Federal Tax Exemption for Ministers Held Unconstitutional

Annie Laurie Gaylor and Dan Barker serve as co-presidents of the Freedom from Religion Foundation, a non-profit organization seeking to protect separation of church and state.  As part of their role, they receive a housing allowance from the Foundation.

ffrf
Dan Barker & Annie Laurie Gaylor, co-presidents of the Freedom from Religion Foundation (Timothy Hughes)

In 2015, the two filed amended tax returns for 2012 and 2013, seeking a partial tax refund like ministers receive under federal law.  The IRS awarded them a refund for 2013 without explanation, but denied their 2012 refund request because they are not religious ministers.  Gaylor then filed a lawsuit against the IRS, arguing that the statute violated the Establishment Clause of the First Amendment by giving an exemption to religious leaders and not to other secular employees.

The IRS argued several points in defense.  To remain constitutional, the statute must have a secular purpose and effect, which the defense argued existed.  The IRS cited the convenience of the employer and the financial hardship on a minister, in an attempt to show that the exemption is given to ministers so that they are better able to apply themselves and their finances to their churches.

The U.S. District Court for the Western District of Wisconsin did not find these points persuasive, as the statute singled out one section of religious people and did not extend its exemptions to equally deserving secular employees without substantially more restriction and justification.  Therefore, the Court found that federal law unconstitutionally gives preferential treatment to religious people which is in violation of the Establishment Clause of the First Amendment.

We would expect the IRS to appeal this ruling to the Seventh Circuit.  We’ll keep you updated on it for sure.

Case: Gaylor v. Mnuchin, No. 16-215 (W.D. Wis. Oct. 6, 2017) (opinion here)

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