Originally published on Forbes.com.
Judge Barbara Crabb’s decision that Code Section 107(2)- the parsonage exclusion – is unconstitutional reminds me of the movie Ground Hog Day, in which Bill Murray lives the same day over and over. Only for those who follow the intersections of religion and taxation, it promises to be a groundhog year as we get to replay what happened the last time Judge Crabb declared the parsonage exclusion unconstitutional in a suit brought by the Freedom From Religion Foundation. When it comes to intersection between religion and taxation, 107(2) is Times Square, where, by the way, you can see iconic tax figure George M. Cohan, when you give your regards to Broadway.
A common feature of my posts is an “Other Coverage” section, but thanks to a tip from The Becket Fund, which is providing representation to the intervenors in the case, my post on Judge Crabb’s decision was arguably a scoop. So this piece will cover some of the reactions to the ruling.
New York Times Gets It Wrong
AP and, hence the New York Times, did not run the story until two days after my piece. And with two extra days, they still managed to get it kind of wrong
The benefit saves clergy, including non-Christian religious leaders, $800 million a year in taxes, according to the latest estimate from the congressional Joint Committee on Taxation.
The Joint Committee on Taxation only gives a score for Code Section 107 as a whole. Code Section 107(1) covers in-kind housing and Code Section 107(2) covers cash housing allowances. Judge Crabb only declared 107(2), the exclusion for cash housing allowances unconstitutional. JCT does not break down the in-kind from the cash allowance. The way the JCT report phrases it is a little ambiguous, but I believe that the Treasury tax expenditure budget makes it clear that the $800 million includes both cash and in-kind.
Exclusion of parsonage allowances.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a clergyman’s taxable income for the value of the clergyman’s housing allowance or the rental value of the clergyman’s parsonage.
In-kind housing went out of favor in many Protestant denominations, although I understand that it is making a comeback in high cost areas. Nonetheless, the largest denomination in the country is Catholicism. According to the Center for Research in the Apostolate , there are just over 25,760 diocesan priests in the United States. I’m going anecdotally here, but I think they mostly live in rectories, meaning their housing is in-kind. The in-kind piece is probably less than half of the $800 million, but it is still probably, as we say, a number.
The Sky Is Falling In
I’m inclined to be kind to Becket given that they gave me the heads up on the decision. Also Becket is not kidding around when it says it is for religious liberty, which sometimes is translated as the right of Protestant Christians to restore the cultural supremacy, they had when the King James version of the Bible was effectively a public school textbook and woe betide a Catholic kid who showed up with Douay-Rheims. You have to scroll down a bit, but you will find Becket defending native burial grounds against a highway, an orthodox Jewish group trying to prevent a Torah from going to a museum, a Santeria priest being prevented by local authorities from doing whatever Santeria priests are supposed to do, Lipan Apaches using eagle feathers in their ceremonies and the Albanian Associated Fund wanting to build a mosque in Wayne NJ.
Nonetheless, Becket’s press release on Judge Crabb’s decision – Court ruling threatens churches with nearly $1 billion in new taxes – is over the top. In my mind 990 million is nearly a billion. Maybe I could buy 950 million. But 800 million is still a long way off. And, as you and I both know, $800 million is the wrong number. Regardless of the wishes of those fanatical atheists at FFRF, the ruling only affected 107(2) which does not have a JCT score, but clearly would be substantially less than $800 million if it did.
Then there was this comment by Hannah Smith:
It’s not unconstitutional for the federal government to treat faith leaders the same as other secular employees in their housing allowances. In fact, treating them differently would be discrimination against religion, pure and simple
I had some back and forth with Becket on that and I think we had to agree to disagree. The only secular housing exclusion that does not have some sort of limit is Section 119, which like Section 107(1), is about in-kind housing. Cash exclusions like Code Section 134 for the military have dollar limitations.
It’s About The Little Guys?
Russell Moore of the Ethics & Religious Liberty Commission of the Southern Baptist Convention has a statement that registered on my bs detector.
This ruling is a sad development that represents a needless challenge to hard-working pastors devoted to serving their communities. More still, this ruling is wrong: the housing allowance is in no sense the government establishing religion. The allowance is neutral, applies indiscriminately to all religions and removing it would disproportionately harm clergy in small congregations across the country.
That part about disproportionately harming clergy in small congregations is also a Becket theme. The intervenors they represent are poster boys for small ministries. SBC, even after losing Jimmy Carter in 2000, is the second largest denomination in membership. The denomination does have many small congregations, it also has more than its share of megachurches, where megapastors draw mega tax free housing allowances. Reverend Moore was too busy to speak to me this time around, but when Judge Crabb ruled last time, I did get into the topic of out-sized housing allowances with him. All he would say is that each congregation is accountable to God for how it compensates its minister.
Reverend William Thornton, SBC minister and brother blogger, takes a different tack.
The idea of clergy excluding hundreds of thousands of dollars from income taxes on this basis is absurd and objectionable. I favor a cap on the amount. Joel Osteen and his wife were used for the photo in the FFRF news release and if they want to live in the Texas equivalent of The Biltmore House, they are free to do so. They shouldn’t get poor, taxpaying, unordained saps to essentially pay for some of it, though. The law should be adjusted.
In comments on the most recent decision, Reverend Thornton shows himself to be a gentleman in the old fashioned sense of the word.
The last time the judge ruled this way, she was the object of not a small amount of venom from religious folks. Perhaps that can be avoided this time.
In a post on an earlier stage of the litigation Reverend Thornton wrote:
The folks involved with the Freedom For Religion Foundation are, like everyone else, our neighbors.
We should love our neighbors. I only know one member of the FFRF and my interaction with him has been respectful and cordial.
It’s really hard to not like Christians, when they are being, you know, Christian.
Somehow It Has To Be Obama’s Fault
The release by the Family Research Council – Court Ruling Striking Down Clergy Housing Allowance Another Example of Hostile Environment Created by Obama administration, says Family Research Council – struck me as particularly absurd. The Obama administration appealed Judge Crabb’s earlier ruling that 107(2) was unconstitutional and got the Seventh Circuit to overturn it. As you will recall, they did not do that with DOMA. So it is tough to see how Obama can be blamed here. For what it is worth President Jill Stein, one of Obama’s opponents in 2012, would likely not have defended 107.
Judge Crabb was appointed by Jimmy Carter, likely the most openly devout President we have had in a while. Although President Trump did mention what a strong Christian he is to account for the extra attention he gets from the IRS.
The statement by Tony Perkins did create an interesting little project for me. Included in his statement was:
I’d like to ask Judge Crabb: Where are the atheist-run soup kitchens, clothes closets, relief agencies, orphanages, adoption agencies, counselors, and hospitals. No, it is the pastor-led churches that primarily provide these benefits to communities and society in general. Americans donate over $100 billion to religious charities, including churches, every year because they believe it makes a positive difference. Churches have been central to the relief efforts in the aftermath of hurricane damage in Southeast Texas, Florida and Puerto Rico.
What About Those Atheists?
I don’t know if Judge Crabb is going to get to that, so I reached out to my facebook friends. One of my friends pointed out a fallacy in Mr. Perkins’s statements.
More to the point, the Council’s claim conflates the amount donated to churches with the amount spent on charity, which assumes no overhead — no bishops, no canon lawyers, no pilgrimages, no buses of nuns and parochial students going to DC every year to protest abortion, no Joel Osteens, no new electric guitars for the snake handlers, no lobbyists, no clerical salaries, no retirement homes for ministers or special retreats for defrocked sex offenders, no stipends for missionaries, no printing of pamphlets and Bibles… you get the idea..
Joe Zamecki pointed me his site about Atheists Helping the Homeless. Hermant Mehta, editor of the Friendly Atheist wrote me.
There are two answers to this question.The first is that atheists simply don’t have the same infrastructure as religion. We don’t play by the same tax-exemption rules, we don’t congregate somewhere every week, we don’t pay any tithes (or threaten people with damnation if they don’t pay it), and we don’t have any systematic way of giving money to a cause. Even if atheists all wanted to donate money to the exact same charity, most of us don’t belong to any group that could facilitate those donations. Instead, we usually give to causes as individuals instead of as a group.The second is that we have created makeshift ways of providing these options for people. (I listed several ways atheist groups were assisting with Hurricane Harvey relief here.) My favorite example is a group I’ve worked with in the past: Foundation Beyond Belief. FBB collects money from atheists for a variety of charities every few months, offers on-the-ground volunteers for relief efforts, and collects money in the case of emergency relief.We may not have the infrastructure to build and maintain our own soup kitchens or orphanages or hospitals, but many atheists regularly volunteer with them.
I don’t know if that would satisfy Mr. Perkins, but it is something. Of course, ]Christians who don’t help the needy are threatened with pretty dire consequences] .
Then shall he say also unto them on the left hand, Depart from me, ye cursed, into everlasting fire, prepared for the devil and his angels: For I was an hungred, and ye gave me no meat: I was thirsty, and ye gave me no drink: I was a stranger, and ye took me not in: naked, and ye clothed me not: sick, and in prison, and ye visited me not. Then shall they also answer him, saying, Lord, when saw we thee an hungred, or athirst, or a stranger, or naked, or sick, or in prison, and did not minister unto thee? Then shall he answer them, saying, Verily I say unto you, Inasmuch as ye did it not to one of the least of these, ye did it not to me. And these shall go away into everlasting punishment: but the righteous into life eternal.
Atheists, on the other hand, just have to contemplate the prospect of thinking themselves as selfish jerks, if they don’t help. At least, in some instances that seems to suffice.
A Less Excited Concern
I decided to check in with my own denomination the Unitarian Universalist Assocation. The noncreedal nature of the UUA where statements like “We need not think alive to love alike” might be heard can feel like being trapped inside Dar Wiliams The Christians And The Pagans
Only, there will be a bunch of Humanists in the other room talking about Margaret Fuller.
A few UU ministers I have spoken to have thought that the housing allowance is probably not such a good thing based on establishment principles, even though they accept it, but Reverend Richard Nugent, Church Staff Finances Director of the the UUA is preoccupied with the practical concerns, particularly the effect on retired ministers of modest means.
First, and perhaps most importantly, are the retirees of the various denominational retirement plans. Since 1954, Federal law has allowed retired ministers to exempt from their income any retirement plan distributions used for housing, up to the existing federal limit. These are funds earned during the course of one’s ministerial career – a career for many retired ministers in their 70s, 80s, and 90s, where salaries tended to be quite low. Our retired ministers and their spouses/partners depend upon this tax benefit to stretch their retirement income. Losing this benefit will be a bitter pill for these ministers and their loved ones. I am hoping that the Judge will grandparent this benefit for those currently in retirement.
Second, I’m concerned about ministers currently serving congregations who face the prospect of losing their housing allowance. These ministers and their families will see their overall federal tax bill increase about 10-15%. These women and men are generally not well paid, and they struggle to meet their monthly obligations. For newer ministers, they often have $50-80,000 or more in debt from their 3-4 years of seminary education. Having to pay $5,000 to 10,000 more in federal taxes will be a major burden on these ministers and their families. If this benefit is to end, then I hope the Judge will allow its continuation for existing contracts, and only end the benefit for future ministerial ministerial agreements.
Third, I’m concerned about the affect of this ruling on religious congregations throughout the United States. As study after study has documented, congregations are struggling in America. The vast majority are small groups of people gathered for worship, service, and community throughout every neighborhood in America. For most, money is tight. They struggle to pay their minister, rabbi, iman, monk, priest, or other religious leader not only a livable salary, but health insurance, retirement, and other employee benefits. It isn’t easy. Judge Crabbe’s decision may result in congregation’s loving their beloved religious leader because they can’t afford to increase his or her salary.
Jean-Marc Favreau of Peer Gan & Gisler represents rabbis and other clergy in negotiating employment contracts. He indicates that congregations and ministers need to address the possibility of loss of the housing allowance now.
Congress Should Act
If you think of churches as something of an industry which would be a reasonable way for secular people to view them, the exclusion for cash housing allowances makes very little sense. Imagine a group of people saying they want to form a kind of club. They are going to hire somebody whose job it is is to explain their special books to them and perform ceremonies and maybe counsel them. There will be all sorts of positive benefits to the community from the club. They have it all worked out, but there is one thing, If their special person has to pay income taxes like everybody else it is not going to work.
Of course, we are not starting fresh. 107(2), dubious as its constitutionality might be, has been around for over 60 years and people have made a lot of plans based on it. When President Trump finally gets around to making me his tax czar, here is my edict. The Clergy Tax Simplification Act of 2018 will say that ministers can pay taxes just like everybody else. Any existing housing allowances will be grandfathered. Only there will be a cap of $4,137 month. If it is good enough for a Brigadier General in Los Angeles, it is good enough for a religious racketeer.