Federal Judge Allows Case Challenging Parish Exemptions To Move Forward
On May 21, U.S. District Court Judge William Shubb in Sacramento ruled that The Freedom from Religion Foundation's challenge of "parish exemptions" should not be dismissed. The Foundation and 21 of its Sacramento, CA area members are suing U.S. Treasury Secretary Timothy Geithner, IRS Commissioner Douglas Shulman and California Franchise Tax Board Director Selvi Stanislaus.
The lawsuit was filed in October 2009 in federal court. Representing the Foundation is attorney Richard L. Bolton with Michael Newdow of Sacramento serving as local counsel. The case centers on IRC 107, which states: In the case of a minister of the gospel, gross income does not include: 1 the rental value of a home furnished to him as part of his compensation; or 2 the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.
In his decision, Judge Shubb ruled that "plaintiffs The Foundation and its members have alleged sufficient facts which, if accepted as true, leave open the possibility that an objective observer would determine that 107 goes too far in aiding and subsidizing religion by providing ministers and churches with tangible financial benefits not allowed secular employers and employees."
However, Judge Shubb denied the Foundation's claim that a related part of the Internal Revenue Code, Section 265a6, "impermissibly lets ministers 'double dip' in that they can receive a housing allowance tax-free under 107, use that allowance to purchase a home, and receive another tax deduction under Section 265a6 for the interest paid on the mortgage."
Judge Shubb said the purpose is clearly to encourage ministers to purchase a home, which is "a permissible secular purpose and effect."
Additionally, Judge Shubb dismissed one claim against California Franchise Tax Board Director Selvi Stanislaus, ruling that the Foundation could not continue its claims against her under the California Constitution, but the Foundation's allegations that the parts of the California Revenue and Taxation Code which incorporate Section 107 substantially violate the federal Establishment Clause of the First Amendment of the Constitution may continue.
Whatever decision is reached at the district court level, an appeal to the Ninth Circuit Court of Appeals is expected. You may read or download Judge Shubb's decision online. It will be every interesting to see the results.
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