The Unconstitutionality of the Parsonage Exemption

Originally Published on forbes.com on March 20th,2012

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As noted in the first paragraph, I invited the Freedom From Religion Foundation to submit a guest post on the constitutionality of the parsonage exemption on which I have written several posts.  I appreciate them providing this.  Information on the author  Andrew Seidel is at the end of the post.

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I work as a constitutional consultant for the Freedom From Religion Foundation (FFRF), a non-profit with almost 18,000 members nationwide that works to uphold the Constitution by keeping state and church separate.  This past Sunday, following an article about the parsonage exemption on this blog, I read what I thought was an unfair characterization of FFRF.  I raised the issue with Peter Reilly in the comments and he responded reasonably and, much to his credit, invited FFRF to do a guest post.  Thank you, Peter. 

FFRF is currently involved in a lawsuit challenging the constitutionality of the parsonage exemption.  This article explains why the exemption is unconstitutional under the First Amendment (it is unconstitutional for other reasons as well, such as violating the Equal Protection Clause but that is for another day).  

The Establishment Clause of the First Amendment states, “Congress shall make no law respecting an establishment of religion.”  Under Establishment Clause jurisprudence, the Lemon test controls the constitutionality of challenged statutes.  It has three prongs, “First, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances nor inhibits religion; finally, the statute must not foster ‘an excessive government entanglement with religion.’” Lemon v. Kurtzman, 403 U.S. 602, 612-613 (1971).  A law or policy that fails to meet any one of these three requirements is unconstitutional.  The parsonage exemption fails to meet each of them. 

The Purpose and Effect is to Benefit and Advance Religion

The legislative history of this law is somewhat sparse, but incredibly revealing.  It is quite obviously designed for the exclusive benefit of clergy and their employers.  In 1953, Representative Peter Mack authored §107 because “in these times when we are being threatened by a godless and antireligious world movement we should correct this discrimination against certain ministers of the gospel who are carrying on such a courageous fight against this foe.” H.R. Comm. On Ways and Means, Hearings on Forty Topics Pertaining to the General Revision of the Internal Revenue Code, 83d Cong. 1576 (Aug. 11, 1953).    

In 2002, the Ninth Circuit was set to rule on the constitutionality of the parsonage exemption, so Congress intervened and amended the law, mooting the case before the court.  According to Representative Jim Ramstad (R-MN), “Without [an amendment], America’s clergy face a devastating tax increase of $2.3 billion over the next 5 years [2002-2007].”  148 Cong. Rec. at H1299.  See also Id. at 1300, 1301.  

The obvious mischaracterizations of a universally applicable tax as “discrimination” or a “tax increase” notwithstanding, it is clear that the intention, purpose, and effect of this law is to benefit “ministers of the gospel” and the churches that employ them.  The benefits that accrue under §107 are substantial.  Ministers of the gospel can exclude virtually all the costs of home ownership from their taxable income including: 

• Home down payments
• Home mortgage principal payments
• Home mortgage interest payments
• Fees associated with acquiring home (i.e. legal, bank, and title fees)
• Real estate taxes
• Personal property taxes
• Fire insurance
• Homeowners liability insurance
• Rental payments 

In addition, costs associated with home maintenance and improvements are also excluded: 

• Repairs
• Utilities
• Furnishings
• Appliances (including pool tables, vacuums, personal computers, etc.)
• Home décor (including rugs, curtains, wall paper, bedding, etc.)
• Telephone
• Television services
• Internet services
• Pest control
• Miscellaneous (light bulbs, cleaning supplies, etc.) 

Churches benefit from this arrangement too.  They can pay their employees considerably less because of the benefit the government extends their employees.  For instance, the minister can deduct their mortgage payments from their income, but those mortgage payments are made with tax-free dollars.  For example: 

John receives a $1,000 per month rental allowance from his church.  John pays $333 in mortgage interest every month and is in the 33% tax bracket.  John is allowed to deduct the interest payments under § 265 giving him a windfall of $111 each month.  The church spends $1,000 but John receives $1,111 in benefits.  Dean T Barham, The Parsonage Exclusion Under the Endorsement Test: Last Gasp or Second Wind?, 13 Va. Tax Rev 397, 421 (1993). 

This added benefit comes from the government, not the church, and amounts to directly supplementing the salary of preachers. 

It cannot seriously be argued that there is a secular purpose to this exemption; it is meant to fund and advance religion and has just that effect.  The parsonage exemption fails the first and second prongs of the Lemontest. 

The Exemption Entangles the Government with Religion

President Thomas Jefferson “consider[ed] the government of the U.S. as interdicted by the Constitution from intermeddling with religious institutions, their doctrines, discipline, or exercises.”  Jefferson’s letter to Rev. Samuel Miller, 1808.  The Supreme Court agrees and has interpreted the Establishment Clause accordingly.  There is an “overriding interest in keeping the government… out of the business of evaluating the relative merits of differing religious claims. The risk that governmental approval of some and disapproval of others will be perceived as favoring one religion over another is an important risk the Establishment Clause was designed to preclude.” United States v. Lee, 455 U.S. 252, 263, n. 2, (1982)(J. Stevens, concurring in judgment). 

The parsonage exemption entangles the government with religious questions.  The IRS is tasked with investigating the role of the person claiming the exemption and determining whether or not their duties are religious enough.  In deciding who is a “minister of the gospel” the government is deciding religious issues and invasively investigating the inner workings of religious institutions.  The idea that “minister of the gospel” is a legal term that the government can rule on, as opposed to a religious idea, is nonsense.  The government does not have the power to make these decisions and it violates the Constitution in doing so.  In sum, the parsonage exemption fails all three parts of the Lemon test and is therefore unconstitutional.   

The Exemption Endorses Religion

Although the Lemon test is controlling, another test is floating around the jurisprudential universe: the Endorsement test.  This test prohibits the government from showing “favoritism” to religion because “government cannot endorse the religious practices and beliefs of some citizens without sending a clear message to nonadherents that they are outsiders or less than full members of the political community.” Allegheny County v. ACLU, 492 U.S. 573, 627 (1989)(O’Connor, J. concurring). An economic endorsement is arguably more potent than one comprised only of words and it should be fairly obvious by now that this exemption endorses religion because it is giving an exclusive benefit to religion.  The government values “ministers of the gospel” so much it is effectively paying them.  What could be more of an endorsement than money? 

Two Cases

There are two cases in Supreme Court precedent that are of particular importance to this issue, Walz and Texas Monthly.  In Walz, the Court upheld a general property tax exemption that happened to include churches.  Critical to the Court’s decision was the broad and nondiscriminatory application of the law:  “The legislative purpose of a property tax exemption is neither the advancement nor the inhibition of religion… It has not singled out one particular church or religious group or even churches as such; rather, it has granted exemption to all houses of religious worship within a broad class of property owned by nonprofit, quasi-public corporations which include hospitals, libraries, playgrounds, scientific, professional, historical, and patriotic groups.”  Walz v. Tax Commission, 397 U.S. 664, 672-673 (1970). 

In Texas Monthly, the Court found unconstitutional a statute that exempted the publication and distribution of wholly religious periodicals from state sales tax.   The Court reiterated the importance of broad exemptions: “Although we found it ‘unnecessary to justify the tax exemption on the social welfare services or ‘good works’ that some churches perform for parishioners and others,’ Walz v. at 674, we in no way intimated that the exemption would have been valid had it applied only to the property of religious groups or had it lacked a permissible secular objective. … the set of organizations defined by these secular objectives was so large that we saw no need to inquire into the secular benefits provided by religious groups that sought to avail themselves of the exemption.”  Texas Monthly v. Bullock, 489 U.S. 1, n2 (1989).  

The parsonage exemption is analogous to Texas Monthly and distinguishable from Walz.  It is not broadly applied, but given only to the religious. Secular organizations and employees that are similarly situated are not extended this benefit.  In the words of one Justice, “the Establishment Clause value suggests that a State may not give a tax break to those who spread the gospel that it does not also give to others who actively might advocate disbelief in religion.” Id. at 26 (White J., concurring).   

It is hard to imagine a more blatant violation of constitutional principles than the parsonage exemption. 

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Andrew L. Seidel is a Constitutional Consultant with the Freedom From Religion Foundation.  Andrew graduated cum laude from Tulane University with a B.S. in neuroscience and environmental science and magna cum laude from Tulane University Law School.  In May of 2011, Andrew completed his Master of Laws at Denver University Sturm College of Law with a perfect GPA. He has written a book on international human rights law (forthcoming) and joined FFRF in November 2011.  

I would like to thank Professor Erwin Chemerinsky, his article in Whitter Law Review (24 Whitter L.Rev. 707 (2002-2003) on this very topic was an invaluable roadmap in preparing this post.