Chicago pastor fights atheist lawsuit, nearly $1B tax on churches

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Religious leaders tell court that ending 64-year-old tax exemption will harm churches, mosques, and synagogues nationwide

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Melinda Skea

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WASHINGTON, D.C. – Pastor Chris Butler, a South Side Chicago pastor, was in court today defending his ministry from a discriminatory lawsuit that would impose nearly $1 billion per year in new taxes on churches across the country. In Gaylor v. Mnuchin, an atheist group is suing the IRS to end the parsonage allowance, a 64-year-old federal tax provision that allows churches, mosques, and synagogues to provide faith leaders a tax-free housing allowance to help them live in the communities they serve. The U.S. Court of Appeals for the Seventh Circuit must now decide if the law requires the government to discriminate against religious groups by denying them a tax exemption similar to exemptions used by hundreds of thousands of secular employees.

In 2016 the atheist group Freedom From Religion Foundation (FFRF) sued the IRS, claiming that the parsonage allowance was an illegal establishment of religion and demanding its end. Pastor Chris of Chicago Embassy Church and several other religious leaders who rely on the parsonage allowance, represented by Becket, intervened in the case. In 2017, the district court ruled the parsonage allowance was unconstitutional. Becket appealed to the Seventh Circuit and today argued that the parsonage allowance is fair tax treatment, not a special benefit for faith leaders.

“The tax code treats ministers the same as hundreds of thousands of nonreligious workers who receive tax-exempt housing for their jobs—that’s not special treatment, it’s equal treatment,” said Luke Goodrich, vice president and senior counsel at Becket.Striking down the parsonage allowance would devastate small, low-income houses of worship in our neediest neighborhoods and would cause needless conflict between church and state.

Pastor Chris is the leader of a predominantly African-American congregation, and devotes his life to mentoring at-risk youth, decreasing neighborhood crime, and caring for the homeless in Chicago’s poorest neighborhoods. The church can’t afford to pay Pastor Chris a salary, but it offers him a small housing allowance so he can afford to live near his church and the community he serves. Ending the housing allowance for faith leaders like Pastor Chris would harm poor communities by diverting scarce resources away from essential ministries and even forcing some small churches to close (Learn more in this 3 min. video).

For over 60 years, federal law has recognized that housing allowances like Pastor Chris’s shouldn’t be taxed as income. This is the same tax principle that allows hundreds of thousands of secular workers including teachers, business leaders, and military service to receive tax-free housing for their jobs. It also keeps the IRS from becoming entangled in religious matters. If the parsonage allowance ends, it would impose nearly $1 billion per year in new taxes on churches, making it impossible, particularly for leaders of small and minority faiths, to live in the communities they serve.

“Today I asked the court to protect our ability to serve our South Side Chicago community – our youth, our single mothers, our homeless, our addicted, our lost, and all those who seek a church family,” said Pastor Chris Butler of the Chicago Embassy Church. “I hope the court will keep letting religious leaders like me not only preach from the pulpit, but live among the people we serve.”

Becket represents Pastor Chris Butler and Bishop Edward Peecher of Chicago Embassy Church, Father Patrick Malone of Holy Cross Anglican Church, and the Diocese of Chicago and Mid-America of the Russian Orthodox Church Outside of Russia. A decision in the case is expected early next year.

For more information or to arrange an interview with a Becket attorney, contact Melinda Skea at media@becketlaw.org or 202-349-7224. Interviews can be arranged in English, Chinese, French, German, Portuguese, Russian, and Spanish.

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Becket is a non-profit, public-interest law firm dedicated to protecting the free expression of all religious traditions and has a 100% win-rate before the United States Supreme Court. For over 20 years, it has successfully defended clients of all faiths, including Buddhists, Christians, Jews, Hindus, Muslims, Native Americans, Sikhs, and Zoroastrians (read more here).

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