Clergy-housing tax break might still be endangered

By Robert Marus

LOS ANGELES (ABP) -- Despite a new law designed to save it, the tax exemption that ministers receive for their housing allowances might still be in danger.

Denominational leaders and religious media outlets hailed the lightning-fast congressional and presidential approval of a recent bill designed to protect the income-tax perk that clergy members enjoy.

The law is aimed at pre-empting a case where judges were prepared to rule on whether the practice is constitutional. Even if that case is dismissed, however, a California law professor who belatedly became a party in the suit said he would likely go back to court to challenge the tax break on his own.

Erwin Chemerinsky, a professor at the University of Southern California School of Law, is continuing to press the case against the clergy exemption. He is the lawyer appointed by the 9th U.S. Circuit Court of Appeals in San Francisco to address the constitutionality of a part of the tax code that allows clergy members to deduct from their taxable income the portion they use to pay housing costs.

He became involved even though neither side in the original case had questioned the law's constitutionality, but only its application. In the suit, the Internal Revenue Service had said that Los Angeles-area pastor Rick Warren wanted to claim too much housing allowance.

In a surprising move, however, a majority of a three-judge panel of the court asked in March for briefs on the larger question of whether the tax exemption violates the Constitution. Two of the judges questioned whether the provision -- which applies specifically to religious leaders -- creates a government subsidy to religion or causes excessive entanglement between church and state. Both are prohibited under the First Amendment's protection against government establishment of religion.

The third judge issued an emphatic dissent to the decision to expand the question.

Chemerinsky's brief in the case argues that the ministerial tax exemption is clearly unconstitutional. Chemerinsky has been an outspoken critic of the practice in the past. Thus, his appointment by the judges led many legal observers to conclude that a majority of the 9th Circuit was poised to rule against the housing-allowance tax exemption.

The dispute got unusual attention on Capitol Hill, where both the House and Senate rushed through legislation designed to render moot the IRS's argument in the case. Bush signed the bill into law in May. Both sides in the case and the Department of Justice then asked the judges to dismiss the case.

However, Chemerinsky -- an official party to the case by virtue of his appointment by the court -- has opposed the motions to dismiss.

The judges have not yet ruled on the dismissal request. But even if they do dismiss the case, that may not end the constitutional question.

In a phone interview, Chemerinsky said he would "probably" file a lawsuit challenging the tax exemption if the Warren case is dismissed. "This tax provision gives 'ministers of the gospel' a benefit that no one else can claim," Chemerinsky said. "For the government to favor religion in that way is to violate the [First Amendment's] Establishment Clause."

Members of the military and U.S. foreign-service employees also get similar tax breaks on housing allowances, but Chemerinsky said those situations aren't comparable. "Those are situations where the government is choosing to pay its own employees, in part by lessening their tax burden," he said. "That's quite different from saying ministers of the gospel get a tax break."

Attorneys for Warren and religious groups that have filed friend-of-the-court briefs in the case argue that many churches could not afford to attract full-time clergy without the benefit. Banning the exemption, therefore, would place an undue burden on the free exercise of religion. That, they say, would violate the other part of the First Amendment's religious-liberty clauses.

But Chemerinsky disagreed with that argument as well. "There is no free exercise problem in taxing ministers' salaries the same way everybody else's is taxed," he said.

Phill Martin, director of education for the Dallas-based National Association of Church Business Administration®, said he continues to be worried about Chemerinsky's involvement in the case.

"This isn't over," Martin said.

Martin said a new lawsuit filed by the professor could be harder to defend. It "will put the IRS and him [Chemerinsky] at the table with no religious body as part of the suit," he said.