September 2, 2002
Housing allowance case dismissed but not dead
___By Robert Marus
___ABP Washington Bureau
___SAN FRANCISCO (ABP)--Federal judges have dismissed one threat to the housing-allowance tax exemption enjoyed by American clergy, but another threat looms in the near future.
___On Aug. 26, the San Francisco-based 9th U.S. Circuit Court of Appeals dismissed Warren vs. Commissioner of Internal Revenue. That case originally involved Los Angeles-area Southern Baptist megachurch pastor Rick Warren and the Internal Revenue Service.
___The IRS contended Warren had claimed too large an amount of his compensation as a tax-exempt housing allowance.
___Since 1921, clerics in the U.S. have been allowed to deduct from their taxable income the portion of it spent on housing. Even though neither side in the Warren case raised the issue, a majority of a three-judge panel of the 9th circuit requested a "friend of the court" brief from a California First Amendment expert regarding the constitutionality of the housing exemption.
___In March, the judges asked University of Southern California Law School professor Erwin Chemerinsky if the tax exemption--which applies specifically to religious leaders--created a government subsidy to religion or caused excessive entanglement between church and state, thus violating the First Amendment's protection against government establishment of religion.
___While two of the judges said the constitutionality of the practice should be further examined, the third judge issued an emphatic dissent to his colleagues' decision.
___Chemerinsky's brief argued that the ministerial tax exemption is clearly unconstitutional, and Chemerinsky has been an outspoken critic of the practice's constitutionality in the past. Thus, his appointment by the judges led many legal observers to conclude that some judges on the 9th circuit were poised to rule against the housing-allowance tax exemption.
___The dispute got unusually immediate attention on Capitol Hill, where both the House and Senate rushed through legislation designed to render moot the IRS's argument in the case. President Bush signed the bill into law in May, and then both sides in the case and the Department of Justice asked the judges to dismiss it.
___Chemerinsky, however, opposed the motion for dismissal and asked the court for permission, as a federal taxpayer, to intervene in the suit against the ministerial tax exemption, thus keeping the case and the constitutional question alive.
___In their Aug. 26 ruling, the same three-judge panel ruled unanimously that Chemerinsky had not presented sufficient grounds for intervening in the suit. However, in an opinion supported by the two judges who originally voted to ask Chemerinsky to become involved in the case, the court noted that Chemerinsky may want to file his own taxpayer lawsuit opposing the tax exemption statute on constitutional grounds.
___Chemerinsky said he would do just that. Reached by phone Aug. 27 at 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 planned 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.
___Chemerinsky noted that although he may file the suit in federal court in North Carolina or Washington, he would likely file it in Los Angeles--meaning that the case almost certainly would come before the 9th circuit again.
___Phill Martin, a Baptist and director of education for the Dallas-based National Association of Church Business Administration, said while the news that Chemerinsky would continue challenging the tax exemption was not a surprise, it still is unwelcome.
___"We continue to have great concern for the future of the minister's housing allowance" tax exemption, Martin said. "Its elimination would have serious financial impact on religious ministries of all faiths."
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