Transcription
Thank you for joining in today. I'm Kyle Dana with AG Financial Solutions, and I'm joined by Dr. Richard Hammer. We're very happy to have Richard Hammer here to discuss a very important recent development on the housing allowance court case.
And I thought before we get right into that, Dr. Hammer, if we could maybe provide a little bit of context for the people that are tuning in today. So just so everybody's aware, the Minister's housing allowance has been under attack for many years by an atheist group, uh, called the freedom from religion Foundation. Uh, Dr. Hammer, can you maybe explain a little bit about what their primary complaint was?
Sure, Kyle. Uh, the Atheist argued that the Minister's housing allowance constituted an unconstitutional preference for religion in violation of the First Amendment's ban on any establishment of religion. So the court concluded—actually, this just came out on Friday, I believe, on March 15th—uh, fortunately for pastors and churches, that the housing allowance is constitutional and it rejected the atheist attack.
Why do you suppose they came to this conclusion, Dr.?
Well, they did, uh, for two reasons. Number one, they applied a 1971 ruling by the United States Supreme Court in a case called Lemon versus Kurtzman, uh, that is often referred to as the Lemon test. Based on that case, in which the Supreme Court said, in evaluating the constitutionality of a federal or state law that is challenged on Establishment Clause grounds, you look at three factors: Number one, was there a clearly secular purpose? Number two, was there a primary effect behind the legislation that neither advances nor inhibits religion? And number three, was there an excessive entanglement between church and state? And the court concluded in this case that all three elements were met and therefore the housing allowance is a constitutional benefit. So it's pretty interesting if you think about it.
Why did the court conclude that the first element that you mentioned with this Lemon test, which is clearly a secular purpose, why would they say that that was met?
Well, that's interesting; that's a key part of this decision. And the court said there are three reasons, uh, there are three secular purposes, if you will. Uh, one of them was that the housing allowance eliminates the discrimination against ministers in the tax code, which contains a number of tax benefits for secular housing, and this just the housing allowance elevates ministers to that same common playing field. Uh, number two, the housing allowance eliminates discrimination among ministers, and the idea here was that ministers who live in parsonages get a tax-free benefit; they don't report the fair rental value of the parsonage as taxable income. What about ministers that don't live in a parsonage? So the housing allowance was created to equalize or to achieve parity between ministers, whether they live in a in a church-provided parsonage or their own home. And then number three, the the third secular purpose was a minimization of the entanglement between church and state.
So Dr. Hammer, you said that the court rejected the atheist Establishment Clause challenge to the housing allowance on two grounds. The first was this Lemon test. What was the second?
The second is something the court referred to as the historical significance test. And the idea here is that, according to a number of Supreme Court rulings, the Establishment Clause must be interpreted and applied with proper reference for historical tradition. So, for example, legislative prayers—every session of Congress since the first Congress, the Congress that drafted, by the way, the Establishment Clause—uh, begins with prayer by a a a taxpayer-funded legislative chaplain. So how can you how can you say that legislative chaplains are unconstitutional when the very Congress that drafted the Establishment Clause of the First Amendment said that they're not, and in fact appropriated funds to pay their salary? So you you can't ignore tradition and historic precedent. And and so the court referred to over 2600 tax exemptions under state and federal law for religious organizations. So this these date back centuries, and how can you say now that this is all unconstitutional? The very fact of that long unbroken, unchallenged practice is powerful testimony to the constitutionality of the provision. So it's got deep roots. That's good.
So Dr. Hammer, everybody's probably concerned with the fact that the the first case ruled it unconstitutional; the appeals court reversed that ruling. What about another appeal of the Court's ruling? Is that likely to happen?
Well, the appeal now is to the United States Supreme Court. They accepted—probably I think I read something like 60 out of 10,000 appeals back in 2017; that's the most recent data that I have. So they can appeal to the Supreme Court, but it's very unlikely that the Supreme Court would take the case. And even if they did, I think it's it's it's probable the Supreme Court would affirm or agree with the appeals court decision.
Could the uh, freedom from religion Foundation seek the assistance of Congress?
Well, they could, you know, they could recommend that Congress repeal the house the housing allowance, but again, I don't see any possibility of that happening. It's interesting.
So Dr. Hammer, in conclusion, obviously we'd love to ask you how should churches and pastors respond to this ruling?
Well, churches should continue granting housing allowances; ministers should continue claiming them when you file your taxes. Be sure that you are properly claiming a housing allowance; it is constitutional, uh, currently. Uh, monitor developments; it is possible that the Supreme Court would take the case and reverse what the appeals court said. I don't think that's likely, but it's possible. Uh, so it's important to monitor these developments. And in the unlikely event that the housing allowance ultimately is determined to be unconstitutional, be prepared to increase or to modify your your quarterly tax returns. You're going to have a hit in terms of increased income taxes that need to be reflected on those quarterly estimated tax payments. Also, I would point out that those of you that are considering purchasing a new home should hold off on that decision until we have a final determination that the housing allowance is constitutional.
That's great. Thank you so much, Dr. Hammer, and for all those that tuned in. So just as a conclusion, the recent Court ruling on March 15th reversed the original ruling, and so that housing allowance is still constitutional, and you can still take advantage of that wonderful benefit that's afforded to our clergy. So in order to keep up with the ongoing developments, please visit agf financial.org. Thank you.