March 06, 2002

JUDGES BICKER OVER TAX BREAK FOR CLERGY

A bitterly divided 9th Circuit panel reaches for an neither side raised.

By John Roemer

Daily Journal Staff Writer

        SAN FRANCISCO - Two federal appellate judges traded insults Tuesday over a unusual and quarrelsome order raising constitutional questions about how ministers pay taxes.

        A sharply divided panel of the 9th U.S. Circuit Court of Appeals voted to ask University of Southern California constitutional law professor Erwin Chemerinsky for advice on the church-state issue.

        The panel acted even though neither the Internal Revenue Service nor the clergyman involved wants to challenge the constitutionality of a longstanding tax exemption for ministers' housing allowances. The tax break is known as the "parsonage exclusion."

        In a dissent from the order raising the Establishment Clause issue, Judge Richard C. Tallman declared, "I believe it injudicious to appoint an amicus curiae to attack the constitutionality of the parsonage income tax exclusion when no one but the other panel judges improvidently wish to reach that issue."

        In a thundering response, majority panelist Stephen Reinhardt replied:

        "Our colleague obviously has a passionate desire that we permit the religious tax deduction, whether constitutional or not."

        Judge James R. Browning voted with Reinhardt in ordering briefing on the constitutional issue.

        The order came months after the court held oral argument in Warren v. Commissioner of Internal Revenue, 00-71217. The case, originating in U.S. Tax Court, involves the tax filings of the Rev. Richard D. Warren, the Baptist minister of Saddleback Valley Community Church in Orange County.

        Church trustees paid Warren about $100,000 in 1995 and defined the sum as a housing allowance. Under Internal Revenue Code section 107(2), Warren deducted the entire amount and paid no taxes on it, according to his lawyer, Arthur A. Oshiro of Saavedra & Zufelt in Long Beach.

        The IRS challenged Warren's tax return, asserting that only the fair market rental value of his parsonage is deductible. The tax court sided with Warren and the IRS appealed.

        Reinhardt wrote that before the appeal can be considered on the merits, the court may have to look at the constitutional implications of Internal Revenue Code Section 107(2).

        "I hadn't anticipated that the constitutional question would arise," Oshiro said Tuesday. "It makes my job tougher."

        IRS attorney Andrea Tebbets of the U.S. Department of Justice in Washington, D.C., declined comment.

        Chemerinsky said Tuesday that each party's self-interest kept the Constitution out of the case until the appellate court brought it up.

        "The government would never raise the constitutionality of its own regulation, and the ministers wouldn't want to disturb their tax deduction," he said. "This is for churches, synagogues and mosques a really big deal."

        The 9th Circuit recently called on Chemerinsky for counsel in its three-strikes case, Brown v. Mayle, 2002 DJDAR 1638. He successfully argued that the law is unconstitutional when petty theft is the third strike.

        The National Association of Church Business Administration® has retained a Texas tax lawyer to write its own amicus brief in the Warren case.

        "I am surprised that it's come to this," said the NACBA lawyer, Frank Sommerville of Weyer Kaplan Paulaski & Zuber in Dallas. "It puts all 850,000 ministers priests and rabbis in the U.S. at risk of losing the housing allowance. For 80 years no one has challenged this law except Stephen Reinhardt and James Browning."

        A longtime observer of 9th Circuit jurisprudence, Arthur D. Hellman of the University of Pittsburgh School of Law, called the panel's internal dispute over the parsonage exclusion remarkable.

        "A fascinating and unusual episode," he said. "An extraordinary and regrettable pair of opinions."

        Hellman called it "quite rare" for an appellate court to raise a constitutional issue on its own, and for the judges to openly disagree about it.

        "They're starting down the path toward considering a major constitutional issue disdained by the parties," he said. "And they are engaging in extended public debate using quite sharp and pretty personal language."

        Indeed, Reinhardt noted much the same thing when he wrote, "It is regrettable that this unfortunate and wholly unnecessary exchange of views must now find its way into the volumes of our published decisions."

        Reinhardt strongly disputed Tallman's view that no constitutional inquiry is needed to reach the merits of the case. Wrote Reinhardt:

        "If, however, under the Constitution, Rev. Warren in not entitled to any tax deduction at all, because such a deduction would violate the First Amendment, then it is not possible to decide the case on non-constitutional grounds and reach the correct result, let alone achieve the 'just resolution' our dissenting colleague purportedly seeks."

        Retorted Tallman, quoting former U.S. Supreme Court Justice Felix Frankfurter's "wise counsel" in a 1958 case:

        "But it is not the business of the Court to pronounce policy. It must observe a fastidious regard for limitations on its own power, and this precludes the Court's giving effect to its own notions of what is wise or politic."

        Again Reinhardt shot back, noting the court's duty to consider the potential constitutional implications of tax benefits for religious figures.

        "No case our colleague can locate, not even the ghost of Justice Frankfurter, could help him avoid this inescapable fact," Reinhardt wrote.

        Hellman, the 9th Circuit scholar, said the intemperate language in the order might make it hard for the panel to grapple with the case itself.

        "As a matter of human behavior, when you've gone public with this kind of disagreement, it's not easy to turn around and start neutrally considering the facts," he said.

        Reinhardt, emphasizing that the appointment of Chemerinsky is solely for help in deciding whether a constitutional issue is indeed involved, denounced Tallman for thinking otherwise.

        "I would hope that our colleague will learn someday that when judges seek information, it does not mean that they have pre-judged an issue," he wrote. "In fact, it is far more likely that those who are opposed to being informed about the law have minds that are already closed.

        "All this is aside from the fact that in my previous twenty-one years of service on this court, I have never known of any judge's filing a formal objection to a colleague's request for additional briefing, let alone to a request by a majority of his colleagues."

        The panelists' tenures span a generation of appointments by Democratic presidents: Browning, of San Francisco, by John Kennedy in 1961; Reinhardt, of Los Angeles, by Jimmy Carter in 1980 and Tallman, of Seattle, by Bill Clinton in 2000.

        A 1938 U.S. Supreme Court decision supplies the authority for judges to raise a constitutional issue in a case where the parties do not, Hellman said.

        He cited Erie Railroad Co. v. Tompkins, 304 U.S. 64, in which Justice Louis D. Brandeis declared that although the litigants did not raise the issue, the unconstitutionality of the diversity of citizenship doctrine "compels us" to abandon it.

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