November 19, 2009
Lawsuit Challenging Minister Rental Allowance Could Foreshadow Broader Assault on Religious Nonprofit Benefits
Last month the Freedom from Religion Foundation and several of its members filed a lawsuit in federal district court in California against Treasury Secretary Geithner, IRS Commissioner Shulman, and California Franchise Tax Board Executive Officer Stanislaus challenging the exclusion from income provided for the value of parsonages and rental allowances provided to a "minister of the gospel" under Internal Revenue Code section 107. While normally such suits would have a taxpayer standing problem - i.e., the long-standing federal court holding that merely being a taxpayer provides insufficient grounds for standing to challenge a tax benefit provided to another taxpayer - the U.S. Court of Appeals for the Ninth Circuit has indicated a willingness to depart from that holding when the Establishment Clause is at issue (see Winn v. Arizona Christian School Tuition Organization (slip. op. pages 4596-4602), rehearing en banc denied). The attorney representing the Foundation is the well-known atheist Michael Newdow, who previously challenged the constitutionality of "under God" in the Pledge of Allegiance used in public schools.
The lawsuit is significant not only because of the plausible threat it provides to Code section 107, which is of significant financial value to religious leaders and their congregations, but also because if it overcomes the standing issue it may open the door to challenges to the many other tax and non-tax legal benefits provided only to religious bodies. While many and perhaps most of those benefits are defensible on avoiding entanglement grounds, it is far from clear that all of them could be so defended.
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