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Saturday, December 13, 2014

Senator Tom Coburn v. IRC 107

Here is an other guest post from Robert Baty.  Bob is a retired IRS Appeals Officer.  He has something of an obsession with an obscure Revenue Ruling from 1970.  Revenue Ruling 70-549 allows colleges affiliated with the Church of Christ to provide faculty and administration with Section 107 cash housing allowances as "ministers of the gospel" regardless of what their position is. When I think of Bob Baty and Revenue Ruling 70-549, I'm reminded of Ahab and Moby Dick

Ahab's a little more easy going.  You can call me Ishmael.

Did you see it?

Tax Decoder
By Senator Tom Coburn (R-OK)
December 2014 - Page 192

(excerpt)

"The parsonage allowance (IRC 107) should be eliminated."

I appreciate the fact that Senator Coburn included the issue in his report, but I am quite disappointed in him, personally, for the way he handled the matter.

Senator Coburn has been in the Senate for many years and I am not aware that he has done anything to actually repeal IRC 107, cure its constitutional defects, or otherwise reign in what most might consider its abuses.

I wonder whether or not Senator Coburn is actually familiar with IRC 107 and the disputes over its constitutionality and abuses.  His report appears to simply copy much of what it has to say from Senator Grassley's earlier report which was a consequence of his investigation into some million dollar ministries.

In the case of Senator Grassley, he farmed out thinking about what to do about IRC 107 to his religious friends and, to no surprise, his religious friends told him, and by implication Congress and the President, to keep hands off of IRC 107.  They did.  They did nothing about IRC 107.

Annie Gaylor and Dan Barker have been litigating the constitutionality of IRC 107 for a number of years.  Last year they were successful in getting Federal District Judge Barbara Crabb to declare IRC 107(2) UNconstitutional, a violation of the Establishment Clause of the 1st Amendment to the United States Constitution.  

What did Senator Coburn have to say about that?
Nothing!
Why wasn't he publicly supporting Annie's and Dan's efforts?

This year, the 7th Circuit was asked to review Annie's and Dan's case and without judging the merits of Judge Crabb's ruling as to IRC 107 simply had the case dismissed because, in the opinion of the 3 judge panel (which gave no indication they actually read and understood Annie's and Dan's position), they did not have "standing" to ask Judge Crabb to decide the IRC 107 issue.

The 7th Circuit panel noted that the U.S. Supreme Court has never considered a "standing" issue such as is presented in Annie's and Dan's case.  The appeal period continues to run.  It is not yet known, at least not by me, whether or not Annie and Dan will ask the U.S. Supreme Court to review the 7th Circuit ruling.  I hope that they do.

Having lived in Oklahoma for the first 55 years of my life, I have a special interest in Senator Coburn and his antics regarding the IRC 107 issue.   Senator Coburn's report names names at times and at other times leaves the names out in rather conspicuous fashion.

For instance, Senator Coburn's report states, in part:

"A prominent California church designated the whole salary of its senior pastor as a housing allowance, prompting an investigation from the IRS. In the midst of that lawsuit, Congress limited the allowance to the fair rental value of the home plus certain expenses – the only time Congress has modified the tax break."

You can form your own opinions as to why Senator Coburn, after naming other names in his report, did not mention that that church was the Saddleback Church and that senior pastor was Rick Warren.  Congress and the President (Bush) was wrong-headed in dealing with that matter and their action was NOT because they were concerned about a problem with IRC 107 but rather they were concerned about helping their religious constituents who wanted to block the 9th Circuit Court of Appeals from taking up, on the Court's own initiative, the constitutional issue regarding IRC 107 (i.e., should Rick Warren get any tax exempt housing allowance simply because he was a "minister"?)

Cute, Senator Coburn, cute.

Another name Senator Coburn doesn't mention is that of one of his constituents, a basketball coach named Jerry Jobe.

Why didn't Senator Coburn mention the case of Jerry Jobe as an example of how successful so-called "ministers" have been in exploiting IRC 107 and the manner in which the politicians have allowed the IRS to administer IRC 107?

Jerry Jobe's case is responsible, in large part, in my opinion, for all of the current, popular, public debate and litigation over IRC 107; even though it was decided 30 years ago.

Never heard of it?
Not surprising, but I would that it was otherwise.

Jerry Jobe had been a coach in public schools for some time when he was hired on by a private school in Oklahoma, what is now Oklahoma Christian University (OC).  In consequence of being hired by OC, Jerry got a letter from his church leaders saying he was ordained and registered it at the courthouse so that he could claim part of his salary for coaching basketball was payment for services of a minister.

The local IRS office in Oklahoma challenged Jobe's housing allowance claim on the basis that OC was NOT an "integral agency of the church".  Apart from the fact the majority of folks who owned and operated OC were church-going folks, there wasn't much going for the proposition that Jobe should get his tax free benefit.  The issue was to be resolved around the question as to whether or not OC was an "integral agency of the church".

Founders of OC are on record of unanimously passing what has been reported to be a "landmark resolution" which included "we believe that such an institution should be kept separate and apart from the church".  For those familiar with what is commonly referred to as the "Church of Christ", that statement will harken back to the historical, theological "college question" controversy.

Historically, OC and similar schools such as Abilene Christian University and Pepperdine University have been owned and operated as private enterprises, though enjoying tax-exempt status as educational institutions, independent of the church while church members owned and operated them consistent with their respective religious beliefs.

As a matter of fact, law, and theology, OC, Abilene, Pepperdine, et al, are NOT "integral agencies of the church".

How then, did Jerry Jobe win his case, and he did win his case?

Jerry Jobe simply waived Revenue Ruling 70-549 in the face of the local IRS litigators who, at the behest of the National Office, were forced to back down.

As it turned out, Revenue Ruling 70-549 was a political plum awarded to the constituents of George H.W. Bush and Omar Burleson who put the squeeze on the IRS in order to bail Abilene Christian University (ACU) out of mess over the housing allowance for ministers where the school had been paying some of its employees in tax free housing.

The IRS tried to hold the line, apply the law, and deny the benefits to the ACU employees, and they were doing OK for awhile.  Then George and Omar showed up to put the squeeze on the IRS at the highest levels and the IRS eventually capitulated and issued Revenue Ruling 70-549.

About that same time, Texas Christian University (TCU), involving the Christian Church, Disciples of Christ, went to court over the "integral agency" issue and lost.  Ronald Flowers was the individual used as the test case for TCU.  The experience changed Ronald Flowers who subsequently indicated he had come to believe IRC 107 is UNconstitutional.  

While TCU went to court and lost, ACU went behind closed doors and got an administrative ruling that allowed them to win.  For those familiar with the historic disputes between the "Church of Christ" and "Christian Church", that outcome may strike you, and properly so, as somewhat backwards.

For those looking for a bonafide IRS scandal, the real story behind Revenue Ruling 70-549 involving George H.W. Bush, Omar Burleson, and the Nixon administration is the one that should be being pursued.  The consequences are burdening us yet and Congress and the President, Senator Coburn, et al, do not appear to be willing to do their job to resolve it, and it could be resolved quite easily for such reasons as Senator Coburn noted in his report.

IRC 107 appears to enjoy considerable special interest support for all the wrong reasons.

I would that it were otherwise.
I hope it will be; sooner rather than later.

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