Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Parsonage Allowance – Once Again It Is An Issue

Author: James F. McDonough

Date: May 13, 2014

Key Contacts

Back

In the 1990s, an Orange County California minister and the Internal Revenue Service (IRS) battled over the amount of his parsonage or housing allowance. The IRS claimed that the allowance, which is tax-free to the minister, was overstated and that some portion of the allowance should have been reported as income. The case proceeded to court and was appealed to the Circuit Court of Appeals for the Ninth Circuit in San Francisco. There, the Court appointed a law professor to write a brief on whether the parsonage allowance was constitutional. Congress took immediate action passing a law granting the exemption but limiting the parsonage allowance to the fair market value of the residence. This statute was a concession to clergy and IRS. The Court dismissed the case because there was no longer an issue to decide although the law professor believed the issue should be briefed, debated and ruled upon.

In 2013, this very same issue appeared in two cases. In Freedom From Religious Foundation v. Lew, a Federal District in Wisconsin held that the parsonage allowance was unconstitutional and that the allowance was an endorsement of religion. That case is on appeal to the Circuit Court of Appeals for the Seventh Circuit in Chicago and enforcement of the decision was stayed. The same issue was litigated in American Atheists v. Schulman, where a Federal District in Kentucky decision is pending. The Kentucky case would also be appealed to the Seventh Circuit.

The impact of a decision adverse to the parsonage allowance may not be limited to housing for ministers. One argument made by atheists is that because churches pay nothing, citizens pay more and that this is unfair. They claim governments could collect 71 billion in tax revenue if the allowance was halted. They also raise an argument that atheist organizations are unable to compete with churches because churches are not subject to the same qualification process. Finally, there is a challenge to the extension of favorable treatment to churches, clergy, religious organizations and non-church organizations that advance religion. They argue equal protection and the establishment clauses claiming that the favorable treatment is without secular purpose and rational explanation in law or fact.

Striking down the parsonage allowance would have a dramatic impact upon real estate property taxation. If other favorable treatment was revoked, the tax-exempt area and religious areas would be dramatically impacted. There has always been tension between church and state throughout history. Once again, it appears, albeit in a slightly different form.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!