the surface. Michael Lewis’ book The Fifth Risk is a short expose of what has happened to the Departments of Energy, Agriculture and Commerce. It is beyond shocking and should scare the shit out of anyone who cares about science, the truth, and the health of our democracy.

    • Rita Prangle
      Posted March 16, 2019 at 3:24 pm | Permalink

      Creepy and disgusting!

    • Ken Kukec
      Posted March 16, 2019 at 4:47 pm | Permalink

      I happened to see that on Rachel last night. It was all I could do to keep myself from climbing through the big screen to wring Scott Lloyd’s neck.

      The sanctimonious hubris of some people!

    • Heather Hastie
      Posted March 16, 2019 at 8:58 pm | Permalink

      Thanks for this Randall.

      Unbelievable. What a disgusting human being Scott Lloyd is. He obviously has no worries about breaking the law when his boss is a criminal himself, and the VP probably privately applauds his efforts too.

  3. Mark R.
    Posted March 16, 2019 at 2:49 pm | Permalink

    As McConnell and Trump keep filling court vacancies with zealots, I don’t see a bright future for our semi-secular democracy.

  4. Posted March 16, 2019 at 3:01 pm | Permalink

    Remind me, where in the constitution is the historical-significance test enunciated?

  5. Historian
    Posted March 16, 2019 at 3:05 pm | Permalink

    As bad as the provision of the tax code is, even worse is that which allows deductions for contributions to churches as an itemized deduction. Although the Trump tax cut of December 2017 was bad because it so favored the rich, one good part was (without going into the details why) that many fewer people will itemize their deductions for 2018 (Schedule A of Form 1040),meaning that they will lose any tax advantage for church contributions as well as other charitable giving. They will now have to take the standard deduction. If these people want to give to the Church, tax calculations will not come into play. Of course, secular charities may see a reduction in giving, but it is my view that the tax code should not be a vehicle for encouraging charitable donations.

    • Posted March 16, 2019 at 3:16 pm | Permalink

      I would delete all deductions, including the mortgage tax deduction.

  6. Filippo
    Posted March 16, 2019 at 3:06 pm | Permalink

    Yes, “Jefferson would be appalled,” and surely he would appeal. I trust that FFRF will appeal, as their work is principle-, not profit-, oriented. I don’t see how SCOTUS could weasel out of granting certiorari, so fundamental is the constitutional issue.

    It strikes me that anyone (not averse to lying) could claim to be a (FSM) minister and receive the exemption. Who is to deny them? Are legislatures and courts empowered to designate “official,” “legitimate” religions?

    • tomh
      Posted March 16, 2019 at 4:52 pm | Permalink

      In answer to your last question, yes they are. As far as appealing this case to the SC, perhaps you’re not aware of the overwhelming deference to religion, especially Christian religion, that the current SC gives. The recent oral arguments on the case of the 40 foot cross on public land that stands at a busy intersection in Maryland was a stark illustration of this.

  7. Posted March 16, 2019 at 3:09 pm | Permalink

    Reblogged this on Apetivist.

  8. davelenny
    Posted March 16, 2019 at 3:11 pm | Permalink

    Quite by coincidence, just five minutes before reading this, I completed two surveys for the Auckland City Council, one of which proposed zero-rating religious properties.

    • infiniteimprobabilit
      Posted March 16, 2019 at 8:27 pm | Permalink

      More information needed. Is that just actual churches, or does it include church-owned land and/or religious staff’s residences?


  9. keith
    Posted March 16, 2019 at 3:16 pm | Permalink

    I wonder if they can request an en banc ruling from the 7th circuit before going to the Supreme Court.

    This is an obviously bad decision, and highlights the trouble with creating special, protected classes of individuals.

  10. Ken Kukec
    Posted March 16, 2019 at 5:08 pm | Permalink

    The jurisprudence regarding the two religion clauses of the First Amendment is among our Nation’s least coherent, especially where, as here, the Establishment and Free Exercise clauses intersect.

    Maybe the solution is, come Passover next month, to invite Jesus back into the Temple to tear the cords from their sashes and fashion a scourge, there once again to drive out the money-changers. Make not my Father’s house a den of housing allowances.

    • Posted March 16, 2019 at 5:25 pm | Permalink

      You think there is something in the constitution that is coherent?

    • Randall Schenck
      Posted March 16, 2019 at 5:27 pm | Permalink

      I say, if they want to give these people free housing fine….then all of the churches should pay taxes. Certainly if they have the money for all this housing they can pay taxes like the rest of us. I suppose whatever house the reverend lives in is also considered tax free?

  11. Posted March 16, 2019 at 5:34 pm | Permalink

    The federal courts have long had a status-quo bias. You might even say it’s built into our system. The idea of precedent is important here. And of course if a judge is a fan of “original intent”, then the existence of religious tax exemptions at the time of the passage of the First Amendment would be highly relevant.

    The court clearly doesn’t want to have to take the next logical step after granting a win to the FFRF here – which would be to rule unconstitutional any property tax exemptions which are for religious institutions only. If they did, the organic fertilizer would really hit the fan. Judges are afraid of political backlash. They’ll work pretty hard to find excuses not to face it.

  12. Jimbo
    Posted March 16, 2019 at 6:44 pm | Permalink

    I’m not so sure a “chink has appeared in the wall” separating church and state as much as an this particular fissure has not been patched given that it has existed for quite some time.

  13. Randall Schenck
    Posted March 16, 2019 at 6:50 pm | Permalink

    I suspect charities are going to take a beating and housing will as well. The primary push for many to buy is the mortgage and property tax that gets them to schedule A. Without this incentive the housing market has to take a big hit. Standard deduction doubled to $24,000 for married couples and that just kills the mortgage deduction. As I think back on my house buying is was kind of this question for you to answer. Did you want to pay uncle Sam or the mortgage co. With the mortgage you owned something and probably accumulated some equity.

  14. Posted March 16, 2019 at 7:37 pm | Permalink

    Slavery should continue because it easily passes the “historical significance test”!
    Tell me why I am wrong.

    • Historian
      Posted March 16, 2019 at 7:45 pm | Permalink

      The 13th Amendment.

    • Steve Gerrard
      Posted March 16, 2019 at 11:21 pm | Permalink

      Much of the “Jim Crow” era was due to judicial decisions more or less like the historical significance test. In the late 1800s and early 1900s, laws in the south that prevented voting and other civil rights were justified based on the argument that if they didn’t explicitly discriminate by naming races, they weren’t discriminatory. The US judiciary sadly has some major periods of awful jurisprudence in its history.

  15. Posted March 16, 2019 at 8:09 pm | Permalink

    All kinds of crazy things are tolerated in the tax code that would not pass muster if the government spent the money directly. If the government wrote checks to the ministers for their housing expenses, it would be ruled unconstitutional in a New York minute.

  16. rickflick
    Posted March 16, 2019 at 10:51 pm | Permalink

    I would like to see the case appealed, even if it is likely to lose. It will stimulate thinking for a future challenge when it will, I think, ultimately prevail.

  17. Posted March 17, 2019 at 4:19 am | Permalink

    You need to get a lot of Imams taking advantage of this exemption; that could get things reviewed!

  18. Posted March 17, 2019 at 8:08 am | Permalink

    As a friend named Bruce S. Springsteen (no, not HIM) said, and I always credit: “Ceremonial Deism is a synonym for opportunistic hypocrisy!”

    Et tu, Historical Significance test?

  19. Posted March 17, 2019 at 11:00 am | Permalink

    The concept of the “priesthood of all believers” was pushed by Luther and other Reformers. Some current denominations take this to the extreme and claim that all of their members in good standing belong to this priesthood and are therefor ministers/clergy. Thus the entire congregation can take advantage of the minister housing allowance deduction. https://www.thetaxadviser.com/issues/2009/jul/clergytaxrulesextendbeyondchurches.html

  20. Posted March 18, 2019 at 11:59 am | Permalink

    Historical Significance Test? I *hate* uncritical social inertia, especially when, er, sanctified.

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