Parsonage Allowance Update 1: Briefing Remedies

By Sam Brunson

So #TaxWeek isn’t going quite the way we expected;[fn1] the House is now expecting to release its tax bill tomorrow. (Or maybe not.) Which means we’re not bringing any coverage of the tax bill today.

But that’s okay! It gives me room to slot it some follow-up to last month’s decision that section 107(2) violated the Establishment Clause. Remember, Judge Crabb found it unconstitutional, but ordered the parties to provide supplementary briefing about the appropriate remedies. Should she enjoin the IRS from providing benefits under section 107(2)? Or should she expand the set of taxpayers who could benefit from section 107(2)? Or something else entirely?

The initial briefs were due (and were filed) Monday. And, unsurprisingly, they all agreed on a lot:

The Freedom From Religion Foundations plaintiffs, the government, and the intervenor-defendants all agreed that the court should not expand the scope of section 107(2). They all agreed that such an expansion should be done, if at all, by Congress, not by the courts. Moreover, they all agree that any injunction should only be prospective; the court should not order the IRS to go back and disallow ministers’ exclusions of their housing stipends in the past.

In spite of the broad agreement on these points, the parties’ recommendations do differ to some extent. While the intervenor-defendants argue that any injunction should be prospective, they also argue that there should be no injunction. Rather, they say, declaratory relief is sufficient. The declaratory relief that the court has already provided will allow the IRS to revisit the FFRF plaintiffs’ refund claims, and will signal to Congress that it needs to do something.

The government requests that relief should not only be prospective, but that the court should stay the relief until after a final resolution upon appeal, to provide certainty to both the IRS and taxpayers. The government also emphasized that section 107(1) (which provides for the tax-free provision of housing, and which the plaintiffs didn’t have standing to challenge) is severable from section 107(2).

The plaintiffs argued that, while any injunction against section 107(2) should be prospective only, that prospective relief does not foreclose their claim for refund. They argue that the IRS should be ordered to refund the taxes they paid on their housing stipend.

Response briefs are due a week from today. Given the broad agreement between the parties, I don’t expect to see a lot of substantive response (unless the government argues against the refund), but I’ll be curious to read the response briefs and see what the court decides.


[fn1] OTOH, maybe it’s going exactly like we expected.

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