Monday, January 15, 2018
I enjoyed speaking on this recent Federalist Society Teleforum, "Is the 'Parsonage Allowance' Allowed?" We discussed the tax-code provision permitting ministers to exclude from their gross income a housing allowance provided by their employer, up to the fair rental value of the home. Last October, Judge Crabb (W.D. Wis.) invalidated the provision as a violation of the Establishment Clause. If that ruling stands on appeal, the cost to religious organizations around the nation--the cost of making up for the new tax liability by paying additional salary--would likely exceed $1 billion yearly. That estimate, along with very useful insight on the provision and how organizations might respond to its invalidation, was provided by my teleforum co-speakers, John van Drunen and Michael Martin of the Evangelical Council on Financial Accountability (ECFA--an organization that does great work encouraging sound financial practices by religious nonprofits).
Here's the concluding bit from my own remarks (Download Housing Allowance - FedSoc Teleforum 2018-01-12 (delivered), which argued that the housing-allowance exclusion is quite defensible as constitutional but faces risks on appeal:
Ultimately, the result in this matter depends on the court’s attitude toward provisions that specifically accommodate religion. The exclusion will be upheld if the court takes a deferential approach and allows the government leeway as long as it’s reasonably promoting valid church-state concerns like denominational equality and nonentanglement in religious questions, and is not directly imposing a significant burden on anyone else. I believe that is the correct approach—the most consistent with the text, tradition, and precedents—especially with respect to treatment of ministers. But there are certainly judges who view it as presumptively unfair to exempt religion when arguably comparable nonreligious activities are not exempt, and they are likely to view the justifications for doing so here as insufficient.
Our religious liberty clinic at St. Thomas defended the provision at length in an amicus brief in a 2014 appeal, where the Seventh Circuit dismissed the challenge to the provision for lack of standing.