Parsonage Allowance: Hanging in the Balance?

What a Recent Federal Court Decision Might Mean for Clergy

On October 6, a Wisconsin federal judge ruled that the parsonage allowance authorized by Internal Revenue Code §107(2) is unconstitutional as violative of the First Amendment’s Establishment Clause.  You may recall that the same judge ruled the same way back in 2013, but her decision was reversed by the Seventh Circuit Court of Appeals on standing grounds, without addressing the substantive issue of the statute’s constitutionality (full text of the decision is available here).

Judge Crabb’s ruling will again come before the Seventh Circuit.  If that court upholds the decision, ministers in Wisconsin, Illinois, and Indiana would be affected.  But the matter would have a good likelihood of ending up before SCOTUS and, if upheld there, the parsonage allowance would no longer be available to clergy. Please note that § 107 (1), which excludes the rental value of actual parsonages from taxable income, would remain intact – at least until that is challenged.

If parsonage allowances were to be removed from the Internal Revenue Code, clergy would be affected significantly.  For some, their income could be sliced nearly in half.  “Ministers,” to include clergy of all faiths and denominations, are typically not wealthy people; their focus in life is often their mission rather than personal indulgence. The humble income they derive from their work is often barely enough to get by, and further reducing it would in some instances be devastating.

Worse yet, the impact of such a change in the law would disproportionately hurt those who need more. Clergy of wealthier congregations who live in a congregation-owned home would not be affected; sadly, those serving smaller congregations with moderate financial resources, and whose compensation is far more modest, would suffer the most.

Nelson Madden Black plans to be filing an amicus brief in the Wisconsin matter, so stay tuned for updates!

Federal Judge Rules Tax-Free Housing for Clergy Unconstitutional

Ruling Could Impact Religious Leaders if Upheld

A federal judge in Wisconsin has again ruled that an Internal Revenue Code provision establishing tax-free housing allowances for clergy is unconstitutional. U.S. District Judge Barbara Crabb had decided similarly back in 2013, but the 7th U.S. Circuit Court of Appeals overturned the decision on standing grounds. The action was essentially reinitiated with the same plaintiffs after they applied to the IRS for the tax exemption and were denied, allowing them to cure the prior standing defect.  This time around the 7th Circuit will be positioned to rule on the merits – the constitutionality of the IRC Section 107(2).

If upheld on appeal, this ruling could drastically impact religious leaders who avail themselves of an estimated $800 million annually in housing allowances.

Attorney General Releases Guidance on Religious Liberties

Religious Liberty Application Under Federal Law

Last Friday, the Attorney General Session issued guidance to all administrative agencies and executive departments regarding religious liberty protections in federal law. The guidance offered practical applications of several preexisting religious liberties. 

NMB partner, Jonathan Robert Nelson, has encouraged courts to implement the International Religious Freedom Act, which was cited in the Attorney General’s release. NMB attorneys have also lectured about the Religious Freedom Restoration Act, another topic covered by the Attorney General.

To read the full release click here.

Partner Jonathan Nelson Selected to 2017 New York Metro Super Lawyers

Sixth Super Lawyers Selection for NMB Partner

Jonathan Nelson was selected to the 2017 edition of Super Lawyers for Business Litigation in the “New York Metro” area. This is the sixth consecutive year Mr. Nelson has been honored by the publication. Super Lawyers is a rating service of outstanding lawyers who have attained a high-degree of professional achievement. Candidates are evaluated on 12 indicators, including peer evaluation and independent research, with the final list comprised of the top 5% of lawyers in the state.

Click here to see Mr. Nelson’s profile: http://bit.ly/2yv7OjO

NMB Partners Published in the New York Law Journal

Tax, Employment and Title VII provisions for Religious Institutions

Barry Black and John B. Madden authored an “expert analysis” article for the New York Law Journal discussing several anomalies in which the law treats religious institutions and clergy uniquely, including certain tax exemptions, employment status of clergy and Title VII provisions.

Click here to view the full text of the article“Exceptions and Exclusions Benefit Religious Institutions and Clergy.”

NYS Supreme Court Sides with Nelson Madden Black Client

In Important Decision involving intra-congregational disputes, NYS Supreme Court Sides with Nelson Madden Black Client

Fresh off the press: in National Church of God of Brooklyn et al. v. Carrington et al., the New York State Supreme Court, County of Kings, sided with Nelson Madden Black client by prohibiting the church’s terminated pastor from holding himself out to be its pastor and his newly “elected” board from holding itself out to be the church’s board, or from transferring interest in the church’s property or preventing church members from accessing the building.

Who is a Minister . . . Again!

Who is a Minister . . . Again!

We reported just one week ago on Grussgott v. Milwaukee Jewish Day Sch. Inc.  applying the SCOTUS ruling in Hosanna-Tabor Evangelical Lutheran Church & Sch. v. E.E.O.C, in concluding that a Hebrew School teacher was included in the “ministerial exception.”  Now another major decision comes down, this time from the Second Circuit Court of Appeals, finding that a Roman Catholic elementary school principal is with in the ministerial exception.  In  Fratello v. Archdiocese of N.Y. (July 14, 2017), the Court determined that “although Fratello’s formal title was not inherently religious, the record makes clear that she held herself out as a spiritual leader of the School and performed many important religious functions to advance its Roman Catholic mission. The ministerial exception thus bars her employment-discrimination claims because she was a minister within the meaning of the exception.”

More to come, for sure!

Who is a Minister?

In Hosanna-Tabor Evangelical Lutheran Church & Sch. v. E.E.O.C, 565 U.S. 171, 188, 132 S. Ct. 694, 181 L. Ed. 2d 650 (2012), SCOTUS concretized the Ministerial Exception, which exempts religious institutions from the applicability of federal employment discrimination statutes in the face of First Amendment concerns. The Court broadened the“minister” category to include those whose work is part of the institution’s religious mission, not necessarily involving ordination. The Court did not, however, set forth specific parameters to help determine exactly who is a minister.

A recent decision in the United States District Court for the Eastern District of Wisconsin, Grussgott v. Milwaukee Jewish Day Sch. Inc., 16-CV-1245-JPS, 2017 U.S. Dist. LEXIS 82010, helps clarify Hosanna Tabor’s scope. This case, unlike Hosanna Tabor, involved a Hebrew School teacher, not known as a “minister” (ordained or otherwise), but whose functions were so tightly connected to the school’s religious mission as to bring her within Hosanna Tabor’s scope. Other courts will surely follow in helping bring more fact-based clarity to this issue.

New York City’s New Freelance Law May Affect Religious Institutions and Ministers.

NYC Freelance Law Affects Religious Institutions

A new law took effect today in New York City.  Designed to protect freelance workers, the Freelance Isn’t Free Act “establishes and enhances protections for freelance workers, specifically the right to: a written contract, timely and full payment, and protection from retaliation.”  The statute’s full text is found here.  Religious institutions that employ freelancers should be aware of the law’s requirements.  Non-employee ministers may be covered by this Act.