Clergy Argue Rental Allowance Exclusion Is Constitutional

ANNIE L. GAYLOR, et al.,
Plaintiffs-Appellees,
v.
STEVEN T. MNUCHIN, Secretary of the United States
Department of Treasury, et al.,
Defendants-Appellants,
and
EDWARD PEECHER, et al.,
Intervening Defendants-Appellants,

In the United States Court of Appeals for the Seventh Circuit

On Appeal from the United States District Court
for the Western District of Wisconsin,
No. 3:16-cv-00215, Judge Barbara B. Crabb Presiding

BRIEF OF INTERVENING DEFENDANTS-APPELLANTS

Luke W. Goodrich
Joseph C. Davis
Daniel Ortner
THE BECKET FUND FOR RELIGIOUS LIBERTY
1200 New Hampshire Ave. NW, Suite 700
Washington, D.C. 20036
(202) 955-0095
lgoodrich@becketlaw.org

Counsel for Intervening Defendants-Appellants

DISCLOSURE STATEMENT

(1) The full name of every party that the attorney represents in the case:

(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court:

(3) If the party or amicus is a corporation:

Luke W. Goodrich
Counsel of Record
The Becket Fund For Religious Liberty
1200 New Hampshire Ave. NW
Suite 700
Washington, D.C. 20036
(202) 955-00955
lgoodrich@becketlaw.org

DISCLOSURE STATEMENT

(1) The full name of every party that the attorney represents in the case:

(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court:

(3) If the party or amicus is a corporation:

Joseph C. Davis
The Becket Fund For Religious Liberty
1200 New Hampshire Ave. NW
Suite 700
Washington, D.C. 20036
(202) 955-00955
jdavis@becketlaw.org

DISCLOSURE STATEMENT

(1) The full name of every party that the attorney represents in the case:

(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court:

(3) If the party or amicus is a corporation:

Daniel Ortner
The Becket Fund For Religious Liberty
1200 New Hampshire Ave. NW
Suite 700
Washington, D.C. 20036
(202) 955-00955
dortner@becketlaw.org

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TABLE OF CONTENTS

DISCLOSURE STATEMENTS

TABLE OF AUTHORITIES

STATEMENT CONCERNING ORAL ARGUMENT

JURISDICTIONAL STATEMENT

STATEMENT OF THE ISSUE

INTRODUCTION

STATEMENT OF THE CASE

SUMMARY OF THE ARGUMENT

STANDARD OF REVIEW

ARGUMENT

CONCLUSION

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE

CIRCUIT RULE 30(D) CERTIFICATION

STATUTORY ADDENDUM

APPENDIX TABLE OF CONTENTS

TABLE OF AUTHORITIES

Cases

Adams v. United States, 585 F.2d 1060 (Ct. Cl. 1978)

Alford v. United States, 116 F.3d 334 (8th Cir. 1997)

Anderson v. United States, 16 Cl. Ct. 530 (1989)

Ariz. Christian Sch. Tuition Org. v. Winn, 563 U.S. 125 (2011)

Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221 (1987)

Cohen v. City of Des Plaines, 8 F.3d 484 (7th Cir. 1993)

Colo. Christian Univ. v. Weaver, 534 F.3d 1245 (10th Cir. 2008)

Comm'r v. Kowalski, 434 U.S. 77 (1977)

Comm'r v. Soliman, 506 U.S. 168 (1993)

Conning v. Busey, 127 F. Supp. 958 (S.D. Ohio 1954)

Corp. of the Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327 (1987)

County of Allegheny v. ACLU, 492 U.S. 573 (1989)

Doe ex rel. Doe v. Elmbrook Sch. Dist., 687 F.3d 840 (7th Cir. 2012)

Dole v. Comm'r, 43 T.C. 697 (1965)

Elmbrook Sch. Dist. v. Doe, 134 S. Ct. 2283 (2014)

Emp't Div. v. Smith, 494 U.S. 872 (1990)

Follett v. McCormick, 321 U.S. 573 (1944)

Fowler v. Rhode Island, 345 U.S. 67 (1953)

Freedom From Religion Found., Inc. v. City of Marshfield, 203 F.3d 487 (7th Cir. 2000)

Freedom From Religion Found., Inc. v. Concord Cmty. Schs., 885 F.3d 1038 (7th Cir. 2018)

Furhmann v. Comm'r, T.C.M. 1977-416 (1977)

Haack v. United States, 75-2 U.S.T.C.

Hamacher v. Comm'r, 94 T.C. 348 (1990)

Hargrove v. Comm'r, T.C. Memo. 2006-159 (2006)

Heyward v. Comm'r, 36 T.C. 739 (1961)

Hobbie v. Unemployment Appeals Comm'n, 480 U.S. 136 (1987)

Hosanna-Tabor Evangelical Lutheran Church and Sch. v. EEOC, 565 U.S. 171 (2012)

Jones v. United States, 60 Ct. Cl. 552 (1925)

Larson v. Valente, 456 U.S. 228 (1982)

Lindeman v. Comm'r, 60 T.C. 609 (1973)

MacColl v. United States, 91 F. Supp. 721 (N.D. Ill. 1950)

McCarthy v. Fuller, 714 F.3d 971 (7th Cir. 2013)

McCreary Cty. v. Am. Civil Liberties Union of Ky., 545 U.S. 844 (2005)

McDonald v. Comm'r, 66 T.C. 223, 1976 WL 3665 (May 5, 1976)

Md. Pennysaver Grp., Inc. v. Comptroller of Treasury, 323 Md. 697, 594 A.2d 1142 (1991)

Medina v. Catholic Health Initiatives, 877 F.3d 1213 (10th Cir. 2017)

Mitchell v. Helms, 530 U.S. 793 (2000)

Mueller v. Allen, 463 U.S. 388 (1983)

Murdock v. Pennsylvania, 319 U.S. 105 (1943)

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992)

NLRB v. SW Gen., Inc., 137 S. Ct. 929 (2017)

Rojas v. Fitch, 127 F.3d 184 (1st Cir. 1997)

Salkov v. Comm'r, 46 T.C. 190 (1966)

Saunders v. Comm'r, 215 F.2d 768 (3d Cir. 1954)

Shelley v. Comm'r, T.C.M. (RIA) 1994-432 (1994)

Sherman ex rel. Sherman v. Koch, 623 F.3d 501 (7th Cir. 2010)

State v. Church of Incarnation, 196 N.W. 802 (1924)

State v. Collector of Jersey City, 24 N.J.L. 108 (Sup. Ct. 1853)

State v. Kittle, 105 S.E. 775 (W. Va. 1921)

Stone v. Comm'r, 32 T.C. 1021 (1959)

Texas Monthly, Inc. v. Bullock, 489 U.S. 1 (1989)

Thomas v. Review Bd., 450 U.S. 707 (1981)

Town of Greece v. Galloway, 134 S. Ct. 1811 (2014)

Trustees of Griswold Coll. v. State, 46 Iowa 275 (1877)

U.S. Jr. Chamber of Commerce v. United States, 334 F.2d 660 (Ct. Cl. 1964)

United States v. Gotcher, 401 F.2d 118 (5th Cir. 1968)

United States v. Seeger, 380 U.S. 163 (1965)

Walz v. Tax Comm'n, 397 U.S. 664 (1970)

Weber v. Comm'r, 103 T.C. 378 (1994)

Williamson v. Comm'r., 22 T.C. 566 (1954)

Williamson v. Comm'r, 224 F.2d 377 (8th Cir. 1955)

Winchell v. United States, 564 F. Supp. 131 (D. Neb. 1983)

Statutes and Constitutional Provisions

26 U.S.C. § 107

26 U.S.C. § 119

26 U.S.C. § 132

26 U.S.C. § 134

26 U.S.C. § 162

26 U.S.C. § 280A

26 U.S.C. § 403

26 U.S.C. § 414

26 U.S.C. § 501

26 U.S.C. § 508

26 U.S.C. § 911

26 U.S.C. § 912

26 U.S.C. § 1401

26 U.S.C. § 1402

26 U.S.C. § 1403

26 U.S.C. § 3121

26 U.S.C. § 3309

26 U.S.C. § 6033

26 U.S.C. § 7611

28 U.S.C. § 1291

28 U.S.C. § 1331

Const. of La. 1898 (as amended 1902), art. 230

1913 Idaho Sess. Laws 175

Iowa Code § 797.1 (1873)

Ky. Const. of 1891, § 176

Laws of the State of Delaware, Section 1, Chapter XCVIII, Vol. 2 (1796)

1860 Me. Laws, ch. 132

Me. Rev. Stat. tit. II, ch. 6, § 6 (1857)

1801 N.Y. Laws 500

Pub. L. No. 107-181, 116 Stat. 583

Pub. Stat. Laws of Conn. tit. 102, § 6 (1821)

Revenue Act, § 32, 28 Stat. 556 (1894)

Wis. Rev. St. § 1038 (1898)

Regulations and Rules

26 C.F.R. 1.911-4

Fed. R. App. P. 4

I.R.S. Priv. Ltr. Rul. 9126063 (June 28, 1991)

I.R.S. Tech. Adv. Mem. 98-25-002 (June 19, 1998)

G.C.M. 14836, 14-1 C.B. 45-46 (1935)

G.C.M. 39874 (May 4, 1992)

O.D. 11, 1 C.B. 66 (1919)

O.D. 119, 1 C.B. 82 (1919)

O.D. 265, 1 C.B. 71 (1919)

O.D. 814, 4 C.B. 84-85 (1921)

O.D. 862, 4 C.B. 85 (1921)

O.D. 915, 4 C.B. 85-86 (1921)

Rev. Rul. 75-540, 1975-2 C.B. 53

Rev. Rul. 90-64, 1990-2 C.B. 35

T.D. 2079, 16 Treas. Dec. Int. Rev. 249 (1914)

T.D. 2992, 2 C.B. 76 (1920)

Treas. Reg. 45, art. 33 (1920 ed.)

Treas. Reg. § 1.119-1

Treas. Reg. § 1.132-5

Treas. Reg. § 1.162-2

Treas. Reg § 1.502-1

Legislative Materials

99 Cong. Rec. (1953)

148 Cong. Rec. (Apr. 16, 2002)

Clergy Housing Allowance Clarification Act, H.R. 4156, 107th Cong. § 2(a)(5) (as introduced Apr. 10, 2002)

H.R. Rep. No. 83-1337 (1954)

S. Rep. No. 83-1622 (1954)

Staff of the Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2016-2020 (Comm. Print 2017)

Other Authorities

1983 Code of Canon Law, cc.1001, 1004

Alex S. Jones, The Media Business: Newspapers See a Threat of Spreading Sales Taxes, N.Y. Times, Aug. 19, 1991

Appendix A of Supplement Containing Appendices to Brief of United States Catholic Conference as Amicus Curiae, Walz v. Tax Comm'n, 397 U.S. 664 (1970) (No. 135)

Arvo Van Alstyne, Tax Exemption of Church Property, 20 Ohio St. L.J. 461 (1959)

Boris I. Bittker, Churches, Taxes and the Constitution, 78 Yale L.J. 1285 (1969)

Chester James Antieau et al., Religion Under the State Constitutions (1965)

Department of Defense, Military Compensation Background Papers 875-76 (7th Ed. Nov. 2011)

Edward A. Zelinsky, Taxing the Church: Religion, Exemptions, Entanglement, and the Constitution (2017)

Evelyn Brody, Property-Tax Exemption for Charities: Mapping the Battlefield (2002)

Internal Revenue Manual § 7.25.3.6.5 (Feb. 23, 1999)

IRS, Tax Topic 511 — Business Travel Expenses, https://www.irs.gov/taxtopics/tc511

J. Patrick McDavitt, Dissection of a Malignancy: The Convenience of the Employer Doctrine, 44 Notre Dame Lawyer 1104 (1969)

Jane Zhao, Nights on the Museum: Should Free Housing Provided to Museum Directors Also be Tax-Free?, 62 Syracuse L. Rev. 427 (2012)

Martha M. Legg, Excluding Parsonages from Taxation: Declaring a Victor in the Duel Between Caesar and the First Amendment, 10 Geo. J.L. & Pub. Pol'y 269 (2012)

Michael McConnell, Establishment and Disestablishment at the Founding, Part 1: Establishment of Religion, 44 Wm. & Mary L. Rev. 2105 (2003)

M. L. Cross, Annotation, Exclusion of Meals and Lodging from Gross Income Under “Convenience of the Employer” Rule, 84 A.L.R.2d 1215 (1962)

Nina J. Crimm & Laurence H. Winer, Politics, Taxes, and the Pulpit: Provocative First Amendment Conflicts (2011)

Philip Schaff, Church and State in the United States (1844)

1 Timothy 3:2

Titus 1:8

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STATEMENT CONCERNING ORAL ARGUMENT

Intervenors respectfully request oral argument. The district court enjoined a 64-year-old act of Congress that has tremendous practical importance to churches and ministers across the country. The court's decision also raises important questions about the interpretation of the First Amendment's Establishment Clause. Oral argument will aid the Court in considering these issues.

JURISDICTIONAL STATEMENT

The district court had federal question jurisdiction under 28 U.S.C. § 1331 because Plaintiffs challenged the constitutionality of a federal statute, 26 U.S.C. § 107(2), under the Establishment and Equal Protection Clauses of the federal Constitution. This Court has jurisdiction under 28 U.S.C. § 1291 because this is a timely appeal from a final judgment disposing of all parties' claims. The district court entered final judgment on December 15, 2017. App.53.¹ Intervenors filed their notice of appeal on February 8, 2018, within the 60 days allowed by Fed. R. App. P. 4(a)(1)(B). Dkt. 97.

STATEMENT OF THE ISSUE

For over 100 years, Congress and the IRS have recognized the convenience-of-the-employer doctrine, which allows employees to exclude housing benefits from their income if the benefits are provided for “the convenience of the employer” rather than the personal benefit of the employee. Congress has applied this doctrine to hundreds of thousands of nonreligious employees at a value of over $10 billion every year. It has also applied the doctrine to ministers. Specifically, over sixty years ago, Congress adopted 26 U.S.C. § 107, which applies the convenience-of-the-employer doctrine to ministers in a way that reduces government entanglement in religious questions and discrimination among religious groups. The issue in this case is:

Whether Congress violated the Establishment Clause by adopting § 107 to apply the convenience-of-the-employer doctrine to ministers in a way that reduces government entanglement in religious questions and discrimination among religious groups.

INTRODUCTION

Home is where the heart is. But home can also be an essential part of a job. That is why, for over 100 years, the IRS and Congress have recognized the convenience-of-the-employer doctrine.

The convenience-of-the-employer doctrine says that if an employer provides an employee with housing for the personal benefit of an employee, it should be treated as income; but if the housing is provided for the “convenience of the employer” — that is, as “part of the maintenance of the [employer's] general enterprise” — it is not income. Jones v. United States, 60 Ct. Cl. 552, 575 (1925). This doctrine has existed since the dawn of the federal income tax and has been applied to a dizzying array of workers — hotel managers, nurses, fishermen, construction workers, apartment caretakers, museum directors, oil executives, non-profit presidents, teachers, school superintendents, diplomats, peace corps volunteers, state governors, prison wardens, soldiers, and many more.

It has also been applied to ministers.² Many ministers, including Intervenors, use their home as an essential part of their ministry. Their home is where they counsel grieving parishioners, prepare sermons, and host Bible studies. It is where they hear confessions, host missionaries, and welcome new members. It is where they make themselves available at all hours of the day or night. And for congregations that lack their own church building — like several Intervenors — the minister's home is often the only place where the congregation can meet.

But deciding whether a home is used “for the convenience of the employer” is no easy task. It requires a fact-intensive inquiry into the nature of the employer's business, the relationship between the employer and employee, and the way the employee uses the home for the job. For that reason, Congress has developed a series of rules to help the IRS implement the convenience-of-the-employer doctrine. There is a default rule — § 119(a)(2) — which allows any employee to receive tax-exempt housing if certain fact-intensive conditions are met. Then there are several bright-line rules that relax these conditions for various types of employees — like employees of educational institutions (§ 119(d)), employees in foreign camps (§ 119(c)), members of the uniformed services (§ 134), employees living abroad (§§ 911-12), and employees away from home on business (§§ 162 & 132). For these categories of employees, Congress determined that a bright-line rule was preferable to a fact-intensive, multi-factor test.

Congress adopted the same approach for ministers. In 1921, it adopted what is now 26 U.S.C. § 107(1), which exempts church-provided homes — sometimes called “parsonages” — from income tax. This bright-line rule ensures that the IRS does not become entangled in second-guessing the nature of a church's ministry and the way the minister uses the home. Then, in 1954, Congress adopted 26 U.S.C. § 107(2), which exempts church-provided housing allowances. Section 107(2) arose because, by the 1950s, more ministers were receiving housing allowances instead of church-provided homes — raising the question whether these ministers should be taxed more heavily than others. Several federal courts ruled that they shouldn't be. E.g., MacColl v. United States, 91 F. Supp. 721 (N.D. Ill. 1950); Conning v. Busey, 127 F. Supp. 958 (S.D. Ohio 1954). So Congress enacted § 107(2) to codify these decisions and eliminate discrimination among ministers.

Over the last 64 years, § 107 has served the country well. It has allowed the IRS to apply the convenience-of-the-employer doctrine fairly to religious and nonreligious employees alike, and it has kept the IRS from becoming entangled in religious questions or discriminating among religious groups.

Until now. The decision below strikes down § 107(2), upsetting over a century of history and long-settled tax law. It also misapplies basic Establishment Clause precedent. According to the district court, § 107(2) “violates the establishment clause because it provides a benefit to religious persons and no one else.” App.2. But the district court was mistaken. Section 107(2) takes the longstanding convenience-of-the-employer doctrine, which benefits hundreds of thousands of nonreligious employees every year, and applies it to ministers in a way that reduces entanglement and discrimination. Under controlling Supreme Court precedent, this is not only constitutionally permissible but desirable.

The district court's decision would also have devastating practical effects on ministers and communities across the country. For over a century, churches and ministers have relied on these rules to start ministries, purchase property, and help the communities they serve. The decision below threatens to impose a massive new tax burden on churches and ministers, forcing them to curtail their ministries, relocate, and in some cases shut down. The hardest hit would be the communities most in need, especially inner-city communities like the ones Intervenors serve. Fortunately, the Establishment Clause does not require this result.

STATEMENT OF THE CASE

Intervenors adopt the Government's Statement of the Case with respect to its description of Plaintiffs (at 9-11) and the procedural history (at 3-4, 12-17). To assist the Court, however, Intervenors offer a more comprehensive background of § 107 and its relation to the convenience-of-the-employer doctrine.

I. The Convenience-of-the-Employer Doctrine

Congress enacted the federal income tax in 1913, shortly after ratification of the Sixteenth Amendment. The Bureau of Internal Revenue then began grappling with the definition of “income,” particularly as applied to employer-provided benefits like meals and lodging. In a series of administrative rulings beginning in 1914, the Bureau developed what is now called the “convenience-of-the-employer doctrine.” See generally J. Patrick McDavitt, Dissection of a Malignancy: The Convenience of the Employer Doctrine, 44 Notre Dame Lawyer 1104 (1969) (“McDavitt”).

The convenience-of-the-employer doctrine flows from a basic principle about the nature of income — that for something to qualify as income, there “must be an economic gain, and this gain must primarily benefit the taxpayer personally.” United States v. Gotcher, 401 F.2d 118, 121 (5th Cir. 1968). For example, a worker might receive any number of things that simultaneously benefit her and her employer's business — such as meals, travel, or office furnishings. But if these things are primarily intended to further the business of the employer, rather than compensate the employee, they are not treated as income. See Treas. Reg. § 1.132-5(a)(1)(v); Treas. Reg. § 1.162-2(a)-(b).

The same principle applies to lodging. Ordinarily, when an employee receives lodging, it doesn't benefit the employer other than by compensating the employee, so the value of the lodging is treated as income. But sometimes, the lodging is provided primarily for the convenience of the employer. Common examples include hotel managers who must live at the hotel, military officers who must live in the barracks, or commercial fishermen who must live on a ship. See M. L. Cross, Annotation, Exclusion of Meals and Lodging from Gross Income Under “Convenience of the Employer” Rule, 84 A.L.R.2d 1215 (1962). For these workers, the lodging is a component of their job. As the first court decision on the doctrine said, it is “part of the maintenance of the [employer's] general enterprise,” not “part of the individual income of the laborer.” Jones, 60 Ct. Cl. at 575. Excluding such lodging from income does not confer a special benefit; rather, it avoids taxing workers unjustly. McDavitt at 1105.

The convenience-of-the-employer doctrine was first recognized by administrative ruling in 1914, in a case involving in-kind lodging provided to government employees. Id. (citing T.D. 2079, 16 Treas. Dec. Int. Rev. 249 (1914)). But the doctrine quickly expanded to cash housing allowances and private employees. In 1919, it was extended to cash living allowances provided to an American Red Cross volunteer³ and a clergyman under a vow of poverty.⁴ Shortly thereafter, it was extended to lodging for seamen,⁵ workers living in camps,⁶ employees in fishing and canning,⁷ and hospital employees.⁸ Then, in 1920, the Bureau issued a regulation applying the doctrine to all employees who received “living quarters . . . for the convenience of the employer.”⁹

In 1921, however, the Bureau refused to extend the convenience-of-the-employer doctrine to a minister who lived in a parsonage. In a one-sentence ruling, the Bureau said that “the fair rental value of the parsonage is considered a part of his compensation for services rendered and as such should be reported as income.” O.D. 862, 4 C.B. 85 (1921).

Congress immediately responded. Within months, it passed a statute excluding from gross income the rental value of a minister's church-provided “dwelling house.” Martha M. Legg, Excluding Parsonages from Taxation: Declaring a Victor in the Duel Between Caesar and the First Amendment, 10 Geo. J.L. & Pub. Pol'y 269, 275 (2012) (quoting then-§ 213(b)(11)). There was no recorded discussion or debate over this provision. It has generally been viewed as an application of “the convenience of the employer rule,” Williamson v. Comm'r, 224 F.2d 377, 379-80 (8th Cir. 1955), and a means of “reduc[ing] the administrative burden of applying [the rule] to clergymen.” Boris I. Bittker, Churches, Taxes and the Constitution, 78 Yale L.J. 1285, 1292 n.18 (1969).

II. Codification in the Tax Code

Throughout the 1930s and 1940s, the IRS and courts developed the convenience-of-the-employer doctrine on an ad hoc — and sometimes conflicting — basis. Comm'r v. Kowalski, 434 U.S. 77, 90 (1977). So when Congress overhauled the tax code in 1954, it sought to “end the confusion” over the convenience-of-the-employer doctrine by codifying it in the tax code. Id. (quoting legislative history).

The main provision codifying the doctrine is § 119(a)(2). This provision excludes the value of lodging from gross income for any employee — secular or religious — if five conditions are met. The lodging must be furnished (1) by an employer to an employee; (2) in kind; (3) on the business premises of the employer; (4) for the convenience of the employer; and (5) as a condition of employment. Treas. Reg. § 1.119-1(b). A wide variety of employees have qualified for this exemption, including construction workers,¹⁰ museum directors,¹¹ an oil executive living in Tokyo,¹² the president of the Junior Chamber of Commerce,¹³ a state governor,¹⁴ a rural school system superintendent,¹⁵ a prison warden,¹⁶ and many others.

Other Code provisions relax § 119(a)(2)'s requirements for certain types of employees. For example, § 119(c) eliminates the “business premises” and “condition of employment” factor for workers who receive “lodging in a camp located in a foreign country.” Compare § 119(c) with § 119(a)(2). The rationale is that, when a camp is in a “remote area where satisfactory housing is not available on the open market,” § 119(c)(2)(A), the lodging is per se for the convenience of the employer.

Another per se rule applies to employees of educational institutions — such as college presidents, university faculty, or even elementary-school teachers. Under § 119(d), such employees can exclude a portion of the fair rental value of “qualified campus lodging,” even if they cannot satisfy any of the elements of the convenience-of-the-employer doctrine. All they need to show is that the lodging is “(A) located on, or in the proximity of, a campus of the educational institution, and (B) furnished to the employee . . . by or on behalf of such institution for use as a residence.” Id. § 119(d)(2)-(3).

An even broader per se rule is § 134, which applies to members of the military. Under this provision, “any member or former member of the uniformed services” can receive tax-exempt housing benefits — including both in-kind lodging and cash allowances — regardless of whether the requirements of § 119(a)(2) are satisfied. 26 U.S.C. § 134. This section codifies the reasoning of the first court decision applying the convenience-of-the-employer doctrine, which emphasized that a service member's duties “require his physical presence at his post or station; his service is continuous day and night; [and] his movements are governed by orders and commands.” Jones, 60 Ct. Cl. at 569. Under § 134, however, every service member is presumed to face these burdens on housing, whether living at home or abroad, on base or off, active duty or retired.

Nor is this per se rule limited to the military. Section 912 extends the same treatment to enumerated housing allowances of all government employees living abroad — including Peace Corps volunteers, CIA operatives, diplomats and consular officials, school teachers, and others. 26 U.S.C. § 912. Early IRS decisions allowed some of these employees to exclude housing allowances when they were “subject to transfer whenever the interests of the service require,” were “available for duty at all hours,” and needed “suitable and appropriate” quarters for conducting their work. G.C.M. 14836, 14-1 C.B. 45-46 (1935) (customs agents); McDavitt at 1108 & n.40 (collecting decisions). But § 912 adopts a per se rule that all such benefits “are inherently for the convenience of the government.” McDavitt at 1108.

Section 911 extends another per se rule to any “citizen or resident of the United States” residing in a foreign country. Such persons need not satisfy any of the requirements of § 119(a)(2); living abroad is enough. They can exclude housing costs above a certain level — whether housing is provided in-kind or through a cash allowance. 26 C.F.R. 1.911-4(b)(1). The rationale is that, if an individual is working abroad, she likely has significant extra housing costs that reduce her real income compared with a domestic worker. But a foreign worker need not prove that these considerations apply in her individual case.

Finally, under §§ 162 and 132, anyone posted away from her normal workplace for one year or less is not taxed on cash housing allowances or in-kind lodging provided by the employer. 26 U.S.C. §§ 162(a)(2), 132(a)(3), (d). Again, there is no need to show that the lodging is used for work; the mere fact that she has moved away temporarily, while still maintaining her permanent home and primary business location, is enough to show that the temporary lodging is for the employer's benefit. IRS, Tax Topic 511 — Business Travel Expenses, https://www.irs.gov/taxtopics/tc511.

The following chart summarizes these exemptions:

Tax Treatment of Housing Benefits

Sec.	Who is eligible?	Form?	What must be shown?
119(a)	All employees, secular or religious	In-kind	Lodging is furnished (1) by employer for employee; (2) in kind; (3) on business premises of employer; (4) for convenience of employer; and (5) as a condition of employment.
119(c)	Any employee living in a foreign camp	In-kind	Lodging is furnished (1) by employer for employee; (2) in kind; (3) as near as practicable to place of service; (4) in a remote area with no satisfactory housing; and (5) not available to the public and normally accommodates 10 or more employees.
119(d)	Any employee of an educational institution	In-kind	Lodging is furnished (1) by an educational institution (2) on or near campus.
134	Any member or former member of the uniformed services	In-kind & cash	Lodging or allowance is received “by reason of such member's status or service as a member of such uniformed services.”
912	Any government employee living overseas	In-kind & cash	Lodging or allowance is on a list of allowances authorized by Congress or regulation.
911	Any citizen or resident living abroad	In-kind & cash	Taxpayer has a “tax home” abroad and approximately one year of overseas residence.
162 & 132	Anyone away from home for business	In-kind & cash	Temporary post is less than one year; taxpayer incurs expenses in pursuit of business away from tax home.

Congress thus has enacted an array of tax exemptions designed to relieve workers who face unique, job-related housing requirements. The default rule is § 119(a)(2), which establishes a fact-intensive standard requiring all employees to demonstrate that their lodging is provided for the convenience of their employer. But Congress has relaxed this default rule in a variety of situations where the type of work, the burdens on housing, or a non-commercial working relationship make it likely that the lodging was intended to benefit the employer.

III. Section 107

Congress followed the same pattern in applying the convenience-of-the-employer doctrine to ministers. As noted above, in 1921, Congress adopted a per se rule exempting church-owned parsonages. By the 1950s, however, fewer ministers lived in church-owned parsonages, and more were receiving cash housing allowances. A.22-23; A.25. This raised the question of whether cash housing allowances should be treated differently from church-owned parsonages.

The first court decision involving the convenience-of-the-employer doctrine rejected any distinction between cash allowances and in-kind housing. Jones, 60 Ct. Cl. at 571. So did early IRS rulings on charitable volunteers. O.D. 11, 1 C.B. 66 (1919); O.D. 119, 1 C.B. 82 (1919). And so did early commentators. See McDavitt at 1132-33, 1138. They reasoned that distinguishing between cash and in-kind housing benefits was “artificial and formalistic”; what mattered is whether the benefits were provided for the convenience of the employer. Id.

Thus, in the 1950s, several ministers challenged the IRS's attempt to limit the parsonage allowance to in-kind housing. Several federal courts ruled in their favor, concluding that cash housing allowances should be treated no differently than in-kind parsonages. MacColl v. United States, 91 F. Supp. 721 (N.D. Ill. 1950); Conning v. Busey, 127 F. Supp. 958 (S.D. Ohio 1954); Williamson v. Comm'r, 224 F.2d 377 (8th Cir. 1955). As the Eighth Circuit explained, “the rationale of the [convenience-of-the-employer] rule” applies regardless whether the items “are furnished in kind or cash i[s] paid in lieu thereof.” Williamson, 224 F.2d at 379 (citing Jones, 50 Ct. Cl. 552). Accordingly, these courts found “no reason to assume any legislative intent to split hairs,” given the lack of any “distinction of substance between the two common methods of providing a minister with a home.” Williamson v. Comm'r., 22 T.C. 566, 570 (1954) (Opper, J., dissenting); accord Williamson, 224 F.2d at 381.

In response to these court decisions, Congress in 1954 enacted 26 U.S.C. § 107. Section 107(1) carries forward the in-kind parsonage allowance originally enacted in 1921. Section 107(2) codifies the federal court decisions requiring the IRS to treat in-kind parsonages and housing allowances alike. In the legislative history, Congress recognized that, in addition to codifying the federal court decisions, this equal treatment of in-kind parsonages and cash housing allowances was necessary to prevent discrimination against smaller, newer, and poorer churches. H.R. Rep. No. 83-1337, at 4040 (1954); S. Rep. No. 83-1622, at 4646 (1954). As one proponent explained, an exemption covering only in-kind parsonages was “discriminatory among our clergy.” 99 Cong. Rec. A5372-73 (1953). Expanding the exemption to include cash allowances would “remove . . . inequity and permit all clergymen to” be treated alike. Id.

In 2002, Congress further amended § 107(2) to clarify that the exclusion was limited to the fair rental value of the parsonage. Pub. L. No. 107-181, 116 Stat. 583. In so doing, Congress emphasized that § 107 is “similar to other housing provisions in the Tax Code offered to workers who locate in a particular area for the convenience of their employers.” 148 Cong. Rec. 4670 (Apr. 16, 2002). But it avoids entangling “inquiries by the government into the relationship between clergy and their respective churches.” Clergy Housing Allowance Clarification Act, H.R. 4156, 107th Cong. § 2(a)(5) (as introduced Apr. 10, 2002). It also seeks to “accommodate the differing governance structures, practices, traditions, and other characteristics of churches through tax policies that strive to be neutral with respect to such differences.” Id. § 2(a)(4).

In keeping with these goals, § 107 is interpreted neutrally to apply to “ministers” from all religious traditions. Salkov v. Comm'r, 46 T.C. 190, 194 (1966) (Jewish cantor). “Religion” is also defined to include faiths that “do not posit the existence of a Supreme Being,” such as “Taoism, Buddhism, and Secular Humanism.” Internal Revenue Manual § 7.25.3.6.5(2) (Feb. 23, 1999) (citing United States v. Seeger, 380 U.S. 163 (1965)). Nevertheless, as shown in the following chart, § 107 accounts for only a small fraction of exemptions claimed under the convenience-of-the-employer doctrine:¹⁷

IV. Intervenors

Intervenors are ministers, churches, and a diocese that would be harmed by the invalidation of § 107(2). Bishop Ed Peecher is the founding pastor of Chicago Embassy Church on the South Side of Chicago; Pastor Chris Butler is its current pastor. A.73; A.109. Father Patrick Malone is the rector of Holy Cross Anglican Church in Waukesha, Wisconsin. A.81. The Diocese of Chicago and Mid-America of the Russian Orthodox Church Outside of Russia (“Diocese”) is a Russian Orthodox diocese headquartered in Chicago that includes twelve parishes within this Circuit. A.89.

Bishop Ed, Pastor Chris, Father Malone, and most of the Diocese's priests receive housing allowances excludible under § 107(2) to enable them to carry out their ministries. A.106, A.111, A.85, A.93. For each of them, their home is an essential component of their job.

For Pastor Chris, because Chicago Embassy lacks its own church building, many “church meetings — leadership gatherings, Bible study, social events, and spiritual counseling — often take place in [his] own home.” A.111. Further, Pastor Chris must meet the “spiritual and temporal needs” of church members when they “are ill or need immediate pastoral care,” including “at irregular hours or on very short notice.” Id. Thus, it is “critical that [he] live near the church and the community that [he] serve[s].” Id.

Father Malone's church likewise lacks its own church building, so Father Malone's “home is an important center of spiritual life in the parish.” A.100. Aside from Sunday worship, most church meetings take place in his home, including weekly morning and evening prayer services and weekday communion services. Id. Father Malone also routinely hosts parishioners in his home for Bible studies or because a parishioner is “in a spiritual crisis and in need of counsel.” Id. Because of his home's extensive role in church services, and because he must be available “at any time, day or night,” it is “extremely important for” Father Malone to live near the congregation. A.84-85.

The Diocese's priests also “use their homes extensively in their pastoral ministry,” hosting parishioners for individual counseling and parish events and often “provid[ing] temporary lodging to church members in transition, guest speakers, missionaries, and other travelers with a connection to the church.” A.103-104. The Diocese's priests must perform numerous divine services per week, act as caretakers for the parish's church buildings, and “counsel their flocks and visit the sick, regardless of the day of the week or time of day or night.” A.91-92; A.103. These duties make “being a priest” in the Diocese “essentially a 24/7 job” and require the priest to live near the church building and parishioners. A.91-93; A.103-104. Church regulations also require priests “to live within the geographic boundaries of their parishes.” A.92.

If § 107(2) is struck down, each Intervenor will be harmed. Chicago Embassy, Holy Cross Anglican, and many parishes within the Diocese cannot “afford to increase the[ir ministers'] compensation to offset the additional tax,” A.94-95, so they would have to cut back on ministries, A.112, or, in the case of Holy Cross Anglican, consider “fold[ing]” altogether. A.86. Pastor Chris, Father Malone, and many Diocesan priests could not bear the increased taxes themselves without taking on additional secular work at the expense of their ministries. A.112; A.86; A.94-95.

On January 19, 2017, the district court granted Intervenors' request to participate in this case, recognizing that “no group of people face more to lose if plaintiffs succeed than ministers such as” Intervenors. Dkt. 35 at 2.

SUMMARY OF THE ARGUMENT

Section 107 is a logical adaptation of the convenience-of-the-employer doctrine to ministers, not an establishment of religion. As such, it is constitutional under controlling Supreme Court precedent.

I. First, § 107 is constitutional under the leading decision on tax exemptions: Walz. There, the Supreme Court recognized a distinction between tax exemptions and direct transfers of government revenue, concluding that tax exemptions for religious groups are generally constitutional — particularly when they comport with historical practice. Here, § 107 fits easily within the general rule of Walz, because it reduces entanglement between church and state and is supported by longstanding historical practice.

II. Second, § 107 is constitutional under Texas Monthly. There, the Supreme Court recognized an exception to Walz for tax exemptions that are exclusive to religious groups, further no secular purpose, and provide preferential support for the communication of religious messages. Here, however, § 107 does not stand alone. Rather, Congress has granted exemptions to hundreds of thousands of secular employees under the convenience-of-the-employer doctrine. Section 107 simply applies that broad, preexisting exemption to ministers in a way that reduces entanglement and discrimination. As such, it is constitutional under any interpretation of Texas Monthly.

III. Third, § 107 is constitutional under Lemon. It has the secular purpose and effect of ensuring fair treatment of ministers' housing costs under the convenience-of-the-employer doctrine, reducing entanglement between church and state, and eliminating discrimination among religions. This sends a message of neutrality and non-entanglement toward religion, not endorsement.

IV. Finally, the district court's mistaken interpretation of the Establishment Clause threatens numerous state and federal tax provisions designed to reduce entanglement and discrimination. These laws show that, under the Establishment Clause, it is not only permissible for the government to consider the unique constitutional difficulties presented by the taxation of churches and ministers, but also desirable.

STANDARD OF REVIEW

This Court reviews the district court's grant of summary judgment de novo. Freedom From Religion Found., Inc. v. City of Marshfield, 203 F.3d 487, 490 (7th Cir. 2000).

ARGUMENT

The Supreme Court has employed various Establishment Clause “tests.” Sometimes the Court has applied the Lemon test, which asks whether a law “(1) lacks a legitimate secular purpose; (2) has the primary effect of advancing or inhibiting religion; or (3) fosters an excessive entanglement with religion.” Doe ex rel. Doe v. Elmbrook Sch. Dist., 687 F.3d 840, 849 (7th Cir. 2012). More recently, the Court has abandoned the Lemon test in favor of a historical approach. Town of Greece v. Galloway, 134 S. Ct. 1811 (2014); Elmbrook Sch. Dist. v. Doe, 134 S. Ct. 2283, 2284 (2014) (Scalia, J., dissenting from denial of certiorari) (“Town of Greece abandoned the antiquated 'endorsement test'”). In the tax context, the Court has not applied Lemon, but has instead focused on the history of the Establishment Clause, the nuances of the tax code, and principles specific to the tax context. Walz v. Tax Comm'n, 397 U.S. 664, 675-680 (1970); Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 11-13 (1989). Accordingly, in this brief, we first show why § 107 is constitutional under the Supreme Court's leading tax cases — Walz and Texas Monthly. We then show why it also constitutional under Lemon.

I. Section 107 is constitutional under Walz.

A. Walz recognizes a distinction between transfers of government revenue and tax exemptions.

The Supreme Court has long distinguished between laws that affirmatively assist religious organizations and laws that merely exempt them from government-imposed burdens. Affirmatively assisting religious organizations — such as by directly funding them — may be unconstitutional if the assistance is not neutral or violates other limitations. See, e.g., Mitchell v. Helms, 530 U.S. 793, 808-836 (2000). But lifting government-imposed burdens from religious organizations — such as by exempting them from certain taxes or regulation — is often permissible and sometimes constitutionally required. Hobbie v. Unemployment Appeals Comm'n, 480 U.S. 136, 144-45 (1987); Corp. of the Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327, 335 (1987).

The Supreme Court first recognized this distinction in the tax context in Walz. There, a taxpayer challenged New York's property tax exemptions for churches, arguing that the exemptions “indirectly require[d] [him] to make a contribution to religious bodies.” 397 U.S. at 666-67. But in a 7-1 ruling, the Supreme Court disagreed.

Although the Court noted that the government granted property tax exemptions to a “broad class” of nonprofits, that was not the basis for the decision. Id. at 673. Instead, the Court grounded its decision on the distinction between situations where the government “transfer[s] part of its revenue to churches,” and where the government merely offers “a tax exemption.” 397 U.S. at 675 (emphasis added). Although transfers and exemptions both provide “economic assistance” to churches, they do so “in fundamentally different ways.” Id. at 690 (Brennan, J., concurring). A revenue transfer “forcibly diverts the income of both believers and nonbelievers to churches.” Id. at 691. But a tax exemption simply “refrains from diverting [the church's income] to [the state's] own uses.” Id. In fact, a tax exemption actually reduces entanglement between church and state by eliminating the problem of “tax valuation of church property, tax liens, tax foreclosures, and the direct confrontations and conflicts [between church and state] that follow in the train of those legal processes.” Id. at 674. Thus, the Court held that “[t]here is no genuine nexus between tax exemption and establishment of religion.” Id. at 675.

The Court also grounded its decision on “more than a century of our history and uninterrupted practice,” which showed “that federal or state grants of tax exemption to churches were not a violation of the Religion Clauses of the First Amendment.” Id. at 680. This “unbroken practice,” the Court said, could not “be lightly cast aside.” Id. at 678; see also id. at 681 (“History is particularly compelling in the present case.”) (Brennan, J., concurring). Thus, Walz teaches that tax exemptions, when they are consistent with historical practice, are typically constitutional.

The Supreme Court's more recent Establishment Clause cases confirm this principle. In Arizona Christian School Tuition Organization v. Winn, the Court considered a tax credit allowing taxpayers to receive dollar-for-dollar tax credits for donations made to school tuition organizations. 563 U.S. 125, 130 (2011). The school tuition organizations then provided scholarships to students attending private schools, many of which were religious. Id. at 129. Plaintiffs argued that a law diverting nearly $350 million in tax revenue primarily to religious schools violated the Establishment Clause. Id. at 147 (Kagan, J., dissenting).

But the Supreme Court held that plaintiffs had suffered no cognizable injury under the Establishment Clause. Drawing on “the history of the Establishment Clause,” the Court emphasized that the “specific evil” targeted by the Founders was the “extrac[ting] and spen[ding] [of] a conscientious dissenter's funds in service of an establishment” — or, as Madison put it, the forced contribution of even “three pence only of his property.” Id. at 140-42. When the government imposes a tax and transfers the revenue to a church, a dissenter “has in some small measure been made to contribute to an establishment in violation of conscience.” Id. at 142. But “[w]hen the government declines to impose a tax” — by granting an exemption or tax credit — “there is no such connection between dissenting taxpayer and alleged establishment,” and therefore no Establishment Clause injury. Id. In other words, a tax exemption is not the same as a revenue transfer.

Similarly, in Town of Greece, the Supreme Court held that “the Establishment Clause must be interpreted by reference to historical practices and understandings.” 134 S. Ct. at 1819 (emphasis added). Although Town of Greece involved legislative prayer, not a tax exemption, the Court emphasized that basing its analysis on history was not an “exception” for legislative prayer. Id. at 1818. Rather, “[a]ny test the Court adopts” — in any Establishment Clause context — “must acknowledge a practice that was accepted by the Framers.” Id. at 1819. Thus, both Town of Greece and Winn affirm the lesson of Walz — that revenue transfers and tax exemptions are different, and that the Establishment Clause must be interpreted in light of history.

B. Section 107 is consistent with Walz.

Section 107 is constitutional under Walz. First, like Walz, this case involves a tax exemption, not a revenue transfer. The government never “extract[s] and spend[s]” any funds in support of any church, so the “specific evil” prohibited by the Establishment Clause is not implicated. Winn, 563 U.S. at 141-42. Instead, the exemption “restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other.” Walz, 397 U.S. at 676.

Second, § 107 is supported by “more than a century of our history and uninterrupted practice.” Walz, 397 U.S. at 680. At the founding, established churches received two kinds of financial support: “land grants and tithes.” Michael McConnell, Establishment and Disestablishment at the Founding, Part 1: Establishment of Religion, 44 Wm. & Mary L. Rev. 2105, 2147 (2003). Both involved a transfer of money or property from the government or taxpayers to the church, thus “implicat[ing] individual taxpayers in sectarian activities.” Winn, 563 U.S. at 141-42.

Tax exemptions, by contrast, were not considered to be an element of an establishment. They were ubiquitous at the Founding, including in the District of Columbia (which was subject to the Establishment Clause) and in states that never had established churches.¹⁸ And as states with established churches dismantled their establishments, they still retained tax exemptions for houses of worship and other church property. Chester James Antieau et al., Religion Under the State Constitutions 122-24 (1965); see also Walz, 397 U.S. at 682-83 (Brennan, J., concurring) (recounting Virginia and New York examples). In the 19th century, such exemptions remained “so entirely in accord with the public sentiment that they universally prevail[ed].” Evelyn Brody, Property-Tax Exemption for Charities: Mapping the Battlefield 121 (2002) (quoting State v. Collector of Jersey City, 24 N.J.L. 108, 120 (Sup. Ct. 1853)); see also Philip Schaff, Church and State in the United States 66 (1844). Indeed, “all of the 50 States provide for tax exemption of places of worship, most of them doing so by constitutional guarantees.” Walz, 397 U.S. at 676.

Parsonages have likewise been exempt in an unbroken tradition from the Founding era through the adoption of § 107(2).¹⁹ These exemptions were never viewed as establishments. For example, one of the earliest cases addressing a parsonage exemption rejected the notion “that exemption from taxation of church property is the same thing as compelling contribution to churches.” Trustees of Griswold Coll. v. State, 46 Iowa 275, 282 (1877). Instead, “the constitutional prohibition extends only to the levying of tithes, taxes, or other rates for church purposes.” Id. The court further explained that the exemption was justified because the parsonage was “fit and proper to the objects of the church,” which “require[d] frequent removals of pastors from one congregation to another” and “an itinerant ministry” (id. at 280-81) — demonstrating that the convenience-of-the-employer rationale for exempting parsonages was understood long before the enactment of § 107.

The district court concluded that this strong historical support for parsonage exemptions was “not instructive” because it “relates to church property tax exemptions, not to income tax exemptions.” App.40. But that is because there was no income tax at the Founding. When Congress enacted the first income tax in 1894, it exempted religious organizations. Revenue Act, § 32, 28 Stat. 556 (1894). It did the same in 1921, just months after the IRS first tried to tax ministers on the value of their parsonages. Thus, “[f]or so long as federal income taxes have had any potential impact on churches — over [120] years — religious organizations have been expressly exempt.” Walz, 397 U.S. at 676.

More importantly, the district court offered no reason why property- and income-tax exemptions should be treated differently under the Establishment Clause — particularly when they have the same effect on churches and the public fisc. Under Justice Kennedy's historical analysis, which the Court adopted in Town of Greece, the question is not whether there is a perfect match between historical and modern practices; it is whether modern practices pose “no greater potential for an establishment of religion” than historical practices. County of Allegheny v. ACLU, 492 U.S. 573, 670 (1989) (Kennedy, J., concurring in part and dissenting in part); see also Town of Greece, 134 S. Ct. at 1819. Thus, in Town of Greece, the Court upheld a city council's prayer practice based primarily on the practices of Congress and the states. 134 S. Ct. at 1819. And in Walz, the Court upheld a state property-tax exemption with reference to a federal income-tax exemption. 397 U.S. at 677. Here, we have the mirror image: an income-tax exemption that poses “no greater potential for an establishment of religion” than a property-tax exemption. Allegheny, 492 U.S. at 670 (opinion of Kennedy, J.). Accordingly, § 107 is constitutional under Walz.

II. Section 107 is constitutional under Texas Monthly.

Section 107 is also constitutional under Texas Monthly. Texas Monthly recognizes an exception to Walz for tax exemptions that benefit only religious groups, serve no secular purpose, and provide preferential support for the communication of religious messages. But § 107 does none of those things. Rather, § 107 serves the constitutionally laudable goal of applying the convenience-of-the-employer doctrine to ministers in a way that reduces church-state entanglement and discrimination among religions. Thus, it is not only constitutionally permissible but desirable.

A. Texas Monthly forbids exemptions that further no secular purpose and provide preferential support for religious messages.

Texas Monthly involved a state sales tax exemption that applied exclusively to “periodicals” that “consist wholly of writings promulgating the teaching of [a] faith” and “books that consist wholly of writings sacred to a religious faith.” 489 U.S. at 5. The Supreme Court struck down the exemption, but no opinion received more than three votes.

Justice White concluded that the exemption violated the Press Clause because it taxed publications differently based on “the message they carry.” Id. at 25-26. Messages “promulgating the teaching of [a religious faith]” were exempt, while all other messages were taxed. Id. at 25-26. This “content” discrimination “is plainly forbidden by the Press Clause.” Id. (citing Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221 (1987)). Because this is the narrowest ground for the decision, Texas Monthly arguably does not apply beyond the context of differential taxation of the press.

Justices Blackmun and O'Connor agreed that the exemption might not “survive Press Clause scrutiny.” Id. at 27-28. But they also concluded that the exemption violated the Establishment Clause. In their view, because the exemption was confined “exclusively to the sale of religious publications,” it amounted to “preferential support for the communication of religious messages.” Id. at 28.

A three-Justice plurality, authored by Justice Brennan, also found an Establishment Clause violation. Although the plurality acknowledged that tax exemptions granted “exclusively to religious organizations” are permissible if they don't “burden[ ] nonbeneficiaries markedly” and can “reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion,” id. at 15, the plurality believed that “[n]o concrete need to accommodate religious activity ha[d] been shown.” Id. at 18. The plurality also acknowledged that religious tax exemptions are permissible if “grounded in some secular legislative policy that motivate[s] similar tax breaks for nonreligious activities.” Id. at 15 n.4. But the government “d[id] not argue” that a secular legislative policy motivated the exemption in Texas Monthly. Id. Thus, by “target[ing] [the exemption] at writings that promulgate the teachings of religious faiths,” without furthering any “secular legislative policy,” the government had “effectively endorse[d] religious belief.” Id. at 15 & n.4, 17.

In sum, Texas Monthly recognizes an exception to Walz for certain types of tax exemptions. Under Justice White's concurrence — which is the narrowest opinion — an exemption violates the Press Clause if it taxes publications differently based on their content. Id. at 25-26. Under Justice Blackmun's concurrence, an exemption is invalid if it is confined “exclusively” to “religious publications” and results in “preferential support for the communication of religious messages.” Texas Monthly, 489 U.S. at 28. And under Justice Brennan's plurality, an exemption is invalid if it is “targeted at writings that promulgate the teachings of religious faiths,” cannot “reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion,” and is not “grounded in some secular legislative policy that motivate[s] similar tax breaks for nonreligious activities.” Id. at 15 & n.4. As explained below, § 107 is permissible under all of these tests.

B. Section 107 applies the convenience-of-the-employer doctrine to ministers in a way that reduces entanglement and discrimination.

The district court held that § 107 is “invalid under either [Justice Brennan's] plurality or [Justice Blackmun's] concurring opinion” because it “provide[s] a benefit that only a group of religious persons may receive.” App.15. But the district court failed to grasp the key distinction between this case and Texas Monthly. In Texas Monthly, an exemption was available only to publications promoting a religious message. Here, an exemption for employer-provided housing is available to hundreds of thousands of employees, religious and secular alike, under the convenience-of-the-employer doctrine. Section 107 simply applies this broad doctrine to ministers in a way that minimizes entanglement and discrimination among religious groups. That makes § 107 permissible under any reading of Texas Monthly.

1. Ministers fit naturally within the convenience-of-the-employer doctrine.

It is undisputed that hundreds of thousands of nonreligious employees receive tax exempt housing every year — at a cost of over $10 billion annually. See p.18, supra. The default rule is the fact-intensive test of § 119(a)(2). But Congress has also relaxed this default rule where the type of work, the burdens on the employee's housing, or the non-commercial working relationship make it likely that the lodging or housing allowance was intended to benefit the employer. These include employees living in a foreign camp, § 119(c), employees of educational institutions, § 119(d), members of the uniformed services, § 134, government employees living overseas, § 912, citizens living abroad, § 911, and employees temporarily away from home on business, §§ 162, 132. In all of these cases, Congress determined that a bright-line rule was preferable to § 119's fact-intensive test.

The same is true of ministers. Ministers routinely face unique, work-related demands on their housing, making them a natural fit for a bright-line rule. A comparison to the strongest case — military service — is instructive. Members of the military are governed by a bright-line rule because their duties “require [their] physical presence at their post or station; [their] service is continuous day and night; [and] [their] movements are governed by orders and commands.” Jones, 60 Ct. Cl. at 569. Of course, this is not necessarily true of every member of the military always; but it is common enough that Congress decided to adopt a bright-line rule. Ministers face similar job-related demands on their housing.

First, many ministers are required to live at or near the church to be available to those they serve. Priests must often live in a parsonage attached to the church. Nuns and monks must often live in the convent or monastery. A.93. Many churches, including the Appellant Diocese, require priests to live within the boundaries of the parish. A.91-92. In the Diocese's case, a priest must lead multiple divine services every week and counsel members and visit the sick whenever the need may arise. A.90-92. Imams likewise must live near the mosque to lead prayer five times daily. Orthodox rabbis must live near the synagogue to comply with Sabbath restrictions on walking.

More practically, many ministers are the primary caretaker of the church building. Like the caretakers of apartment buildings — who often receive tax-exempt housing under § 119(a)(2) — ministers must respond when the fire alarm goes off, a pipe bursts, the furnace fails, the snow needs shovelling, or the building has other needs. A.103. The need is magnified for Russian Orthodox priests, who must be present when outside maintenance or emergency personnel enter the church to ensure that holy items are not desecrated. Id.

Second, ministers are often expected to be available “at all hours of the day and night” (A.9) to pray with congregants about emergencies, comfort grieving families, hear confessions, and offer advice. A.74-75; A.84-85; A.91-92; A.111. Roman Catholic priests must be available at any hour to administer the sacrament of anointing of the sick, which must be given “at the appropriate time” to those in danger of death. 1983 Code of Canon Law, cc.1001, 1004. Likewise, Russian Orthodox priests must be available to “drop whatever [they are] doing,” “wherever” they are, and hear the final confession of dying parishioners. A.92.

Third, ministers are expected to use their homes to serve the church. The Christian New Testament requires church leaders to be “hospitable.” Titus 1:8; 1 Timothy 3:2. In practice, this means ministers host numerous church events, like Bible studies, women's meetings, meals for new members, and the like. A.75; A.94; A.100; A.104; A.111. It also means providing temporary lodging for church members in transition, guest speakers, missionaries, and other travelers with a connection to the church, A.100-01; A.103-04.

Ministers also use their homes for church-related duties. When congregants seek comfort, prayer, and counsel, they often meet in the minister's home. A.74-75; A.94; A.100; A.111. These duties, especially when involving sensitive matters, are often best discharged in the comfort of a home rather than a formal office. A.11. Meetings with lay leaders routinely occur in the home. Id.; A.75. Sermons are often prepared in the home. A.75. And in small churches that lack their own building — such as Chicago Embassy, Holy Cross Anglican, and some of the Diocese's parishes — the only place to gather is often the minister's home. A.111; A.100; A.104.

Fourth, many ministers face frequent movement and limited choice in their housing. In the Russian Orthodox Church, priests must live within the geographic boundaries of their parish, and the diocesan bishop has absolute authority to move them from parish to parish. A.92-93. Bishops can also agree to move priests across diocesan lines, including to foreign countries. Id. The requirement that Russian Orthodox priests live within their parish is based partly on “theological” reasons: by doing so, they “follow the example of Christ,” who “became incarnate and lived among mankind.” A.103. Anglicans, too, have “theological reasons why a[ ] priest must live in the parish”: “the priest is effectively Christ's presence in the community.” A.100. And even in less hierarchical denominations, the “paramount consideration” in the choice of the minister's housing remains the “the congregations' need,” not the personal consumption choices of the minister. A.29.

The point is not that ministers are like military service members or other beneficiaries of bright-line convenience-of-the-employer rules in every respect. It is that they are in a unique employment relationship that places extensive demands on their housing. Given this reality, Congress could “fairly conclude[ ] that [ministers] could be thought to fall within the natural perimeter” of the convenience-of-the-employer doctrine — and adopt a bright-line rule just as it has done for a host of other employees. Texas Monthly, 489 U.S. at 17 (plurality).

The district court disagreed with this logic on three main grounds, none persuasive. First, it argued that some of the bright-line rules for non-religious workers are “not instructive,” because they apply to in-kind housing or travel expenses, rather than “housing allowances.” App.22. But that misses the point. Regardless of the form of the housing benefit, Congress has recognized that, when applying the convenience-of-the-employer doctrine, many benefits should be treated as per se for the convenience of the employer — even when the employee can't satisfy all of the requirements of § 119(a)(2). Congress made the same decision for ministers.

Second, the district court said other bright-line rules should be ignored because some are underinclusive. App.23. In other words, because the district court could think of other employees who might be deserving of a bright-line rule but aren't governed by one — such as “healthcare providers, hotel managers, maintenance staff, [and] funeral service directors” — then there must be no “general congressional policy” implementing the convenience-of-the-employer doctrine. App.23-24. But when Congress legislates in an area as complex as the IRS Code, there will inevitably be both overinclusison and underinclusion. Kowalski, 434 U.S. at 95-96. The question is not whether Congress got it perfect, but whether it was pursuing a reasonable secular purpose. See Rojas v. Fitch, 127 F.3d 184, 189 (1st Cir. 1997) (“Texas Monthly nowhere requires [an] underinclusiveness analysis”). Here, there was ample reason for Congress to conclude that a bright-line rule for ministers was appropriate — not only because of their unique housing demands, but because of constitutional concerns of entanglement and discrimination.

Third, the district court argued that § 107 is overinclusive, because “[s]ome ministers” don't receive housing for the convenience of their employer, while all overseas workers and members of the military “necessarily” do. App.24-25. But that is simply wrong. Under §§ 911-912, overseas workers receive an exemption for their housing allowances regardless of whether their housing is used for their job, and regardless of whether they can satisfy the requirements of § 119(a)(2). In many cases, they could not. And under § 134, all members and former members of the uniformed services receive an exemption for their housing allowances — even if they buy off-base housing that is never used for their job, and even if they are retired. Section 107 is no more overinclusive than these other bright-line rules.

2. Section 107 reduces entanglement in religious matters.

Section 107 is also justified by independent constitutional concerns about entanglement in religious questions. The Supreme Court has long held that government must “avoid excessive entanglement” with religion. Walz, 397 U.S. at 670. This means that the government must avoid conducting “intrusive inquir[ies] into religious belief,” Amos, 483 U.S. at 339, or answering “religious questions,” McCarthy v. Fuller, 714 F.3d 971, 976 (7th Cir. 2013); see also Texas Monthly, 489 U.S. at 20 (government must avoid “inconsistent treatment [of religious groups] and government embroilment in controversies over religious doctrine”) (plurality).

Amos is instructive. There, the Court unanimously upheld Title VII's religious exemption, which allows religious employers to hire “individuals of a particular religion” to carry out both religious and nonreligious “activities.” Amos, 483 U.S. at 329-30 n.1. The Court assumed that the Free Exercise Clause would require an exemption only for “religious activities.” Id. at 335-36. But because this narrower exemption would entangle courts in “intrusive inquir[ies]” about which activities flowed from a religious employer's “religious tenets and sense of mission,” Congress was entitled to enact a “categorical” exemption for all of a religious employer's activities. Id. at 336, 339; id. at 343-46 (Brennan, J., concurring). Following Amos, this Court and others have upheld bright-line religious exemptions to avoid entanglement “that would likely occur in [the exemption's] absence.” Medina v. Catholic Health Initiatives, 877 F.3d 1213, 1233-34 (10th Cir. 2017); Cohen v. City of Des Plaines, 8 F.3d 484, 490-91 (7th Cir. 1993) (bright-line zoning exemption for daycares located in churches avoided “governmental meddling” in whether a daycare's activities were religious or not).

Here, § 107 reduces entanglement in the same way. If Congress had not adopted the bright-line rule of § 107, ministers would have to seek an exemption under the default rule of § 119(a)(2). This section permits an exemption for in-kind housing only if the taxpayer can show that his lodging was furnished:

Treas. Reg. § 1.119-1(b). But this test is notoriously complex and fact-intensive, and applying it to ministers would create severe problems of entanglement and discrimination. See Edward A. Zelinsky, Taxing the Church: Religion, Exemptions, Entanglement, and the Constitution 169 (2017). Consider each criterion in turn.

To an Employee. Section 119(a)(2) applies only if the recipient of housing qualifies as an “employee” under IRS rules. Applying these rules to ministers would require the government to examine the church's “behavioral control” over the minister (including how it instructs and trains the minister); its “financial control” (including how it pays the minister and how much the minister invests in his own work); and how the church and minister view their own relationship. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992) (“all . . . incidents of the relationship must be assessed and weighed”). This is an “extraordinarily fact intensive” inquiry, and both the courts and the IRS have acknowledged that the results will turn on “[d]ifferences in church structure.” Alford v. United States, 116 F.3d 334, 337 (8th Cir. 1997); see also I.R.S. Tech. Adv. Mem. 98-25-002 (June 19, 1998).

If the minister belongs to a denomination that gives him broad autonomy with little training or instruction, he will be deemed self-employed. But if his denomination exercises more control, he will be deemed an employee. Accordingly, some courts have held that United Methodist ministers are employees,²¹ while Assemblies of God and some Pentecostal ministers are not²² — depending on the internal governance of the church. And even if a minister qualifies as an employee, an exemption under § 119 would be unavailable if one entity provided the housing (such as the congregation), but a different entity qualified as the “employer” (such as the diocese) — thus pressuring churches to make ministers answerable to those paying them, and discriminating against more hierarchical churches. See Furhmann v. Comm'r, T.C.M. 1977-416 (1977). For these reasons, Congress has amended other parts of the Code to avoid the “employee” inquiry altogether and treat all ministers the same. See, e.g., 26 U.S.C. § 414(e)(3)(B)(i) (defining “employee” to include self-employed ministers — thus treating all ministers as employees); id. §§ 1401-03 (treating all ministers as self-employed). Section 107 has the same disentangling effect.

On the Employer's Business Premises. Section 119(a)(2) also applies only if the housing is on the “business premises of the employer.” Treas. Reg. § 1.119-1(c)(1). This requirement, too, is fact-intensive. “[S]patial unity” is not dispositive, so the employer's “business premises” are not “limited to the business compound or headquarters of the employer.” Adams, 585 F.2d at 1065-66. Instead, courts and the IRS take “a commonsense approach,” id., looking to whether the “business functions” performed on the premises are sufficiently “important” with respect to the “interests of the business.” Hargrove v. Comm'r, T.C. Memo. 2006-159, at *4 (2006). Under this test, the taxpayer's home may constitute the employer's “business premises” if the “quantum [and] quality of” business activities performed there are “significant” enough. McDonald v. Comm'r, 66 T.C. 223, 231, 1976 WL 3665 (May 5, 1976); see also, e.g., Adams, 585 F.2d at 1065-67; U.S. Jr. Chamber of Commerce v. United States, 334 F.2d 660, 663-65 (Ct. Cl. 1964).

This inquiry is “elusive” even in the secular context. Lindeman v. Comm'r, 60 T.C. 609, 617 (1973) (Tannenwald, J., concurring). But applying it to ministers raises serious religious questions. For instance, to determine whether a minister qualified for a § 119(a)(2) exemption, the IRS would have to determine whether the ministerial activities he performed at home — such as spiritual counselling, prayer groups, Bible studies, and church social events, A.111; A.100-101 — were sufficiently “important” with respect to the church's mission, Hargrove, 2006 WL 2280631, at *4, or were instead only incidental to the primary “business” of Sunday worship. Yet the Supreme Court has repeatedly “warned that courts must not presume to determine” whether “a particular act is 'central'” to a religious faith. Emp't Div. v. Smith, 494 U.S. 872, 887 (1990), and that courts should not second-guess a sincere belief that a particular course of action is religiously required. Thomas v. Review Bd., 450 U.S. 707, 716-17 (1981). Section 107 eliminates these entangling inquiries.

For the Convenience of the Employer. Finally, § 119(a)(2) requires the government to decide whether a taxpayer's housing was “furnished for the convenience of the employer” as “a condition of his employment.” Treas. Reg. § 1.119-1(b). This, in turn, requires the government to decide whether the lodging is truly necessary “to enable [the taxpayer] properly to perform the duties of his employment.” Id.; see also Heyward v. Comm'r, 36 T.C. 739, 744 (1961), aff'd, 301 F.2d 307 (4th Cir. 1962) (lodging must be “required,” not just “desirable”). The taxpayer's “state of mind” regarding what is necessary for doing his job is “not controlling,” so the government must make its own determination of whether the housing is “necessary.” Dole v. Comm'r, 43 T.C. 697,705-06, aff'd, 351 F.2d 308 (1st Cir. 1965); accord, e.g., Winchell v. United States, 564 F. Supp. 131, 134-36 (D. Neb. 1983).

Again, when the taxpayer is secular, this inquiry is difficult, McDavitt at 1139-40; when he is a minister, it is theologically charged. Does the minister's work really require that he host Bible studies, prayer meetings, and visiting missionaries in his home? Is it really necessary for a Christian minister to be available at all times to counsel grieving families and administer last rites to the dying? Is it truly important that the minister live close to the church so he can respond to emergencies, care for the building, and open it for services multiple times per week? It is well established “that courts should refrain from trolling through a person's or institution's religious beliefs.” Mitchell, 530 U.S. at 828. Yet applying § 119(a)(2) to ministers would require the IRS to do just that.

The district court didn't dispute that applying § 119 to ministers would cause entanglement and discrimination. Instead, it said that “§ 119 is not relevant” because it applies to “employer-provided housing” (like § 107(1)) instead of housing allowances (like § 107(2)). App.33-34. But the Supreme Court has repeatedly emphasized that courts applying the Establishment Clause must consider the entire “history of the government's actions,” including the complete “context in which the policy arose.” McCreary Cty. v. Am. Civil Liberties Union of Ky., 545 U.S. 844, 866 (2005). Section 107 was motivated by closely related historical, practical, and constitutional concerns, and § 107(2) cannot be understood in isolation from § 107(1).

Regardless, even considering § 107(2) in isolation doesn't eliminate the entanglement problem. If § 107(2) were struck down, ministers could seek to deduct some of their housing expenses under the “home office” deduction, 26 U.S.C. § 280A. That section exempts expenses attributable to a portion of a dwelling that is “exclusively used on a regular basis” for certain “business” purposes, provided the taxpayer, if he is an “employee,” maintains the home office “for the convenience of the employer.” Id. But this standard presents the same entanglement problems as § 119 — requiring the government to (1) define the scope of the minister's “business”; (2) decide whether the minister is an “employee”; and (3) determine whether she maintains her home office “for the convenience of” the church. See Comm'r v. Soliman, 506 U.S. 168, 175 (1993) (§ 280A inquiry is “subtle” and “depend[s] upon the particular facts of each case”); Hamacher v. Comm'r, 94 T.C. 348, 358 (1990) (articulating convenience-of-the-employer test under § 280A identical to that under § 119).

Alternatively, the district court suggested that § 107 increases entanglement by requiring the IRS to decide who is a “minister.” App.32-33. But courts routinely decide whether employees are ministers. See Hosanna-Tabor Evangelical Lutheran Church and Sch. v. EEOC, 565 U.S. 171 (2012). Congress could easily decide that applying the well-worn term “minister” is less entangling than the “extremely fact-intensive” test of Section 119. Cf. Medina, 877 F.3d at 1233 (rejecting argument that determining whether entity was a “church” for purposes of exemption was just as entangling as eliminating the exemption).

3. Section 107 reduces discrimination among religious groups.

Section 107 also eliminates discrimination among religious groups. The Supreme Court has repeatedly held that this is “[t]he clearest command of the Establishment Clause.” Larson v. Valente, 456 U.S. 228, 244, 246 (1982) (collecting cases). This applies not just to intentional discrimination among religions, but also to “indirect way[s] of preferring one religion over another.” Fowler v. Rhode Island, 345 U.S. 67, 70 (1953). Particularly “when the state passes laws that facially regulate religious issues” — as § 107 does — “it must treat individual religions and religious institutions 'without discrimination or preference.'” Colo. Christian Univ. v. Weaver, 534 F.3d 1245, 1257 (10th Cir. 2008) (McConnell, J.) (citation omitted).

Applying § 107(1) without § 107(2) would violate this principle. It takes “accumulated capital” to buy a parsonage. A.22. So “well-established churches” with “financial support” can take advantage of § 107(1), while “churches which are new and lacking in a constituency” cannot. Larson, 456 U.S. at 246 n.23. Indeed, before enactment of § 107(2), the parsonage allowance “worked well for clergy of established, mainstream, and populous churches” like the “traditional, colonial-era” denominations, but it “discriminat[ed]” against “less affluent . . . groups such as Pentecostals, evangelical churches, and independent African-American congregations” — despite both having “religiously motivated reasons to provide housing to ministers.” A.22-24.

Nor was the disparity merely financial. The decision to have a church-owned parsonage is influenced by theological considerations. In some denominations, like the Roman Catholic Church, the use of church-owned parsonages is “hardwired into their deployment models for clergy.” A.12. The three Plenary Councils of Baltimore (1852, 1866, and 1884) urged the Catholic Church in America to “build[ ] up parishes with schools, rectories, and convents, not just houses of worship.” Id. In part, this was because the bishops “could, and did, send ministers to different parishes according to the religious needs of the Church as a whole.” Id.

In other denominations — typically newer and less hierarchical ones — there is no theological emphasis on church-owned parsonages. A.22-25. Sometimes, this is because churches expect ministers to be bi-vocational, A.16-17; other times, it is because churches may take years before acquiring a permanent place of worship, A.25; still other times, it is because the churches have a theological reluctance to amass large holdings of worldly property. And in some cases, ministers are expected to be itinerant, making a housing allowance the only feasible way of meeting their housing needs. Because of these differences, applying § 107(1) without § 107(2) “would require religious organizations, in order to receive the exemption's benefits, to adopt a particular structure, thus interfering in the internal organization of a religious institution.” Medina, 877 F.3d at 1234.

Thus, it is no surprise that equal treatment of housing allowances was first imposed by courts, even before Congress enacted § 107(2). This occurred in the early 1950s, when three federal courts held that cash housing allowances must be excluded from the income of ministers — specifically to avoid discriminatory treatment between the “quite similar arrangements” of ministers that receive in-kind parsonages and those that receive housing allowances. Williamson, 22 T.C. at 570 (Opper, J., dissenting), rev'd, 224 F.2d 377; see also MacColl, 91 F. Supp. 721; Conning, 127 F. Supp. 958. Congress then codified these decisions in § 107(2). When it did so, it expressly stated that it was seeking to “remove[ ] the discrimination in existing law” among various denominations. H.R. Rep. No. 83-1337, at 4040 (1954); S. Rep. No. 83-1622, at 4646 (1954). It would be ironic if the federal courts now struck down § 107(2) — over six decades after first imposing it.

Nor is this desire to remove discrimination unique to ministers. Congress did the same thing for government workers living overseas. In the 1950s, many overseas employees received tax-exempt, in-kind housing. But some did not. So Congress enacted the Overseas Differential and Allowances Act, which authorized cash housing allowances, and § 912, which excluded those cash housing allowances from income. Anderson v. United States, 16 Cl. Ct. 530, 534 (1989). The intent was “that all federal overseas employees be treated uniformly.” Id. at 535. Congress adopted a similar approach for military service members, enacting § 134 in part to “eliminate ambiguity” over whether both in-kind housing and cash housing allowances were exempted. See Department of Defense, Military Compensation Background Papers 875-76 (7th Ed. Nov. 2011). Thus, §§ 912 and 134 do the same thing for overseas employees and military service members that § 107(2) does for ministers.

But treating cash allowances and in-kind housing equally does not just reduce discrimination; it is also logical. The financial impact on the minister is obviously the same. And while cash payments may be compensatory, they need not be. See Williamson, 224 F.2d at 379 (quoting Saunders v. Comm'r, 215 F.2d 768, 771 (3d Cir. 1954)). Thus, it is no surprise that, when considering the convenience-of-the-employer doctrine, early courts and commentators both rejected a distinction between cash and in-kind housing. Id.; see also p.15, supra (collecting authorities). Indeed, § 119 is the only housing exclusion to distinguish between cash and in-kind housing benefits. There is no reason to import this distinction into § 107 — especially when it creates discrimination among religions.

The district court rejected this rationale for three main reasons, none of which have merit. First, it argued that § 107(1) “does not discriminate,” because it applies a facially neutral rule that requires all religious groups “to meet the same requirements.” App.28-31. But the same argument was made and rejected in Larson. There, too, the state's solicitation rule was “facially neutral” and required all religious groups to meet the same “secular criteria.” 456 U.S. at 246 n.23. But the Supreme Court still struck it down because those criteria favored “well-established churches” over those that “are new and lacking in a constituency.” Id.

Second, the district court said that even if § 107(2) reduces discrimination, it is “not an appropriate response” because Congress “could have created” a more narrowly tailored exemption focusing on “rental housing” that is “subject to restrictions imposed by the church.” App.31-32. But this ignores the reasons for adopting a bright-line rule. Of course, a case-by-case evaluation of the “restrictions imposed by [each] church” would be more narrowly tailored. But it would produce the same problems of entanglement and discrimination that § 107 was designed to avoid. Congress adopted a bright-line rule to address these problems — just as it did for many nonreligious employees — and that is a permissible secular purpose. See Freedom From Religion Found., Inc. v. Concord Cmty. Schs., 885 F.3d 1038, 1050 (7th Cir. 2018) (Establishment Clause requires only a nonreligious purpose, not that the government “tailor [its] conduct narrowly to the stated aim.”).

Finally, all the district court's objections proceed from a faulty premise — that Congress cannot seek to reduce discrimination among religions unless that discrimination is independently unconstitutional. See App.29-31. But even if it was not constitutionally required to do so, Congress was well within its discretion to eliminate discrimination between cash and in-kind housing. As the Supreme Court has repeatedly emphasized: “The limits of permissible state accommodation to religion are by no means co-extensive with the noninterference mandated by the Free Exercise Clause.” Walz, 397 U.S. at 1413. Indeed, because “[l]egislatures have especially broad latitude in creating classifications and distinctions in tax statutes,” Congress' legislative judgments receive “substantial deference” in Establishment Clause cases involving tax exemptions. Mueller v. Allen, 463 U.S. 388, 396 (1983).

C. Section 107 satisfies both opinions in Texas Monthly.

Viewed in this context — as a means of applying the convenience-of-the-employer doctrine to ministers — § 107 easily satisfies both the concurring and plurality opinions in Texas Monthly.

1. Justice Blackmun's concurrence.

Under Justice Blackmun's concurrence, a tax exemption is invalid if it is confined “exclusively to the sale of religious publications” and results in “preferential support for the communication of religious messages.” 489 U.S. at 28. Section 107 is distinguishable under this opinion in three ways.

First, unlike Texas Monthly, where the exemption for religious publications stood alone, § 107 is one of many exemptions offered to hundreds of thousands of non-religious employees. It is as if, in Texas Monthly, the state had coupled the exemption for religious literature with exemptions for hundreds of thousands of nonreligious publications. That would not be a form of “preferential support” for religious messages; it would be a form of putting religious messages on the same footing as many nonreligious messages. Indeed, in that case, Justice Blackmun would likely have said that “the Free Exercise Clause requires a tax exemption for the sale of religious literature.” Texas Monthly, 489 U.S. at 28 (emphasis added) (citing Follett v. McCormick, 321 U.S. 573 (1944), and Murdock v. Pennsylvania, 319 U.S. 105 (1943)).

Second, Justice Blackmun's concurrence did not address preferential support for “religion” generally; it emphasized that the Court was dealing with “the taxation of books and journals,” which implicates “three different Clauses of the First Amendment,” including “the Press Clause.” Id. at 26, 28. Accordingly, his analysis placed great weight on the fact that the tax exemption applied specifically to religious “literature” — mentioning this point, or some variation of it, no less than eighteen times. See id. at 26-27. Here, of course, the parsonage allowance applies to housing, not religious literature. And it applies regardless of whether the minister is involved in spreading a religious message. Because it is tied to property, the parsonage allowance is more like the property-tax exemption upheld in Walz than the religious-literature exemption struck down in Texas Monthly. See id. at 15 n.5 (plurality) (distinguishing Walz because the Walz exemption “failed to single out religious proselytizing as an activity deserving of public assistance”).

Finally, the exemption in Texas Monthly was a short-lived innovation, not a policy with deep historical roots like property-tax exemptions (Walz) or parsonage exemptions (this case). It existed only for a three-year window from 1984-87; both before and after that, Texas exempted all magazines from taxation, 489 U.S. at 6, in keeping with the pattern in other states. See, e.g., Md. Pennysaver Grp., Inc. v. Comptroller of Treasury, 323 Md. 697, 702, 594 A.2d 1142, 1145 (1991) (newspapers exempt by regulation the same year that the state sales tax was enacted); Alex S. Jones, The Media Business: Newspapers See a Threat of Spreading Sales Taxes, N.Y. Times, Aug. 19, 1991, at D6 (newspapers and periodicals had been “largely exempt from sales taxes on circulation”). This stands in stark contrast to the extensive historical record supporting § 107.

2. Justice Brennan's plurality

Under Justice Brennan's plurality, an exemption for religious groups is permissible if it is “grounded in some secular legislative policy that motivate[s] similar tax breaks for nonreligious activities.” Texas Monthly, 489 U.S. at 15 n.4. The fit between the secular legislative policy and the exemption for religious groups need not be perfect. Rather, it is enough if “it can be fairly concluded that religious institutions could be thought to fall within the natural perimeter [of the legislation].” Id. at 17 (emphasis added).

As shown above, § 107 is grounded in the longstanding convenience-of-the-employer doctrine, which provides tens of billions of dollars in similar tax breaks to all sorts of employees — dwarfing the value of § 107 to ministers. Ministers fit easily within this doctrine. They are often required to live where they serve, to be available at all hours, to use their homes to serve the church, and to move at the discretion of the church. Like many nonreligious employees who are governed by bright-line rules, ministers are in a unique employment relationship with unique, job-related demands on their housing. Given this reality, Congress could “fairly conclude[ ] that [ministers] could be thought to fall within the natural perimeter” of the convenience-of-the-employer doctrine. Texas Monthly, 489 U.S. at 17. And given potential problems of entanglement and discrimination, § 107 is a particularly logical response.

Alternatively, even ignoring that § 107 is one of many provisions applying the convenience-of-the-employer doctrine, the Texas Monthly plurality still recognizes that a benefit “conferred exclusively upon religious groups” is permissible if it either does not “impose substantial burdens on nonbeneficiaries” or is “designed to alleviate government intrusions that might significantly deter adherents of a particular faith from conduct protected by the Free Exercise Clause.” 489 U.S. at 18 n.8.

Here, § 107 imposes no substantial burdens on nonbeneficiaries. Many thousands of nonreligious employees can invoke bright-line convenience-of-the-employer rules of their own, and all employees can invoke the general convenience-of-the-employer rule under § 119. And because § 107 is an exemption — not a transfer of funds — not a dime of taxpayer money is extracted and spent on a religious institution. Winn, 563 U.S. at 142. By contrast, “it is a significant burden on a religious organization to require it . . . to predict which of its activities a secular court will consider religious,” Amos, 483 U.S. at 336 — a burden § 107 alleviates by preempting the fact-intensive inquiries under § 119. Further, religious organizations have a First Amendment right to “decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine,” Hosanna-Tabor, 565 U.S. at 186 — and § 107(2) removes financial pressure on religious organizations to alter their relationships with their ministers. Thus, even viewing § 107 in isolation from the convenience-of-the-employer doctrine, it is still permissible under Texas Monthly.

Finally, this case is distinguishable from Texas Monthly on entanglement grounds. In Texas Monthly, the exemption “produce[d] greater state entanglement with religion” because it “require[d] that public officials determine whether some message or activity is consistent with 'the teaching of the faith.'” 489 U.S. at 20 (plurality). Striking down the exemption meant that everyone would pay the same tax — thus eliminating entanglement. Here, by contrast, striking down § 107 doesn't mean that everyone will pay the same tax. It means the government must apply the fact-intensive requirements of § 280A or § 119(a)(2) to ministers — resulting in more entanglement in religious questions.

III. Section 107 is constitutional under Lemon.

For many of the same reasons, § 107(2) also satisfies the Lemon test. Under Lemon, a law is unconstitutional if it “(1) lacks a legitimate secular purpose; (2) has the primary effect of advancing or inhibiting religion; or (3) fosters an excessive entanglement with religion.” Doe, 687 F.3d at 849. Alternatively, the test is described as prohibiting “government endorsement or disapproval of religion.” Id. at 849-50.

As explained, § 107(2) has the valid secular purpose of ensuring fair taxation of ministers' housing under the convenience-of-the-employer doctrine, reducing government burdens on the exercise of religion, reducing entanglement between church and state, and eliminating discrimination among religions. Its primary effect is to accomplish precisely these goals. Further, § 107 sends a message of neutrality with respect to religion, not endorsement. Just as Congress took the unique circumstances of many nonreligious employees into account when it codified other applications of the convenience-of-the-employer doctrine, so it did with ministers and § 107.

In ruling against § 107(2) under Lemon's purpose prong, the district court relied on “[t]wo pieces of legislative history.” App.16. First, it cited the House Committee Report, which explained that the purpose of § 107(2) was to “remove[ ] the discrimination in existing law.” App.16. According to the district court, this “is not a secular purpose.” App.16-17. But of course it is. The First Amendment requires neutral treatment of religions. Larson, 456 U.S. at 244. If reducing denominational discrimination were not a secular purpose, the government would be “in a double-bind”: it “could not constitutionally pass a law to avoid [denominational discrimination], but then the [discrimination] would run afoul of the Constitution.” Medina, 877 F.3d at 1231. That is not the law.

Second, the district court emphasized a fragment of Congressman Peter Mack's floor statement, arguing that his statement revealed a purpose “to 'fight against' a 'godless and anti-religious world movement.'” App.16, 23, 32. But the district court simply ignored the rest of Congressman Mack's statement, which called on Congress to “correct th[e] discrimination against certain ministers of the gospel” caused by § 107(1). 99 Cong. Rec. A5372-73 (1953). This latter statement of purpose accords with both the House and Senate Reports and the federal court decisions that § 107(2) codified. See pp.15-16, supra.

Thus, if one had to identify the purpose motivating the passage of § 107(2), it would be the secular purpose of reducing entanglement and denominational discrimination, not advancing religion. But in fact, government action survives the Lemon test so long as it merely “had a secular purpose.” Sherman ex rel. Sherman v. Koch, 623 F.3d 501, 507 (7th Cir. 2010) (emphasis original). Further, this Court “generally defer[s] to the government's articulation of a secular purpose unless it is a sham.” Id. at 508. Because § 107(2) has multiple secular purposes, and Plaintiffs haven't shown that they are “shams,” § 107(2) isn't invalidated by a single out-of-context remark from one of “the least illuminating forms of legislative history” — a “floor statement[ ]” by one “individual legislator[.]” NLRB v. SW Gen., Inc., 137 S. Ct. 929, 943 (2017).

IV. Striking down § 107 would endanger scores of tax provisions throughout federal and state law.

The district court's interpretation of the Establishment Clause is not only wrong, it also threatens numerous church-specific provisions throughout federal and state tax codes. There are over 2,600 federal and state tax laws providing religious exemptions. Nina J. Crimm & Laurence H. Winer, Politics, Taxes, and the Pulpit: Provocative First Amendment Conflicts 43, 74-76 (2011). Many of these, like § 107, specifically address churches or ministers to reduce entanglement and discrimination.

Some of these provisions protect the relationship between churches and ministers by exempting churches from paying or withholding certain types of taxes. For example, § 3401(a)(9) exempts churches from withholding federal income taxes from ministers. Sections 1402(c)(4), 1402(e), and 3121(b)(8) exempt churches from Social Security and Medicare taxes for wages paid to ministers. And § 3309(b)(1) exempts churches from state unemployment insurance funds.

Other provisions reduce entanglement and protect church autonomy by offering procedural protections or exempting churches from disclosing information. For example, § 7611 grants special protection for churches in tax audits. Sections 508(a) and 508(c)(1)(a) exempt churches from petitioning the IRS for tax-exempt status under § 501(c)(3). And § 6033(a)(3) exempts churches from filing Form 990, which discloses sensitive financial information.

Still others modify tax provisions so they apply neutrally among various church polities. For example, § 414(e) allows churches to maintain a single church benefits plan exempt from ERISA for employees of multiple church affiliates, regardless of common control, and for ministers, regardless of their employment status. Section 403(b)(1)(A)(iii) allows churches to include ministers in a type of tax-deferred benefit contract even if the ministers do not qualify as employees. And § 501(m)(3)(C)-(D) allows churches to provide certain insurance to entities with common religious bonds, regardless of common control. G.C.M. 39874 (May 4, 1992); Treas. Reg § 1.502-1(b).

All of these provisions share the same salient feature as § 107: They single out churches and ministers to reduce entanglement and discrimination. But under the district court's theory — that “government may not provide a benefit that only a group of religious persons may receive” — all of these provisions would be constitutionally suspect. App.15. Indeed, many of these provisions would be more at risk than § 107, because they are not part of a broad secular policy like the convenience-of-the-employer doctrine.

Fortunately, the district court's decision is wrong. The Establishment Clause does not forbid laws that “give special consideration to religious groups.” Amos, 483 U.S. at 338. When laws address religious groups to reduce entanglement or discrimination, they are constitutionally desirable and may even be constitutionally required. Id.; Larson, 456 U.S. at 244; Hosanna-Tabor, 565 U.S. at 171. More importantly, the law in this case does not “single out” religious groups. It offers ministers the same treatment as hundreds of thousands of secular employees under the longstanding convenience-of-the-employer doctrine.

CONCLUSION

The decision of the district court should be reversed.

Respectfully submitted,

Luke W. Goodrich
Joseph C. Davis
Daniel Ortner
THE BECKET FUND FOR RELIGIOUS LIBERTY
1200 New Hampshire Ave. NW, Suite 700
Washington, DC 20036
(202) 955-0095
lgoodrich@becketlaw.org
Counsel for Intervening Defendants-Appellants

April 19, 2018