Breaking: Federal District Court Declares A Religious Income Tax Exemption Unconstitutional

[StarrGazerr]

Last edited Sat Nov 23, 2013, 11:16 AM - Edit history (1)

A federal district court judge has declared “unconstitutional” a portion of U.S. law that allows “a minister of the gospel” to not pay income tax on a specific portion of their compensation.

U.S. District Court Judge Barbara B. Crabb of the Western District of Wisconsin ruled that the so-called “parish exemption,” which allows religious ministers to avoid paying taxes on the value of their housing granted to them by their religious employers, “violates the establishment clause” of the U.S. Constitution and must be discontinued.

The law, 26 U.S. C. § 107(2), has bee on the books since 1954.

The tax exemption was estimated to cost U.S. taxpayers $2.3 billion from 2002-2007 alone, likely more in the years since.

http://thenewcivilrightsmovement.com/breaking-federal-district-court-declares-a-religious-income-tax-exemption-unconstitutional/politics/2013/11/22/79158#.UpDDguIliov

[Edited to add link]

[NightWatcher]

1. Next stop Megachurches and Mercedes-driving ministers

[Ilsa]

13. Prosperity-gospel preaching is a con, too, and should

have its exemption challenged as well.

[NightWatcher]

14. It's a pyramid scheme

They preach (con) people right out of their tithes. I wish I ran a con that could get people to cough up 10% of their income.

[Ilsa]

16. Sometimes I think about these things as a fall-back position

to raise money for my kids' futures. I'm not anywhere near devious enough to keep it up long enough to collect, though.

[yeoman6987]

52. All non profits

Next will be all non profits. I am for everyone paying taxes. We are in a financial mess and still give all these tax exemptions. Stop them all!!!!!!

[MrModerate]

62. Well, nonprofits don't make any, well *profits,* and so don't qualify for taxes . . .

But their employees pay the same taxes as any other worker.

I'm actually OK with churches being treated as non-profits, so long as they're subject to the same strictures as, say, the local art museum or dog shelter.

[yeoman6987]

63. Non profits

Certainly a thought provoking post. You may have caused me to revisit my hard stance.

[truedelphi]

64. I guess you ae unfamiliar with how many

hospital franchises operate. They're all declared to be "non-profits" but they are certainly profitable.

[MrModerate]

69. If by 'profits' you mean

That directors and other senior staff are paid obscene salaries and benefits, you 're quite right. And those laws need fixing, too.

[Cal Carpenter]

2. Interesting

I tend to default to the idea that the whole church tax-exempt thing is iffy at best.

But I know a woman who is a priest in the Episcopal church. Her salary isn't anything special, but the church where she works happens to own a house/parsonage that must be worth close to a million dollars, mainly because of its location in a particular city. She and her husband live there. I don't know the specifics of her situation, but I would think that it would be a major burden if the 'value' of that housing is taxed like income for her.

Hmm..

[RKP5637]

4. In that case, at least to me, the church should pick up the tax burden. I say that because,

for example, old people have to often leave their housing as they age because they don't have the income to pay taxes.

I've owned, for example, a number of houses now valued over 1M and the taxes are exceptionally high. I could not afford to live there, but the people living there now can afford their high taxes. ... and often religious tax exemptions are a front and a complete sham.

[Cal Carpenter]

9. That was my thought too

that the church needs to compensate for this in some way, otherwise no one would want to work for a church in a high-rent area, so to speak.

But I also totally agree with your last sentence. If it weren't for this example that I happen to know, I probably wouldn't have even blinked at this OP, just thought "GOOD!".

[StarrGazerr]

5. It's not her burden.

If the Church owns the building and makes it available for one of their employees (a priest) it is the Church's responsibility to pay any taxes on the building, not the priest and her family. Just like an employer has to provide the insurance when they let an employee drive a "company car."

[Cal Carpenter]

8. Your OP says that the priest would have to

pay taxes on the 'value' of the housing as though it were income.

So if the 'value' of that housing is, say $4,000 a month (a number I pulled outta the sky but seems realistic), she would be taxed on an additional $48,000 per year. At her income, that would surely throw her into a higher bracket, and increase her overall income taxes by a huge amount.

The church may be responsible for the property taxes etc but the court case indicates that the ministers (aka the priest in my example) has to pay taxes on the value of the housing granted to her by the church.

[StarrGazerr]

19. Correct

You're right. I was thinking in terms of the property taxes on the property, which are always the responsibility of whoever is the owner of the property. In this case they're talking about a different tax. The specific statute that was involved in this case says:

26 USC § 107 - Rental value of parsonages
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.

In most cases not involving religious figures, if your boss provides you with "free" housing, you're supposed to include the reasonable value of the rent you're not paying in your gross income. Under this statute that general rule doesn't apply to ministers. While I agree that could place a financial burden on the minister, it nonetheless seems (to me at least) that if you're a minister and get rent free housing and I'm an advertising executive and get rent free housing, the tax implications for each of us ought to be the same. The fact that you get a financial advantage because of your affiliation with a church still seems, to me, to be a violation of the First and Fourteenth Amendments.

It's unfortunate if this places a financial burden on ministers, but that's how I read the Constitution as requiring. Maybe churches should simply pay their ministers a higher wage to compensate for the tax burden?

[Cal Carpenter]

24. I don't disagree overall

And I especially agree with your last sentence when it comes to most mainstream ministers who don't get paid a lot in actual income. Because unlike advertising executives, most preachers don't make a lot.

I also want to add this point I made on another post:

I see it as a drop in the bucket of all the taxes that churches are avoiding, and I see it putting the burden on the wrong people - the workers, rather than the owners.

Cheers!

[alphafemale]

10. As noted above she would not pay taxes on property

But she is still getting rent free living which is a benefit she should be taxed on.

A rent free house is at least a thousand dollars a month benefit even in the lowest rent areas of the country. Maybe up to 4,000 or higher in some.

Why should she be exempt from paying her fair share?

[Cal Carpenter]

21. I understand your point

and I know there are situations where a very well-paid minister also gets fancy free housing.

But in a relatively accountable church like hers, she isn't getting paid a whole lot, and the housing isn't just a 'benefit', it's part of her obligation as a worker - she is on the same property as the church and that's because she is basically on the job 24/7.

I have a major problems with churches themselves not paying taxes on all the incredibly valuable properties they own. Whereas I see her as a worker who doesn't have the benefit of owning anything, and who is being asked to carry the burden of the church's tax-exempt status.

I want to be clear - IMO, the church tax-exempt thing is bunk. But I see this court decision as putting the burden on the worker(s), not on the church, and that doesn't seem fair to me at all. If she were a mega-church millionaire it would be one thing, but she is paid a middle class wage and living in a very expensive city. Her real income ($$) is already taxed like anyone else's. To tax her on the 'value' of the housing and to treat that as income, I just don't see it adding up.

I see it as a drop in the bucket of all the taxes that churches are avoiding, and I see it putting the burden on the wrong people - the workers, rather than the owners.

Anyway, I'm not trying to be argumentative, just thinking it through. I'm not a church-goer, fwiw.

[MH1]

32. Well, it's either a violation of the establishment clause, or it isn't.

The judge has to rule on the case before him or her.

I don't disagree with your point exactly - there are definitely bigger fish that ought to be fried first - but if it's a correct interpretation of the establishment clause (I think it sounds right, but IANAL), then it is what it is and it's just unfortunate that it's hitting the small fry first. Hopefully the bigger fish will get dealt with later and that later is soon.

[Cal Carpenter]

33. Yep - in legal terms I totally agree

I wish I were more optimistic about the bigger fish though!

[StarrGazerr]

22. Agreed

Please see my Reply #19. I misstated myself a little - the statute involved in this case does concern the rental value of the housing provided, not property taxes.

[Ms. Toad]

40. I'm not sure where the balance is - but there are some differences.

(when it is a house provided, rather than a housing allowance).

The house is often located near the church to be accessible parishioners (or to make the clergy "on call" to the church on short notice). The clergy person doesn't get to house shop and find a home within his or her means.

The other is that (at least in my experience) the home is often used as an extension of the church - for counseling, small get togethers for the church, etc. in a way which a purely private home would not be.

[loudsue]

58. True. Our family member who was in the ministry would have parishioners walk into his house

without knocking, any time they pleased. They had to be ready for guests 24/7/365. The wife protested, and the church told the pastor that, since it was church property, they weren't entitled to "privacy".

I couldn't do it....be a minister's wife. No wonder all the religious freaks carry guns; Their whole culture is messed up, and they think it's the way the world works.

I also learned that church politics puts the Harper Valley PTA to shame in its hypocrisy and viciousness. Organized religion is the devil.


.....but that's off topic. Sorry.

[valerief]

11. So they can move to a cheaper residence like everyone else has to. nt

[Ms. Toad]

41. Living in the housing is often a mandatory part of the job.

Which it is why it isn't quite the same as just part of a normal benefits package.

It is more akin, in some ways, to businesses which provide cars to employees to get to and from work. That benefit (for church employees or others) is not taxed - except for the portion used for personal benefit. In many ways when the parish house is adjacent the church, having it there is for the benefit of the church (in large part).

[valerief]

42. They can change the rules. nt

[Ms. Toad]

43. They can - but my point is that it is the wrong analogy being used.

And that there are reasons that providing housing is a benefit to the church, not the clergy - just as when businesses provide a car to their employees (which is an untaxed benefit - to the extent the car is used for business purposes).

[valerief]

44. They should pick a cheaper residence and sell the expensive building. nt

[Ms. Toad]

45. Unless there are no cheaper residences near the church.

Part of the benefit to the church comes from having the clergy nearby, often from having space for smaller church gatherings in the (nearby) parish, and from clergy using the parish for things like less public counseling space.

Those benefits to the church are decreased if the parish is far from the church.

[valerief]

48. They should do what every other poor person has to do. nt

[Ms. Toad]

49. What I was addressing was the legal analogy.

Taxation of the value of something provided to an employee which is a benefit to the employee is handled differently from taxation of the value of something provided to an employee which is a benefit to the business (whether that business is a religious or secular one).

The assumption is being made that the parish house is provided purely as a benefit to the clergy (and should be taxed to the clergy). My experience is that it is more akin to the company car, which is provided as a benefit to the business - and not taxed to the clergy.

Your comment has nothing to do with that question.

[valerief]

50. If they can't afford the taxes, they should do what poor people do when they can't

afford the taxes.

[Ms. Toad]

51. I have not been addressing affordability at all.

I am addressing solely the question of whether the court, and people in this thread, is correct when it treated the housing provided to the clergy as a fringe benefit to the clergy (in which case it is a special exemption provided to religions which is not provided to secular employees)

If the provision of housing to clergy more akin to providing a company car, or overnight sleeping accommodations for on-call doctors, firefighters, etc., or the housing allowance for military then it should be taxed the same way those are taxed. Hint: they are not taxed to the employees.

If it is a fringe benefit which solely benefits the employee, then it should be treated as fringe benefits received by secular employees.

The sole question is whether the housing benefit is intended to benefit the church or the clergy - not whether anyone can afford it. So your response makes no sense at all.

[valerief]

77. Sorry, I've been lazy and distracted. You're right. But churches become churches so

that they won't have to pay taxes. At least, that's how I always saw it. If the churches had to pay, they wouldn't, so there'd be no perks to employees like housing.

Sorry. Too much work this weekend. I hope I have today off.

[Ms. Toad]

78. I hope so too -

Sounds like you're a bit frazzled.

[RKP5637]

3. Excellent! Why one invoking "religious' should be exempt from taxes is beyond me, and

many of these so called "religious" outfits are nothing more than political operatives and/or mind bending/twisting religions.

[Major Nikon]

65. There is no constitutional basis for it

Government is not obligated to give any church a tax exemption. The only reason they started was because churches received a blanket endorsement and were thrown in with other charitable non-profits who have to justify their public benefit in order to qualify.

[mdbl]

66. Completely agree

Religions are the biggest con job on our tax system. I know most con artists look at churches in wonderment, except for those running their own church already. Organized crime is probably jealous!

[Raine1967]

6. Could you supply a link? EOM

[StarrGazerr]

20. Link

I tried to put the link in the OP but for some reason it isn't showing up. It's from "TheNewCivilRightsMovement.Com". Here goes another try:



http://thenewcivilrightsmovement.com/breaking-federal-district-court-declares-a-religious-income-tax-exemption-unconstitutional/politics/2013/11/22/79158#.UpDDguIliov

[Raine1967]

27. Thanks StarrGazerr, and welcome to DU!

[Heather MC]

7. I use to go to a Mega Church

The pastor was always being "Gifted" stuff from the Church
Like
A Bently
a Rolls Royce

Now I will say this my Former Pastor whould Offten say he paid 48% in taxes. So he did pay something
but He did got a lot of big "gifts" from the Church
And he would always put on a good show actting surprised, and claiming the blessing came from his tithing

[MrModerate]

12. Drip . . . drip . . . drip . . .

That's how you wear away a stone.

[packman]

18. I remember

as a youngster sitting around the kitchen table with my extended family when the topic of the local priest, who publicly complained about his low wages, came up. First, I was shocked that a priest got paid anything. I, naive and young, thought it was a calling and somehow they just lived and existed outside the sphere of going to work every day. Well, my relatives went off talking about how he got a new car every year from the local dealership, how he lived in the best house in the best part of town, getting "gifts" from parishioners, how he collected money from funerals,baptisms, confirmations, marriages and all the rest of the things he took care of as his duties. The anger and sarcasm was as thick as they railed on about the perks of his job. Then, of course, they were good people who went to church on Sunday

[mountain grammy]

15. One victory at a time.

[99Forever]

17. Good.

A small start, but a step in the right direction.

[Coyotl]

23. Bravo. Can this precedent be applied to reduce unjust benefits given exclusively to religions?

Like exceptions to property taxes on all their mansions.

[westerebus]

25. Where are they getting $2.3 billion in lost income tax from?

Even over five years that seems a might high.

The work around, the one used by corporations, is to rent the residences at a very low cost to the religious ministers, as corporations do for their executives.

The cost of operating one US Navy carrier is about $25 Billion a year. We have ten of them.

[fadedrose]

26. "Render unto Caesar" still good advice.....

[Dawson Leery]

47. +1

[JimboBillyBubbaBob]

28. Good, a first step.

This whole church and tax issue is a great con game. If the followers were so faithful, they would contribute and not be concerned about getting a break from Caesar. If you wish to be a member of the club, pay the dues!!

[Adsos Letter]

53. Didn't Jefferson say something along those lines

Churches that provide something of value won't need government to help prop them up?

I could be misremembering...on a phone, so looking it up is problematic.

[JimboBillyBubbaBob]

55. I don't know,

but he should have!

[obxhead]

29. It's a start anyway.

Tax exemption based on religion needs to be completely eliminated.

[meaculpa2011]

30. Do politicians living in goveror's/mayor's mansions...

pay income tax on the value of their housing?

Here in NYC only a billionaire would be able to afford the tax on Gracie Mansion.

[Major Hogwash]

60. No, the state usually picks up the tab for the Governor's mansion.

We have quite a problem with this in Idaho because after J.R. Simplot, the billionaire "Potato King", died he left his $20 million dollar mansion to the state to be used exclusively for the purpose of the Governor's housing.

But, the current Governor, the ex-son-in-law of Simplot, refuses to live in that mansion . . . so the state has been stuck with an empty mansion, all the while paying 10s of 1000's of dollars a year for upkeep and maintenance.

[Iliyah]

31. US Supreme Court "5" justices will rule in favor of only the "Christian"

churches only be exempt.

[RussBLib]

34. suit was brought by FFRF

The Freedom From Religion Foundation (FFRF) which the wife and I have been members of for years now.

http://ffrf.org

Join us! Most of you are already freethinkers anyway.

Link to story: http://ffrf.org/news/news-releases/item/19361-ffrf-gaylor-barker-overturn-‘parsonage-exemption’-clergy-privilege

snip

FFRF, Gaylor, Barker overturn ‘parsonage exemption’ clergy privilege

November 22, 2013
The Freedom From Religion Foundation and its co-presidents Annie Laurie Gaylor and Dan Barker have won a significant ruling with far-reaching ramifications declaring unconstitutional the 1954 “parish exemption” uniquely benefiting “ministers of the gospel.”

“May we say hallelujah! This decision agrees with us that Congress may not reward ministers for fighting a ‘godless and anti-religious’ movement by letting them pay less income tax. The rest of us should not pay more because clergy pay less,” Gaylor and Barker commented.

- See more at: http://ffrf.org/news/news-releases/item/19361-ffrf-gaylor-barker-overturn-%E2%80%98parsonage-exemption%E2%80%99-clergy-privilege#sthash.6DtwleLo.dpuf

[eqfan592]

73. Fantastic organization!!! nt

[MADem]

35. Pay UP!!!

Next, they need to make churches pay property taxes, so the rest of us don't have to carry them with ours!

[VanillaRhapsody]

36. Does this mean that Romney will have to pay taxes on his houses?

Isn't he some kind of Bishop in the Mormon Church? Wonder if that is why he didn't want his taxes really examined...

[justhanginon]

39. Jeez! I never thought of that angle.

Wouldn't surprise me though as it seems the wealthiest among us always seem to have an angle and are able to hire people to find ways around paying their fair share.

[yellowwoodII]

37. It's About Time

This would change the whole perspective

[SpankMe]

38. Oh, please...please..let the dominoes begin falling!! n/t

[SoCalDem]

46. Exactly.. The ministers/preachers are being paid a WAGE

and other than the regular costs of doing business, they should get NO tax breaks..

[TroglodyteScholar]

54. Backwards

Should have begun with the church itself, but I guess it's a start....

[Vashta Nerada]

56. Good.

Next, the churches that mettle in politics should lose their tax-exempt status.

And the Joel Osteens (e.g. pastors of mega churches) of the church world should lose their tax-exempt statuses as well.

[go west young man]

57. Time for churches to pay tax on those tithes people give.

It's all a big money making scheme anyway. Jesus (the man) never asked for tithes. Only the corporate church does so. And the churches have heavily involved themselves in politics these days so they definitely aren't in the clear in that regard any longer. If money changes hands every business should pay equally. Personally I think they should have to give the money to NASA to make up for all the progress that they have impeded for the last 400+ years since Galileo. It's more than time for them to pay up.

[hue]

59. So awesome & I can't believe this came out of Wisconsin!!!

[WillyT]

61. It's A Start...

& Rec !!!

[nikto]

67. And please...

Let's use the increased revenue for promoting Gay rights, Evolution and stem-cell research.

[Drahthaardogs]

68. I bet Pope Francis would pay his taxes without making a sound.

.

[progressoid]

70. Hoo boy. Supreme Court, here we come.

[TexasProgresive]

71. How about consecrated religious?

Men and women in religious who take a vow of poverty living in community in monasteries and convents; they receive no saleries unless they teach or nurse and those go to support the community.

[WinkyDink]

74. I'm betting this exemption is most enjoyed by Protestants (as in, my late brother-in-law minister,

who, with his family, lived in free housing most of his adult life. And in NC, that meant a 4-BR Colonial.).

[TexasProgresive]

75. Most Catholic and Orthodox parishes have rectories.

That house the priest(s). Priests in our diocese receive a salary of $1,200 per month and housing. If they are to be taked on the fair market rental of the rectory that could in effect double the salary they must pay income tax upon. As it is pay roll taxes eat up a substantial amount of their salary.

But my question above was concerning people who live in community and receive no salary- are the liable to pay income tax on the monastery or convent if this holds up on appeal?

Most of these communities are suffering from aging populations.

[TexasProgresive]

72. And thanks, StarrGazerr, for using the excerpt feature on the quote.

In DU 1 & 2 it was a pain to do this but in DU3 it's right there easy to use but few bother. It saves readers falling into the error of thinking the quote is by the poster.

[Demo_Chris]

76. Fantastic start. nt

[Guaguacoa]

79. Just curious. Could this

in some way be used to affect people getting housing assistance/credit (like section 8 housing)? Not saying it will, just curious if the right could try and "boomerang" it that way.