Gaylor v. Mnuchin
I attended a very stimulating seminar Wednesday, October 17th, at the Loyola University School of Law, regarding an upcoming hearing (next Wednesday) in the 7th Circuit Court of Appeals regarding a lower-court decision concerning the tax-exempt housing allowances often granted to ministers in lieu of living in a “parsonage.”
The seminar was organized by Samuel D. Brunson, professor at Loyola who has taken an interest in the case, and whose recent book, The IRS and Religion: Accommodating Religious Practice in U.S. Tax Law (Cambridge University Press, 2018) I’m currently reading on my Kindle – it’s an excellent read. He was joined by another Chicago law professor, Anthony M. Kreis of Chicago-Kent College of Law. The questions from lawyers, law-school students, and other law professors was stimulating.
Some of his lecture today came straight out of chapter 5 (“Housing Clergy”) in the book. It concerns a lawsuit, brought originally in 2013 by the Freedom From Religion Foundation in Wisconsin, which was decided in their favor by Federal judge Barbara Crabb (a Carter appointee who gained some notoriety a few years ago for another decision upholding gay marriage in Wisconsin), but was then reversed and dismissed on appeal by the 7th Circuit Court of Appeals a few years ago. FFRF made some changes regarding their standing to sue as suggested by the 7th Circuit, and again prevailed in Judge Crabb’s court, so here they are again, back at the appellate level. However decided this time, the issue seems likely to rise to the Supreme Court at some point.
The Constitutional issues are complex, and probably will take a boxcar of lawyers to sort out, but here is one layman’s understanding of some of the issues. Basically, the question concerns whether allowing ministers, but not other citizens generally, to exempt a designated portion of their compensation from taxation violates the religion clauses of First Amendment to the US Constitution (“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof …”
Some of the relevant issues which surfaced in the session include:
— The “standing” issue (whether FFRF has suffered damages or otherwise has “standing” to sue the IRS) is probably not significant this time since FFRF seems to have made the changes suggested by the 7th Circuit in the original case. Whether these would be recognized by SCOTUS if the case rises to that level is another question.
–Legislative history (see Chapter 5 and of professor Brunson’s book for details): while the history of how the housing allowance came to be and has been amended in ad hoc fashion almost from the beginning of the IRS itself is fascinating, the speakers seemed to feel that legislative history is less relevant in recent court decisions and may not play a significant role in the decision. “But we’ll see” was also a repetitive phrase during the presentations. The comments of Rep. Peter Mack in introducing HR 4275 are relevant in revealing an anti-discriminatory motive behind the legislation, but also portrayed the feelings of many in the 1950’s regarding the role of religion in anti-communist crusades. Prof. Brunson has blogged about this and other related issues at https://bycommonconsent.com/…/when-religious-tax-accommoda…/
–The “Lemon” test: Derived from a landmark 1971 SCOTUS decision (Lemon v. Kurtzman), creating a triple-pronged set of criteria to adjudicate “separation of church and state.” A statute (1) must have a secular legislative intent, (2) must neither advance nor inhibit religion, (3) must not involve “excessive government entanglement” with religion. If any of the “prongs” are violated, the statute can be declared unconstitutional. Often considered vague and cumbersome — what’s “excessive?” plus most good lawyers can probably find some secular (or religious) “intent” in many statutes. The sense of the room seemed to be that Gaylor v. Mnuchin might be the case that allows SCOTUS to replace Lemon with something more viable, or maybe just scrap it.
–Internal Revenue Code Section 107 (1) and 107 (2) – one of the most interesting features of this case is that, as I understand it, the suit challenges only IRC Section (2) which exempts a minister’s housing allowance from taxation. Section 107 (1) which allows a parsonage owned by a church and provided for the minister’s housing is not challenged in the present case (though it could be in the future if a group with standing were to bring such a challenge). Does this raise the possibility that churches (which for their convenience have largely divested themselves of parsonages in recent decades) might get back into the “parsonage business” again? “We’ll see”
— Churches of Christ and this issue (or, “Robert Baty, George HW Bush, Omar Burleson, and Pepperdine University’s ‘Basketball ministers’”). Though this did not arise in the seminar, the “backstory” to this case is intriguing. About 20 years ago, I became acquainted online with a fellow Christian, Robert Baty, who had taken an intense interest in these issues. An IRS Appeals officer (now retired), Robert was disturbed at some of the arguments made in support of legislation and/or IRS ruling 70-549 created at the behest of then-Congressman George HW Bush of Houston, and fellow Congressman Omar Burleson of Abilene, to allow colleges such as Abilene Christian University and Pepperdine University in Malibu, CA, to allow staff personnel (including athletic coaches) to claim tax-exempt housing allowances since the colleges portrayed themselves as “integral agencies of the church” – as several religious colleges do. Attempting to find Rep. Burleson’s papers for enlightenment on the issue, we discovered that they had been donated to ACU (where Burleson was an alum) but were sealed or embargoed until well into the 21st century. For more information, see the Forbes blogs of Peter J. Reilly, who has also turned a spotlight on these issues (see, for example, https://www.forbes.com/…/john-oliver-should-not-blame-irs…/… ).
(Full disclosure: like most ministers, I have taken advantage of the legal provisions for housing allowance, and in my work with one church, occupied a church-owned house. My arrangements, including years as a bi-vocational minister have survived IRS scrutiny through two audits. The case may possibly have future implications as well for other similar arrangements (university presidents and deans who are often provided housing, military housing, housing arrangements for US citizens living abroad, and other cases which may be similar though not exactly parallel).
This is an interesting case about which legal minds can reasonably disagree (as with many decisions which often have multiple dissenting opinions). I plan to be at the Dirksen Federal Building next week to hear the oral arguments before the 7th Circuit. Stay tuned.