Warren v. Commissioner of Internal Revenue

Section § 107(2) of the Internal Revenue Code exempts rental allowances paid to "ministers of the gospel" from federal income tax. This case initially involved a decision by the IRS that Rev. Richard D. Warren, in claiming his entire $80,000 annual cash housing allowance as a tax exclusion, wasn't entitled to excluding the full amount of the allowance because it exceeded his home's fair rental value. Rev. Warren took the case to federal tax court, which agreed with him, and the IRS appealed.

A divided three judge panel of the 9th Circuit decided, sua sponte, to address the question of whether the IRS regulation was constitutional, and designated University of Southern California Law Professor Erwin Chemerinsky as court-appointed amicus to advise on the matter. Chemerinsky is well known for his negative view of such laws.

The Becket Fund filed an amicus curiae brief (PDF format, 138K) with the 9th Circuit panel, arguing that the IRS regulation clearly passes constitutional muster because it has a secular purpose (it's simply a part of a larger section of tax law providing that employees who receive lodging for the convenience of an employer should not be taxed on the value of it), and that it does not advance religion ("It merely reduced the potential for church-state entanglement").

Meanwhile, the U.S. Congress took up legislation that would resolve the question of how to interpret the statute, and on May 20, 2002 the President signed the Clergy Housing Allowance Clarification Act of 2002 into law. Two days later, both the IRS and Rev. Warren filed a stipulation to dismiss the appeal. On the same day, Prof. Chemerinsky filed an opposition to dismissal and notice of a motion to intervene. On May 29, he filed a motion asking that he be allowed to intervene in the case in order to challenge the constitutionality of § 107(2).

On August 26, the 9th Circuit panel issued an order (PDF format, 40K) denying Chemerinsky's motion and dismissing the appeal. The nine page order observed that "Neither the voluntary dismissal here nor the passage of the Clergy Housing Allowance Clarification Act resolves the constitutionality of § 107(2)." It noted that "Prof. Chemerinsky may raise this issue through a separate lawsuit," and that "Given the weighty nature of Prof. Chemerinsky's constitutional arguments, they are better suited for consideration in the first instance in a traditional procedural posture before a district court."

Somewhat defensively, the panel stated in a footnote that "We questioned the constitutionality of § 107(2) not because it was a freestanding issue that needed resolution, but only as necessary to determine whether the Tax Court had erred when it issued declaratory relief. . ."

One member of the panel, Judge Richard C. Tallman, added a terse concurrence: "I concur only in the judgment of the court. Because the parties had previously stipulated to a dismissal, pursuant to Federal Rule of Appellate Procedure 42(b), the Clerk should simply dismiss the appeal. The Court need not consider Professor Chemerinsky's subsequent motion to intervene because it is moot. Nothing more need be said."

Articles & News Items

• "IRS rule allowing tax deduction for church parsonages is constitutional," May 6, 2002