Monday, June 14, 2010
The U.S. District Court for the Eastern District of California ruled that the Freedom from Religion Foundation, Inc. and a number of its California members could proceed with a lawsuit challenging the constitutionality of the minister housing allowance income tax exclusion found in Internal Revenue Code section 107 and a parallel California state income tax provision. The court rejected the government's argument that the plaintiffs lacked standing, finding that there is an exception for Establishment Clause claims to the general rule that taxpayers lack standing to challenge federal tax rules that benefit other taxpayers. In reaching this conclusion, the court relied in part on Winn v. Arizona Christian School Tuition Organization, 562 F.3d 1002 (9th Cir., 2009), a decision for which the Supreme Court recently granted certiorari. The district court also found that plaintiffs had stated sufficient facts supporting a claim that these provisions violated the second prong Lemon v. Kurtzman, 403 U.S. 602 (1971), which relates to whether Congress' action has a principal or primary effect that advances or inhibits religion. It therefore denied the government's motion to dismiss with respect to these provisions, allowing plaintiffs' Establishment Clause challenge to proceed. Given the reliance of religious congregations of all types on this tax provision and the firestorm (for example, see this Baptist Press story) that erupted when the U.S. Court of Appeals for the Ninth Circuit tried to consider the constitutionality of Code section 107, this case could lead to significant controversy.