The Church Alliance–a coalition of the chief executive officers of 38 denominational benefit programs including Church of the Brethren Benefit Trust (BBT)–has filed an amicus curiae brief in the Seventh Circuit US Court of Appeals (Chicago) in the case challenging the constitutionality of the clergy housing exclusion under Section 107(2) of the Internal Revenue Code of 1986 (Code).
BBT participates as a member organization of the Church Alliance, where BBT president Nevin Dulabaum serves as the Church of the Brethren representative. Church of the Brethren general secretary Stan Noffsinger and associate general secretary Mary Jo Flory-Steury have signed on in support of the brief on behalf of the denomination.
The case is Freedom From Religion Foundation, Inc., et al. v. Jacob Lew, et al. (FFRF v. Lew). The US government is appealing a decision by Judge Barbara Crabb, US District Court for the Western District of Wisconsin (November 2013), that Code §107(2) is unconstitutional.
Clergy housing exclusion
Code §107(2), commonly called “clergy housing exclusion” or “clergy housing allowance,” excludes from income taxation the cash compensation provided to “ministers of the gospel” (clergy) toward the cost of their housing. This section of the IRS code essentially excludes the value of clergy-owned housing from income taxation. It is related to Code §107(1), which excludes from a minister’s taxable income the value of church-provided housing (commonly called a parsonage, vicarage, or manse). The FFRF v. Lew appeal does not involve a challenge to Code §107(1).
Judge Crabb ruled that Code §107(2) is unconstitutional because it violates the Establishment Clause of the First Amendment to the US Constitution. Under the Establishment Clause, “Congress shall make no law respecting an establishment of religion….” Judge Crabb stayed the effect of her ruling until all appeals are exhausted. The government’s opening brief was filed on April 2.
The Church Alliance brief adds a perspective not duplicated in the government’s brief, focusing on the jurisprudential history of permitted legislative accommodations of religion. The brief argues that Code §107(2) is a constitutionally permitted accommodation of religion when viewed in the context of Code §107(1), the parsonage exclusion, and Code §119, which excludes employer-provided housing from employees’ incomes in numerous secular circumstances.
“The Church Alliance has a substantial interest in the validity of Code §107(2) because of the immediate impact on compensation and housing of active clergy in the benefit plans of its member denominations, and also because of the indirect impact on retirement benefits,” said Barbara Boigegrain, chair of the Church Alliance and chief executive of the General Board of Pension and Health Benefits of the United Methodist Church.
Religious organizations represented
The members of the Church Alliance stand with other religious organizations in their vested interest in the outcome of this litigation. The clergy housing exclusion is important to millions of active and retired clergy from the 38 Church Alliance-represented denominations including, in addition to the Church of the Brethren, the American Baptist Churches in the USA, Church of the Nazarene, Christian Church (Disciples of Christ), Christian Brothers Services, Episcopal Church, Evangelical Lutheran Church in America, Joint Retirement Board for Conservative Judaism, Lutheran Church-Missouri Synod, Presbyterian Church (USA), Reform Pension Board, Southern Baptist Convention, United Church of Christ, and the United Methodist Church, among others.
Numerous other churches, associations or conventions of churches, and other religious organizations with religious leaders eligible for the clergy housing exclusion under Code §107(2) are additional signers of the brief, supporting the filing of the Church Alliance’s brief and the positions advocated in it. They include the US Conference of Catholic Bishops, Central Conference of American Rabbis, Moravian Church, Rabbinical Assembly, Salvation Army, Union for Reform Judaism, United Synagogue of Conservative Judaism, and Wisconsin Council of Churches, among others.
The Church Alliance first formed in 1975 as the “Church Alliance for Clarification of ERISA” to address the problems presented for established church plans by the Employment Retirement Income Security Act of 1974 (ERISA). The Church Alliance advocated for changes to the church plan definitions in ERISA and the Code. As a result of these efforts, Congress revised the definition of “church plan” in both ERISA and the Code when it passed the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) to make clear that a church plan can provide retirement and welfare benefits to employees of all church agencies. The Church Alliance continues to ensure that benefit-related legislative and regulatory initiatives fully address the unique nature of church plans.
— Much of this report was provided by M. Colette Nies, managing director of Communications for the United Methodist Church General Board of Pension and Health Benefits.