Clergy housing-allowance case dismissed, but threat remains

By Robert Marus

SAN FRANCISCO (ABP) -- A federal court has thrown out one challenge to a long-standing benefit that exempts American clergy from paying taxes on the money they spend on housing. But a law professor challenging the practice vows to file another lawsuit claiming it is unconstitutional.

The 9th U.S. Circuit Court of Appeals in San Francisco dismissed a high-profile case Aug. 26 pitting Southern Baptist mega-church pastor Rick Warren against the Internal Revenue Service.

Warren sued the IRS after it turned down his $80,000 claim as a housing allowance. The IRS said the tax code allows deduction of only the fair-market rental value of a minister's home. Warren argued that it exempts all costs related to clergy housing.

The case took on added importance when a three-judge panel hearing the case took upon itself to decide whether the entire notion of the housing allowance violates the Constitution by subsidizing religion and creating excessive entanglement between church and state.

They asked a law professor at the University of Southern California Law School to prepare a "friend of the court" brief on the legality of the practice. Professor Erwin Chemerinsky, previously an outspoken critic of the clergy tax break, argued the exemption is clearly unconstitutional.

Anticipating a ruling against the exemption, Congress rushed to pass legislation to protect ministers from being forced to pay an additional $500 million in annual taxes. President Bush signed the bill into law in May. Both sides in the lawsuit, joined by the Department of Justice, asked that the case be dismissed.

But Chemerinsky opposed the motion for dismissal, asking the court to allow him, as a federal taxpayer, to intervene in the case and keep the constitutional question alive.

In their Aug. 26 ruling, the three-judge panel said Chemerinsky had not established grounds to continue in the lawsuit, but noted that he may now want to file his own separate lawsuit as a taxpayer challenging the ministerial tax exemption on constitutional grounds.

Chemerinsky said he would do just that in a telephone interview Aug. 27. From his office in North Carolina, where he is spending the semester as a visiting professor at Duke University Law School, Chemerinsky told Associated Baptist Press he plans to go ahead and challenge the exemption in a lower federal court.

"I am going to file a taxpayer action -- I'm not sure exactly when, but relatively soon -- challenging the parsonage allowance," he said.

Phill Martin, director of education for the Dallas-based National Association of Church Business Administration®, said he wasn't surprised by news that Chemerinsky would continue challenging the tax exemption, but it was still unwelcome.

"We continue to have great concern for the future of the minister's housing allowance [tax exemption]," said Martin, a Baptist minister and current moderator of the Cooperative Baptist Fellowship. "Its elimination would have serious financial impact on religious ministries of all faiths."

Martin's organization previously filed its own friend-of-the-court brief supporting Warren's position in the original lawsuit, and has tracked the case and accompanying legislation.

Chemerinsky said he could file the suit in federal court either in North Carolina or Washington, but he would most likely file it in Los Angeles. That would almost guarantee that the case will once again make it to the 9th Circuit.

The 9th Circuit has made news lately with several notable rulings involving the separation of church and state. It is the court that in June declared the "under God" phrase in the Pledge of Allegiance unconstitutional. While some criticized that decision as anti-religion, a panel of the court also recently upheld the right of a Washington student to spend a state-funded scholarship to study theology at the college level.