Tag Archives: Federal Tax Code

Zelinsky on Religious Tax Exemptions and Entanglement

Edward A. Zelinsky (Cardozo School of Law) has posted Do Religious Tax Exemptions Entangle in Violation of the Establishment Clause? The Constitutionality of the Parsonage Allowance Exclusion and the Religious Exemptions of the Individual Health Care Mandate and the Fica and Self-Employment Taxes. The abstract follows.

In Freedom From Religion Foundation v. Geithner, the Freedom From Religion Foundation (FFRF) argues that Code Section 107 and the income tax exclusion that section grants to “minister[s] of the gospel” for parsonage allowances violate the Establishment Clause of the First Amendment. This case has important implications for a new federal law mandating that individuals maintain “minimum essential” health care coverage for themselves and their dependents. That mandate contains two religious exemptions. One of these exemptions incorporates a pre-existing religious exemption from the federal self-employment tax. These sectarian exemptions raise the same First Amendment issues as does the Code’s exclusion from gross income of clerical housing allowances.

I ultimately find unpersuasive the indictment of Section 107 as constitutionally entangling. For the same reasons, I also conclude that the religious exemptions of the Social Security taxes and of the individual health mandate pass First Amendment muster. In the modern world, extensive contact between tax systems and religious institutions is unavoidable. Whether religious entities and actors are taxed or exempted, there are inevitable tensions between the contemporary state and sectarian institutions and their personnel. Whether religious entities and actors are taxed or exempted, there are no disentangling alternatives, just imperfect trade-offs between different forms of entanglement.

Thus, Section 107 and the exclusion from gross income it grants to clerical recipients of housing and parsonage allowances are constitutionally permitted, though not constitutionally required, responses to the problems of entanglement inherent in the relationship between modern government and religion. Similarly, the Code’s sectarian exemptions from the individual health care mandate and from the FICA and self-employment taxes are acceptable, though not obligatory, means under the First Amendment of managing the inevitable contacts and tensions between the contemporary state and the religious community.

However, as a matter of tax policy, the exclusion of Section 107(2) for cash parsonage allowances stands on weaker ground than does the exclusion of Section 107(1) for in-kind housing provided to “minister[s] of the gospel.” The taxation of such cash allowances, in contrast to the taxation of housing provided in-kind, does not involve problems of valuation or of taxpayer liquidity and is thus more practicable as a matter of tax policy.

Giving the Ministerial Exception a Bad Name

Over at PrawfsBlawg, our friend Paul Horwitz notes an interesting piece in the New York Times yesterday on doings at the Trinity Broadcast Network, an extremely successful Christian cable channel. Well, “doings” is perhaps too polite. TBN, which advocates the so-called “Prosperity Gospel,” has received many millions of dollars over the years in donations from the faithful — $93 million in 2010 alone. An insider now claims that much of the money has gone to fuel the lavish lifestyle of TBN executives, particularly the network’s founders, the husband-and-wife team of Paul and Janice Crouch. I won’t go into the details, except to say that the portrait is one of high-spending, low-rent excess, and that the allegations come from one of the Crouch’s own granddaughters, who other family members say was the real sponger.

IRS regulations prohibit “excess compensation” for executives of non-profit organizations. According to the Times, though, TBN has been able to avoid scrutiny by relying on the ministerial exception. TBN has allegedly ordained “dozens of staff members . . . including chauffeurs, sound engineers, and others,” as ministers, thus allowing TBN to give them rent-free luxury “parsonages” and to avoid paying Social Security taxes on their salaries. TBN’s lawyer defended the network’s actions, arguing that the hundreds of ordained employees, including performers at a TBN-affiliated religious theme park, had experienced a true religious vocation.

Who knows how these allegations will sort out? One issue that seems sure to arise, though, is fraud. Some of the Court’s church autonomy cases suggest that fraud is a limitation on the ministerial exception, though the cases don’t really develop the idea. If the IRS were to go after TBN, it could argue that the ordinations for company workers without any theological or pastoral training were phony. Questioning such ordinations would obviously raise free exercise concerns, though, and at least one legal expert the Times quotes thinks it won’t happen: “absent clear fraud, the government is not going to touch that.”

Double Daring the IRS

Tomorrow is Pulpit Freedom Sunday, an annual event, sponsored by the Alliance Defense Fund, that encourages pastors to give political sermons from their pulpits.  The event is basically an attempt to goad the IRS into prosecuting someone under the 1954 law that prohibits churches and other charities from engaging in  electoral campaigns.  The ADF argues that the law violates the First Amendment and would like a test case.  The problem, according to the New York Times, is that the IRS apparently has little interest in prosecuting anyone under the 1954 law, a fact that frustrates the law’s opponents and supporters alike.  Where’s Inspector Javert when you need him? — MLM

Politics, Taxes, and the Pulpit (Oct. 12, 2011)

Professor Nina Crimm will discuss her book, Politics, Taxes, and the Pulpit: Provocative First Amendment Conflicts (Oxford 2011) (with Laurence Winer), at a conference at the University of Kentucky Law School on October 12. For  information, please click here.

Atkinson on The Future of Philanthropy: Questioning Today’s Orthodoxies, Re-affirming Yesterday’s Foundations

Rob Atkinson Jr. (Florida State University College of Law) has posted The Future of Philanthropy: Questioning Today’s Orthodoxies, Re-Affirming Yesterday’s Foundations. The abstract follows. – ARH

Philanthropy today has reached an impasse, in both theory and practice. This article maps a way beyond that impasse by taking us back to philanthropy’s core function and traditional values. The standard academic model sees philanthropy as subordinate and supplemental to our society’s other public sectors, the market and the state, and uses their metrics to measure its performance. Current law, best reflected in the federal income tax code, closely parallels that perspective. This article proposes to reverse the dominant theoretical perspective and reveal a radically different relationship among society’s three public sectors, the market, the state, and the philanthropic. Following both classical western philosophy and the West’s three Abrahamist faiths, this perspective places philanthropy first and measures everything, including our current economic and political systems, by a neo-classical philanthropic standard: the highest good of all humankind.