Orthodox groups have filed briefs asking a federal appeals court to uphold a long-standing tax exemption for funds that go towards housing for clergy members. The case has elicited attention from a broad base of religious groups as the pending suit threatens a long-standing part of the tax code which, if struck, would place a major financial burden on clergy and faith institutions charged with paying their salaries.
Noted attorney Nathan Lewin, who authored a brief on the case on behalf of the National Jewish Commission on Law and Public Affairs (COLPA), told Hamodia that the points raised by the organizations that signed onto the umbrella group’s filing were “extremely important” to the case as a whole.
“It would be unjust for clergy like Orthodox rabbis who must live near the synagogue to have their expense for a home treated like their salary,” he said.
In what Mr. Lewin described as a “uniquely Jewish brief,” he outlined the halachic considerations that make it necessary for rabbis to live near their shuls, chiefly due to Shabbos observance and a daily need to be present at tefillos and shiurim.
“This makes living within walking distance of a shul a requirement that is for the convenience of the employer — the standard for exempting rental or other housing reimbursements from ordinary income-tax treatment,” said Mr. Lewin.
The COLPA brief was joined by the Agudath Israel of America, The Agudas Harabbonim of the United States and Canada, the Rabbinical Council of America, the National Council of Young Israel, and Torah Umesorah.
In question in the case is a 1954 law, found in Section 107 of the Internal Revenue Code (IRC), which exempts clergymembers from paying income tax on portions of their salaries designated as a housing allowance. As most congregations have come to rely on tax shields, it is estimated that the law collectively saves them an estimated $1 billion each year. According to a statement by the Orthodox Union (OU), 81 percent of full-time senior clergy receive a housing allowance, as do 75 percent of associate clergy and 67 percent of full-time solo clergy.
Rabbi Abba Cohen, Vice President for Federal Government Affairs, Washington Director, and Counsel of Agudath Israel of America, said the long history of law should be a factor in considering its future.
“Parsonage is a tax allowance that is time-honored, constitutional and good public policy that allows clergy to better serve their communities,” he said. “We all benefit. It should be preserved.”
The challenge began in 2013 when the Wisconsin-based Freedom from Religion Foundation (FFRF) sued the Department of the Treasury, claiming the exemption unconstitutionally favored religious groups, as their own secular employees could not take advantage of it. The group, which promoted a policy that encourages the total removal of religion from the public sphere, has a long history of legal struggles against laws and policies that are seen as helpful to religious groups.
Becket, a law firm promoting religious liberty interests, which is acting as an intervener in the case on behalf of a group of churches, drew attention to FFRF’s past actions, saying they belie the group’s bias.
“The same group of atheists claimed it was unconstitutional to put Mother Teresa on a postage stamp, so it’s no surprise they’re trying to sic the IRS on churches,” said Luke Goodrich, deputy general counsel at Becket. “Treating ministers like other professionals isn’t an establishment of religion; it’s fair tax treatment.”
FFRF’s 2013 challenge was upheld by Wisconsin District Court Judge Barbara Crabb, who ruled that Section 107 was unconstitutional, as it provided “a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise.”
The next year, the Seventh Circuit Federal Appeals Court struck down the ruling on the grounds that the FFRF employees named in the suit lacked standing, as they had not shown how the law injured them.
Following that decision, FFRF’s executives applied for the exemption, and when they did not receive it, sued a second time. In 2017, Judge Crabb reaffirmed her earlier ruling against the Treasury Department. The case is now on appeal, once again in the Seventh Circuit.
Oral arguments are expected to be held in the coming months, but a date has yet to be set.
Given the heavy financial impact that a ruling could potentially have on clergy and on houses of worship, multiple religious groups and advocates have filed briefs in support of the government’s position to uphold the exemption.
The Alliance Defending Freedom (ADF) has submitted a filing on behalf of 8,899 ministers and churches, arguing to uphold the allowance.
“The power to tax is the power to destroy, and so refusing to tax a minister’s housing expenses is the best way to ensure the free exercise of religion and prevent the excessive entanglement of government with religion,” said ADF Senior Counsel Erik Stanley. “The suggestion that the minister’s housing allowance somehow establishes a religion is simply untrue.”
Multiple briefs that advocate for upholding Section 107 also call attention to the fact that in many instances secular employees such as military personnel and government workers stationed overseas, whose place of residence is determined by their job, also enjoy tax exemptions.
The OU joined a brief on behalf of several Christian organizations, authored by law professor Tom Berg, focusing on the scale of the impact that striking the exemption would have on religious institutions as well as its long-standing status in the tax code.
“The legal brief the Orthodox Union joins in filing presents to the appeals court the massive disruption that will be caused if the parsonage allowance is invalidated,” said Nathan Diament, OU Executive Director for Public Policy.
He told Hamodia that while the OU thought the points made in the COLPA brief were indeed important, his organization felt it was valuable to lend a Jewish voice to the filing of the Christian groups.
“Appeals courts focus on jurisprudence issues; at the same time, what good judges do have to be mindful of is the effects their rulings will have in the real world,” said Mr. Diament. “If G-d forbid this was struck down, it would be significantly disruptive to all shuls large and small, as well as to many yeshivos and day schools who take parsonage exemptions into account with their salaries. They will be in the hole hundreds of thousands of dollars on an annual basis, and that money will not be so easy to find elsewhere.”