Annie Laurie Gaylor v. Steven T. Mnuchin

Since the Founders crafted the Religion

Clauses of the First Amendment, courts have grappled

2 Nos. 18-1277 & 18-1280

with the “play in the joints” between them. Walz v. Tax Comm.

of City of N.Y., 397 U.S. 664, 669 (1970). This case calls us to do

so once more. Freedom From Religion Foundation (“FFRF”)

claims that a longstanding tax code exemption for religious

housing, 26 U.S.C. § 107(2) of the Internal Revenue Code, violates

the Establishment Clause. The district court agreed.

The U.S. Treasury Department and several intervening religious

organizations ask us to reinstate the exemption, asserting

that the survival of many congregations hangs in the

balance. We must decide whether excluding housing allowances

from ministers’ taxable income is a law “respecting an

establishment of religion” in violation of the First Amendment.

I.

A. History of § 107(2)

The facts before us are not in dispute. The Sixteenth

Amendment was ratified in 1913, authorizing Congress to

levy an income tax. Congress imposed a federal income tax

that same year and has levied one in various forms since. As

a result, Congress and the Treasury Department needed to

define taxable “income.” A rule defining income that survives

today in the Internal Revenue Code is the “convenience-ofthe-

employer” doctrine. Under that doctrine, housing provided

to employees for the convenience of their employer is

exempt from taxable income. Early examples of exclusions

under the doctrine include housing provided to sailors living

aboard ships, workers living in camps, and hospital employees.

But the convenience-of-the-employer doctrine was not

Nos. 18-1277 & 18-1280 3

made available to ministers.1 In 1921, the Treasury Department

announced ministers would be taxed on the fair rental

value of parsonages provided as living quarters. O.D. 862, 4

C.B. 85 (1921).

Congress reacted quickly and enacted a statute to exclude

church-provided parsonages from the taxable income of ministers.

The Treasury Department interpreted this statute to

apply only to housing provided in-kind; cash housing allowances

were included in income. I.T. 1694, C.B. II-1, at 79 (1923).

This continued for decades until in the 1950s several ministers

successfully challenged the limitation to in-kind housing.2

Congress then enacted 26 U.S.C. § 107, which provides:

In the case of a minister of the gospel, gross income

does not include—

(1) the rental value of a home furnished to him

as part of his compensation; or

(2) the rental allowance paid to him as part of

his compensation, to the extent used by him to

rent or provide a home …

1 The text of the tax code refers specifically to “ministers of the gospel,”

so we use that term. Courts have long held the provision applies to

religious leaders of any denomination, regardless of formal title. See, e.g.,

Salkov v. Comm’r, 46 T.C. 190, 194 (1966) (holding a Jewish cantor was a

“minister of the gospel”).

2 See, e.g., Williamson v. Comm’r, 224 F.2d 377 (8th Cir. 1955); Conning

v. Busey, 127 F. Supp. 958 (S.D. Ohio 1954); MacColl v. United States,

91 F. Supp. 721 (N.D. Ill. 1950).

4 Nos. 18-1277 & 18-1280

Section 107(1) reauthorized the in-kind parsonage exemption

in place since the 1920s. Section 107(2) authorized the IRS to

also exempt cash allowances from ministers’ taxable income.3

B. District Court Proceedings

FFRF describes itself as a “nonprophet nonprofit” organization

that “[t]akes legal action challenging entanglement of

religion and government, government endorsement or promotion

of religion.” What Does the Foundation Do?, FREEDOM

FROM RELIGION FOUNDATION, https://ffrf.org/faq/item/15001-

what-does-the-foundation-do (last visited March 10, 2019).

Seeking to challenge both § 107(1) and § 107(2), FFRF paid its

co-presidents Annie Gaylor and Dan Barker a portion of their

salaries in the form of a housing allowance. FFRF also paid

this housing allowance to a former president of the organization,

Anne Nicol Gaylor (“Nicol Gaylor”).4 FFRF, Gaylor,

Barker, and Nicol Gaylor, none of whom meet the IRS’s definition

of “minister,” then sued the Treasury Department,

claiming § 107 violates the First Amendment because it conditions

a tax benefit on religious affiliation. We dismissed this

challenge for lack of standing because FFRF and its employees

never applied for § 107(1) or § 107(2) exemptions, so they were

3 An amicus brief from the University of St. Thomas School of Law

(Minnesota) estimates that of the United States’ 384,000 congregations,

200,000 to 300,000 provide a housing allowance to their ministers under

26 U.S.C. § 107(2).

4 Nicol Gaylor, Annie Gaylor’s mother and co-founder of FFRF,

passed away during the initial lawsuit filed by FFRF. Although the party

to this lawsuit is technically the Estate of Anne Nicol Gaylor, we refer to

her as “Nicol Gaylor” for brevity.

Nos. 18-1277 & 18-1280 5

never denied them. Freedom From Religion Foundation, Inc. v.

Lew, 773 F.3d 815, 825 (7th Cir. 2014) (“Lew”).

In response, Gaylor and Barker filed amended tax returns

for 2012 and 2013 claiming refunds for their housing allowances

under § 107(2); Nicol Gaylor did the same for 2013. The

IRS erroneously issued refunds to Gaylor and Barker for 2013

but made no decisions on plaintiffs’ other claims. After more

than six months without IRS action on plaintiffs’ claims, FFRF

and its employees brought this suit. The IRS then denied the

2012 refund claims because none of the claimants were ministers.

The Treasury Department moved to dismiss FFRF’s

§ 107(1) challenge for lack of subject matter jurisdiction. The

district court granted the motion for the same reasons we

articulated in Lew: FFRF’s employees never claimed a § 107(1)

exemption. FFRF does not appeal that ruling. Later, the district

court permitted several pastors who receive housing

allowances and their associated religious organizations to intervene

to defend § 107(2).5

The Treasury Department and intervenors moved for

summary judgment. The district court denied their motions

and instead granted summary judgment to FFRF and its employees.

The court held that FFRF and its employees had

standing to challenge § 107(2), and that that statute violates

the Establishment Clause of the First Amendment. Gaylor v.

5 The intervening defendants are Bishop Edward Peecher, the Chicago

Embassy Church, Father Patrick Malone, the Holy Cross Church, the

Diocese of Chicago and Mid-America of the Russian Orthodox Church

Outside of Russia, and Pastor Christopher Butler. Each of the intervenors

receive or provide housing allowances under § 107(2).

6 Nos. 18-1277 & 18-1280

Mnuchin, 278 F. Supp. 3d 1081, 1104 (W.D. Wis. 2017). The

court held that § 107(2) violated the secular purpose prong of

the test set forth in Lemon v. Kurtzman, 403 U.S. 602 (1971), and

ruled that the statute’s true purpose was to “provide aid to a

group of religious persons.” Gaylor, 278 F. Supp. 3d at 1099.

The court rejected the argument that § 107(2) avoids excessive

government entanglement with religion, because in the

court’s view “concerns about entanglement [do not] justify

preferential treatment for religious persons.” Id. The Treasury

Department and the intervenors appeal.

II.

Neither the Treasury Department nor the intervenors

dispute the district court’s ruling that FFRF has standing to

challenge § 107(2). Nevertheless, even if the issue has not been

raised, if there is no Article III standing our court must dismiss

the suit. Diedrich v. Ocwen Loan Servicing, LLC, 839 F.3d

583, 588 (7th Cir. 2016). We evaluate standing to determine

whether FFRF resolved the deficiencies we noted in Lew.

To establish Article III standing, plaintiffs must show they

have suffered “(1) a concrete and particularized ‘injury in fact’

(2) that is fairly traceable to the challenged action of the defendant,

and that is (3) likely to be redressed by a favorable

judicial decision.” Lew, 773 F.3d at 819 (citing Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)). To challenge

the constitutionality of a tax provision, a plaintiff must have

“personally claimed and been denied the exemption.” Lew,

773 F.3d at 821.

An essential element of “injury in fact” is that the injury

be “actual and imminent, not conjectural or hypothetical.”

Nos. 18-1277 & 18-1280 7

Lujan, 504 U.S. at 561 (internal quotations and citations omitted).

When FFRF filed this action, Gaylor and Barker had yet

to be denied a refund from their 2012 tax returns, and Nicol

Gaylor had still, by the time of the district court’s decision,

received no answer to her 2013 refund request. Yet this does

not necessarily mean FFRF lacked standing. Under 26 U.S.C.

§ 6532(a)(1), an income tax refund suit may be filed no earlier

than six months after the refund claim was submitted. A statute

cannot “‘lower the threshold for standing below the minimum

requirements imposed by the Constitution,’ but

Congress does have the power to ‘enact statutes creating legal

rights, the invasion of which creates standing, even though no

injury would exist without the statute.’” Sterk v. Redbox

Automated Retail, LLC, 770 F.3d 618, 623 (7th Cir. 2014) (quoting

Kyles v. J.K. Guardian Sec. Servs., Inc., 222 F.3d 289, 294 (7th

Cir. 2000)).

The district court concluded it was reasonable to interpret

§ 6532(a)(1) as rendering a claim “effectively denied if the IRS

does not render a decision within six months.” Gaylor, 278

F. Supp. 3d at 1087. We agree. As the district court noted, preventing

a claimant from filing a refund suit until the IRS

responded to the claim “would allow the IRS to deprive a

party of standing indefinitely by withholding a decision.” Id.

at 1088. Several courts of appeals have cited the six-month filing

requirement approvingly. See, e.g., Fletcher v. United States,

452 Fed. App’x 547, 552 (5th Cir. 2011) (“[B]efore a taxpayer

can bring a refund suit, he or she must … wait until either the

IRS denies the claim or six months have expired since filing

the administrative claim.”); Dumont v. United States, 345 Fed.

App’x 586, 590 (Fed. Cir. 2009) (“[A] suit … cannot be instituted

until either the IRS denies the claim or six months pass

without its taking action.”); Sorenson v. Secʹy of Treasury of

8 Nos. 18-1277 & 18-1280

U.S., 752 F.2d 1433, 1438 (9th Cir. 1985), affʹd, 475 U.S. 851

(1986) (“The former section prohibits the courts from entertaining

any refund suit filed before the expiration of six

months from the date the claim for refund is filed … .”); see

also Lew, 773 F.3d at 821 n.3 (“The plaintiffs could have … paid

income tax on their housing allowance, claimed refunds from

the IRS, and then sued if the IRS rejected or failed to act upon

their claims.”) (emphasis added).

Gaylor, Barker, and Nicol Gaylor have properly alleged a

“concrete, dollars-and-cents injury.” Lew, 773 F.3d at 821.

“[T]hey have incurred a cost or been denied a benefit on

account of their religion [or lack thereof],” Arizona Christian

Sch. Tuition Org. v. Winn, 536 U.S. 125, 130 (2011), which confers

Article III standing. Because its members have standing

and the contested issue is germane to its organizational purpose,

FFRF has organizational standing to sue as well. See

Sierra Club v. United States E.P.A., 774 F.3d 383, 388–89 (7th

Cir. 2014) (“‘An organization has standing to sue if (1) at least

one of its members would otherwise have standing; (2) the

interests at stake in the litigation are germane to the organization’s

purpose; and (3) neither the claim asserted nor the relief

requested requires an individual member’s participation in

the lawsuit.’”) (quoting Sierra Club v. Franklin Cty. Power of Ill.

LLC, 546 F.3d 918, 924 (7th Cir. 2008)).

III.

This case comes to us after a grant of summary judgment,

so we assess the parties’ claims de novo. Freedom from Religion

Found., Inc. v. Concord Cmty. Sch., 885 F.3d 1038, 1045 (7th Cir.

2018) (“Concord”).

Nos. 18-1277 & 18-1280 9

Currently, Establishment Clause jurisprudence incorporates

a number of tests when evaluating the constitutionality

of government action. Two are relevant to this case: the test

announced in Lemon v. Kurtzman, 403 U.S. 602 (1971), and the

“historical significance” test of Town of Greece v. Galloway, 572

U.S. 565, 576 (2014).6 Because the Supreme Court has not clarified

which should take precedence, we evaluate FFRF’s

claims under both tests and associated case law. See Concord,

885 F.3d at 1045 n.1 (“Indeed, there is debate among the Justices

about the continuing validity of the endorsement

test. … For now, we do not feel free to jettison that test altogether

… .”).7 We consider this case under the Lemon test in

6 A third relevant to this challenge, the endorsement test, clarifies

Lemon and is woven into our consideration of § 107(2) under the Lemon

test, particularly under the second prong. See, e.g., Freedom from Religion

Found., Inc. v. City of Marshfield, Wis., 203 F.3d 487, 493 (7th Cir. 2000), as

amended on denial of rehʹg and rehʹg en banc (Mar. 22, 2000) (“[T]he effect

prong of [the Lemon] test has been analyzed under the ‘perception of endorsement’

test developed in Lynch v. Donnelly, 465 U.S. 668, 690 (1984)

(O’Connor, J., concurring).”).

7 An amicus brief filed by Wisconsin and fifteen other states notes the

Supreme Court has not applied the Lemon test to a religious freedom case

in many years. Even so, until the Supreme Court explicitly overturns

Lemon we must apply it, as well as the other tests more recently relied

upon by the Court. Other circuit courts also apply multiple tests when

considering a challenge under the Establishment Clause. See, e.g., American

Humanist Assoc. v. McCarty, 851 F.3d 521, 525–26 (5th Cir. 2017) (balancing

the Lemon, endorsement, and coercion tests against the historical significance

test in Town of Greece); Smith v. Jefferson Cty. Bd. of Sch. Comm’rs,

788 F.3d 580, 586–87 (6th Cir. 2015) (setting forth Lemon, the endorsement

test, and Town of Greece as the “three main jurisprudential threads” that

must be woven together in assessing government action under the Establishment

Clause).

10 Nos. 18-1277 & 18-1280

this Part of this opinion, and under the “historical significance”

test in Part IV.

Lemon summarized prior case law into a three-prong test:

“[f]irst, the statute must have a secular legislative purpose;

second, its principal or primary effect must be one that neither

advances nor inhibits religion; finally, the statute must not

foster an excessive government entanglement with religion.”

403 U.S. at 612–13 (internal citations and quotations omitted).

This test is not cumulative: if § 107(2) fails any of Lemon’s three

prongs, it violates the Establishment Clause.

A. Secular Legislative Purpose

We first examine whether § 107(2) has a secular legislative

purpose. “When the government acts with the ostensible and

predominant purpose of advancing religion, it violates that

central Establishment Clause value of official religious neutrality,

there being no neutrality when the government’s ostensible

object is to take sides.” McCreary Cty., Ky. v. Am. Civil

Liberties Union of Ky., 545 U.S. 844, 860 (2005) (citing Corporation

of Presiding Bishop of Church of Jesus Christ of Latter-day

Saints v. Amos, 483 U.S. 327, 330 (1987)). A statute is unconstitutional

under this test “only when … there [is] no question

that the statute … was motivated wholly by religious considerations.”

Lynch v. Donnelly, 465 U.S. 668, 680 (1984). The

Treasury Department and intervenors point to three secular

legislative purposes of the statute: to eliminate discrimination

against ministers, to eliminate discrimination between ministers,

and to avoid excessive entanglement with religion. FFRF

counters that § 107(2) was passed to confer a government benefit

on religion, which necessarily violates the Establishment

Clause.

Nos. 18-1277 & 18-1280 11

We will defer to a government’s sincere articulation of secular

purpose, so long as the plaintiffs have not proved that

articulation of purpose is a sham. Edwards v. Aguillard, 482

U.S. 578, 586–87 (1987) (“While the Court is normally deferential

to a State’s articulation of a secular purpose, it is

required that the statement of such purpose be sincere and

not a sham.”); Cohen v. City of Des Plaines, 8 F.3d 484, 489 (7th

Cir. 1993) (“We will defer to a municipality’s sincere articulation

of a secular purpose.”). This does not mean “that the

law’s purpose must be unrelated to religion … .” Amos, 483

U.S. at 335. Instead, “the government lacks a secular purpose

under Lemon only when ‘there is no question that the statute

or activity was motivated wholly by religious considerations.’”

Milwaukee Deputy Sheriffs’ Ass’n v. Clarke, 588 F.3d 523,

527–28 (7th Cir. 2009) (quoting Books v. Elkhart Cty., 401 F.3d

857, 863 (7th Cir. 2005), in turn quoting Lynch, 465 U.S. at 680).

So we evaluate the purposes articulated by the Treasury Department

to determine whether they are sincere, or whether

the government’s “‘actual purpose is to endorse or disapprove

of religion.’” Edwards, 482 U.S. at 585 (quoting Lynch,

465 U.S. at 690 (O’Connor, J., concurring)).

The Treasury Department first contends Congress passed

§ 107 to put ministers on equal footing with secular employees

receiving the same benefits; in other words, to eliminate

discrimination against ministers. The Treasury Department

points to its 1921 decision to not exclude parsonages from taxable

income and Congress’s quick passage of the parsonage

exemption, now codified at § 107(1), in response. The Treasury

Department argues this is a secular purpose because it

simply places religious employees on par with secular ones.

FFRF counters that the benefits given to ministers under

§ 107(2) are different—and better—than those the tax code

12 Nos. 18-1277 & 18-1280

gives to secular employees. FFRF argues putting ministers in

a better position than secular employees promotes the dissemination

of religious ideas and thus cannot be secular.

To determine whether § 107(2) confers a special benefit, or

simply integrates ministers into an existing tax system, we

must delve into the convenience-of-the-employer doctrine.

Though the doctrine was originally developed in Treasury

Department regulations, it has since been codified in several

places. The principal statute is 26 U.S.C. § 119(a)(2) and exempts

meals and lodging furnished to employees if they meet

five requirements: the meal or lodging is furnished (1) by an

employer to an employee, (2) in kind (as opposed to in cash),

(3) on the business premises of the employer, (4) for the convenience

of the employer, and (5) as a condition of employment.

See also 26 C.F.R. § 1.119-1(b) (2018). This exemption

applies generally: any qualifying employee can rely on

§ 119(a)(2), including religious employees.8

The express proof requirements of § 119(a)(2) are relaxed

throughout the tax code for various types of employees. Section

119(c) exempts employees living in a foreign camp from

needing to fulfill the “business premises” and “condition of

employment” factors. Section 119(d) exempts certain teachers

and university employees from the convenience-of-theemployer

doctrine altogether, and allows them to exclude

from taxable income the fair rental value of campus housing.

Myriad provisions in Title 26 employ this categorical

approach and exempt any form of housing benefits, whether

8 For additional history on the development of the convenience-of-theemployer

doctrine, see Commissioner v. Kowalski, 434 U.S. 77, 84–96 (1977).

Nos. 18-1277 & 18-1280 13

in cash or in kind: § 132 and § 162 exclude housing provided

to an employee away on business for less than a year; § 134

excludes housing provided to current or former members of

the military; § 911 excludes housing above a certain level provided

to citizens or residents living abroad; § 912 excludes

housing provided to government employees living abroad;

and, of course, § 107 excludes housing provided to ministers.

These categorical exemptions allow hundreds of thousands of

employees (including ministers) to receive tax-exempt

housing every year without needing to satisfy the proof requirements

of § 119(a)(2).

These parallel provisions show an overarching arrangement

in the tax code to exempt employer-provided housing

for employees with certain job-related housing requirements.

Congress has exempted certain categories of employees from

complying with the specific requirements of § 119(a)(2) to

simplify the application of the convenience-of-the-employer

doctrine to those occupations. Section 107, including subsection

(2), recognizes ministers often use their homes as part of

their ministry. This provision thus eases the administration of

the convenience-of-the-employer doctrine by providing a

bright-line rule, instead of requiring that ministers and the

IRS repeatedly engage with a fact-intensive standard.

Reading § 107(2) in isolation from the other convenienceof-

the-employer provisions, and then highlighting the term

“minister,” could make the challenged statute appear to provide

a government benefit exclusively to the religious. But

reading it in context, as we must, we see § 107(2) is simply one

of many per se rules that provide a tax exemption to employees

with work-related housing requirements. See ANTONIN

14 Nos. 18-1277 & 18-1280

SCALIA & BRYAN A. GARNER, READING LAW 252 (2012) (“‘Several

acts in pari materia, and relating to the same subject, are to

be taken together, and compared in construction of them, because

they are considered as having one object in view, and

as acting upon one system.’”) (quoting 1 James Kent, Commentaries

on American Law 433 (1826)); see also Mueller v. Allen, 463

U.S. 388, 396 (1983) (upholding Minnesota tax deduction for

tuition expenses, primarily used by parents of children at sectarian

schools, in part because the deduction was “only one

among many deductions—such as those for medical expenses

… and charitable contributions … available under the

Minnesota tax laws”). Congress’s policy choice to ease the administration

of the convenience-of-the-employer doctrine by

applying a categorical exclusion is a secular purpose, not

“motivated wholly by religious considerations.” Lynch, 465

U.S. at 680.

FFRF argues considering the context of § 107(2) is inapt.

To FFRF, the benefits the statute provides apply to a broader

category of persons—any minister, as opposed to any minister

that uses his or her home for religious purposes—than

other categorical housing exclusions in the tax code. The district

court agreed, and found that § 107(2) is not analogous to

other bright-line housing benefit provisions in the tax code

because, in comparison, it is overinclusive. Gaylor, 278

F. Supp. 3d at 1095 (“[Sections 134, 911, and 912] relate to employees

whose housing is necessarily affected by their

jobs. … Some ministers may be in a similar situation … but by

no means are all ministers so restricted … .”) (emphasis in

original).

It is not immediately apparent that § 107(2) is broader than

the other categorical exemptions for employee housing. For

Nos. 18-1277 & 18-1280 15

example, under 26 U.S.C. § 911, any person living abroad is

permitted to exclude or deduct housing expenses, regardless

whether that person is living abroad at the behest of his or her

employer.

But to the extent § 107(2) may be overinclusive, that alone

does not render the statute unconstitutional. FFRF’s argument

is a critique of categorical rules generally, rather than of

§ 107(2) specifically. “Read literally, rules are generally overinclusive

and underinclusive if assessed by references to their

purposes. There is always a gap between the justification for

a rule … and the rule itself.” Cass R. Sunstein, Problems with

Rules, 83 CALIF. L. REV. 953, 990–91 (1995). No rule will perfectly

address the concerns to which it is addressed, because

“[a]ll generalizations … are to some degree invalid, and hence

every rule of law has a few corners that do not quite fit.” Antonin

Scalia, The Rule of Law as a Law of Rules, 56 U. CHI. L. REV.

1175, 1177 (1989). Categorical rules sacrifice precision of result

for administrative ease and equality of result. So it is not surprising

that § 107(2) covers some housing allowances that

may be excluded under a case-by-case discretionary standard.

In this respect, § 107(2) is not an outlier.

Important to our consideration, any imprecision does not

make § 107(2) any less analogous to other “convenience-ofthe-

employer” related provisions in the tax code. Each covers

a different subset of eligible taxpayers and activities, but they

all serve a common purpose: excluding from taxable income

certain employment-related expenses. The constitutionality

of § 107(2) does not turn on which ministers the statute includes

or excludes. See, e.g., Kowalski, 434 U.S. at 95–96

(“[A]rguments of equity have little force in construing the

boundaries of exclusions and deductions from income many

16 Nos. 18-1277 & 18-1280

of which, to be administrable, must be arbitrary.”); Delong v.

Depʹt of Health & Human Servs., 264 F.3d 1334, 1343 (Fed. Cir.

2001) (“Like all bright line rules, [the statute] is both overinclusive

and under-inclusive, but the imprecision of the statute

does not make it unconstitutional.”).

The second secular legislative purpose cited by the Treasury

Department is elimination of discrimination between

ministers. The government argues Congress passed § 107(2)

because providing the tax exemption only to ministers given

in-kind housing tended to exclude ministers of smaller or

poorer denominations. FFRF argues this is a sham and the

true justification was to subsidize religion, based on a statement

made in the early 1950s by § 107(2)’s sponsoring representative

Peter Mack: “Certainly, in these times when we are

being threatened by a godless and antireligious world movement

we should correct this discrimination against certain

ministers who are carrying on such a courageous fight against

this foe.” Hearings Before the Committee on Ways and Means:

Statement of Hon. Peter F. Mack, Jr., on H.R. 4275, Concerning the

Taxability of a Cash Allowance Paid to Clergymen in Lieu of

Furnishing Them a Dwelling, 83d. Cong. 1, at 1576 (June 9,

1953). The Treasury Department and intervenors respond by

quoting other statements by Representative Mack from the

same hearing, such as that the bill was proposed because

“present tax laws are discriminatory among our clergy,” id. at

1574–75, and because he believed “a serious injustice [was]

being done to those ministers who must provide their own

home,” id. at 1576.

This smattering of legislative history does not establish

Representative Mack’s motives in proposing the bill. Even if

Nos. 18-1277 & 18-1280 17

his first quote above did so, the motivation of one representative

in a House of 435 does not definitively reveal the impetus

behind the bill’s passage. At the same hearing, other representatives

stated different motives. Speaking on the same proposed

provision, Representative Ray G. McKennan said the

changes were proposed to “create an equitable condition for

ministers similarly situated, and would probably eliminate

court action [by ministers suing for discrimination].” Id. at

1574.

The legislative record does not establish a singular motive

behind § 107(2). Conflicting statements among members of

Congress—even by the same member—reveal the unreliability

of this legislative history. Certainly, these statements do

not render “a sham” the Treasury Department’s proffered

purpose of avoiding discrimination among religions. Cf.

Edwards, 482 U.S. at 586–87. As such, we take the government

at its word, which resolves this question. “The clearest command

of the Establishment Clause is that one religious

denomination cannot be officially preferred over another.”

Larson v. Valente, 456 U.S. 228, 244 (1982). Avoidance of discrimination

against certain religions in favor of others is a permissible

secular legislative purpose.

The third secular legislative purpose cited by the Treasury

Department is to avoid excessive entanglement with religion.

To the government, Congress’s decision to exempt ministers

from the proof requirements of § 119(a)(2) prevents the IRS

from conducting intrusive inquiries into how religious organizations

use their facilities. See, e.g., Amos, 483 U.S. at 339

(“avoid[ing] … intrusive inquiry into religious belief …” prevents

entanglement). FFRF responds that § 107(2) does not

18 Nos. 18-1277 & 18-1280

avoid such entanglement because the IRS must still administer

a test to determine whether a taxpayer qualifies as a minister.

FFRF argues this is as fact-intensive an audit as the

inquiry administered for the generally applicable statutory

exemption, § 119(a)(2).

On this entanglement question, two Supreme Court decisions

are particularly instructive. In Walz v. Tax Comm. of City

of N.Y., the Court upheld a New York property tax exemption

for properties owned by churches and used exclusively for religious

worship. Walz disagreed with the lower court’s examination

of churches’ contribution to the social welfare to

determine whether the tax exemption had a secular purpose:

To give emphasis to so variable an aspect of the

work of religious bodies would introduce an

element of governmental evaluation and standards

as to the worth of particular social welfare

programs, thus producing a kind of continuing

day-to-day relationship which the policy of

neutrality seeks to minimize.

397 U.S. at 674. Similarly, in Amos v. Corporation of the Presiding

Bishop of the Church of Jesus Christ of Latter-day Saints, the

Supreme Court upheld a categorical exemption for religious

organizations from the provisions of Title VII of the Civil

Rights Act of 1964. The opinion noted that, under Lemon, “it

is a permissible legislative purpose to alleviate significant

governmental interference with the ability of religious organizations

to define and carry out their religious missions.”

Amos, 483 U.S. at 335.

Any financial interaction between religion and government—

like taxing a church, or exempting it from tax—entails

Nos. 18-1277 & 18-1280 19

some degree of entanglement. But only excessive entanglement

violates the Establishment Clause. See Walz, 307 U.S. at

674 (“We must also be sure that the end result—the effect—is

not an excessive government entanglement with religion.”)

Crucial to our evaluation, the Supreme Court has already permitted

the level of entanglement incurred under § 107(2). In

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC,

565 U.S. 171 (2012), the Court inquired into the facts underlying

Hosanna-Tabor’s employment to determine whether she

was a minister. Id. at 190–92. The IRS does the same under

§ 107(2) to determine whether a taxpayer qualifies as a minister.

The Court would not have so inquired if it violated the

Establishment Clause.

In contrast, the application of § 119(a)(2) to ministers

would entangle church and state far more than under

§ 107(2). For example, to determine what constitutes the business

premises of the employer under § 119(a)(2), the IRS

would have to determine what the “business” of the church is

and where and how far the “premises” of the church extend.

See EDWARD A. ZELINSKY, TAXING THE CHURCH 168–69 (2017).

To do so, the IRS would need to interrogate ministers on the

specifics of their worship activities, even determine which

activities constitute “worship.” Such government inquiries

into the internal affairs of churches to determine their eligibility

for tax relief have been rejected as excessive entanglement.

See, e.g., Serbian E. Orthodox Diocese for U.S. of Am. & Canada v.

Milivojevich, 426 U.S. 696, 708–20 (1976) (holding civil courts

cannot interfere with the rulings of ecclesiastical tribunals on

church affairs); Schleicher v. Salvation Army, 518 F.3d 472, 475

(7th Cir. 2008) (“Congress does not want courts to interfere in

the internal management of churches … .”).

20 Nos. 18-1277 & 18-1280

Worse, if subject to § 119(a)(2), congregations might alter

their religious activities to attempt to conform with its requirements.

Congress enacted § 107(2) in part to avoid that.

And congressional action “to minimize governmental interference

with the decision-making process in religions … does

not violate the Establishment Clause.” Amos, 483 U.S. at 336

(internal citations and quotations omitted).

The categorical nature of § 107(2) also avoids excessive

entanglement by providing ministers and their churches certainty

as to whether their housing allowances will be exempt

from tax. In Amos, the Supreme Court held “it is a significant

burden on a religious organization to require it, on pain of

substantial liability, to predict which of its activities a secular

court will consider religious.” Amos, 483 U.S. at 336.

Recognizing the potentially excessive entanglement

threatened by the application of § 119(a)(2) to ministers, Congress

enacted a less-entangling tax exemption. Seeking to

avoid government entanglement is a secular legislative purpose

under Lemon. See, e.g., Medina v. Catholic Health Initiatives,

877 F.3d 1213, 1231 (10th Cir. 2017) (“[T]he Supreme Court has

expressly held that a purpose of avoiding government entanglement

does not violate the Establishment Clause.”) (citing

Amos, 483 U.S. at 335). Because the government has articulated

not one, but three secular purposes, we conclude the

first prong of Lemon is satisfied.

B. Primary Effect of Advancing or Inhibiting Religion

The second prong of the Lemon test requires that a statute

have a “principal or primary effect … that neither advances

nor inhibits religion.” Lemon, 403 U.S. at 612. “For a law to

have forbidden ‘effects’ under Lemon, it must be fair to say

Nos. 18-1277 & 18-1280 21

that the government itself has advanced religion through its

own activities and influence.” Amos, 483 U.S. at 337 (emphasis

in original). This entails “sponsorship, financial support, and

active involvement of the sovereign in religious activity.”

Walz, 297 U.S. at 668.

FFRF contends the Supreme Court’s holdings in Amos and

Walz were superseded by Justice Brennan’s plurality opinion

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

resolved an Establishment Clause challenge to a state tax exemption

for religious publications. To determine whether

Justice Brennan’s opinion controls, we examine the grounds

for decision in Texas Monthly’s various concurrences. See

Marks v. United States, 430 U.S. 188, 193 (1977) (“When a fragmented

Court decides a case and no single rationale explaining

the result enjoys the assent of five Justices, the holding of

the Court may be viewed as that position taken by those

Members who concurred in the judgments on the narrowest

grounds.”).

In Texas Monthly, Justice Brennan authored an opinion

joined by Justice Marshall and Justice Stevens and announced

the result of the case; Justice White concurred in the result and

wrote separately; Justice Blackmun concurred in the result

and wrote for himself and Justice O’Connor; and Justice Scalia

filed a dissenting opinion, joined by Chief Justice Rehnquist

and Justice Kennedy. Justice Brennan’s opinion concluded

that the tax exemption for religious publications violated the

Establishment Clause because “[e]very tax exemption constitutes

a subsidy that affects nonqualifying taxpayers.” Texas

Monthly, 489 U.S. at 14 (Brennan, J., plurality opinion). He

stated any subsidy directed “exclusively to religious organi22

Nos. 18-1277 & 18-1280

zations that is not required by the Free Exercise Clause … cannot

but convey a message of endorsement to slighted members

of the community.” Id. at 15 (internal citations and

quotations omitted).

The other opinions in Texas Monthly were narrower in

scope. Justice White’s concurrence reached the same result,

but on an independent ground, the Press Clause. Justice

Blackmun’s concurrence agreed that the tax exemption violated

the Establishment Clause, but did not adopt many of

Justice Brennan’s sweeping statements. Justice Blackmun

urged that the case be resolved narrowly and concluded only

that “a tax exemption limited to the sale of religious literature

by religious organizations violates the Establishment Clause.”

Id. at 28 (Blackmun, J., concurring) (emphasis in original). Because

Justice Blackmun decided the case on Establishment

Clause grounds,9 and on a narrower basis than Justice

Brennan’s opinion, under the Marks rule Justice Blackmun’s

concurrence sets the rule of decision of Texas Monthly. His

concurrence did not comment on what constitutes a forbidden

effect under Lemon, so Texas Monthly does not alter our

analysis of this second prong.

9 Even if Justice White’s opinion were based on narrower grounds

than Justice Blackmun’s opinion, it reached the same result under a different

constitutional clause. “Marks applies ‘only when one opinion is a logical

subset of other, broader opinions.’” Gibson v. American Cyanamid Co.,

760 F.3d 600, 619 (7th Cir. 2014) (quoting King v. Palmer, 950 F.2d 771, 781

(D.C. Cir. 1991) (en banc)). Justice Blackmun’s opinion provided the fourth

and fifth votes in Texas Monthly and shared the “common denominator”

of resolving the issue under the Establishment Clause, so it controls. Gibson,

760 F.3d at 619 (quoting United States v. Heron, 564 F.3d 879, 884 (7th

Cir. 2009)).

Nos. 18-1277 & 18-1280 23

With Walz and Amos still in effect, we evaluate forbidden

effects under their framework. FFRF contends a tax exemption

for religion is identical to a government subsidy for religion.

In economic terms, a subsidy and a tax exemption may

have the same practical impact. See, e.g., Adam Chodorow,

The Parsonage Allowance, 51 U.C. DAVIS L. REV. 849, 854 (2018)

(“The claim that exemptions differ from direct subsidies for

Establishment Clause purposes simply ignores economic reality.”).

But the Supreme Court has already found a constitutionally

significant difference between the two on taxing

religion. “The grant of a tax exemption is not sponsorship

since the government does not transfer part of its revenue to

churches but simply abstains from demanding that the

church support the state.” Walz, 397 U.S. at 675.10

Under Walz and Amos, then, § 107(2) does not advance religion

on behalf of the government. Providing a tax exemption

does not “connote[] sponsorship, financial support, and active

involvement of the [government] in religious activity” under

Walz, 397 U.S. at 668; see also Amos, 483 U.S. at 337 (“[W]e do

not see how any advancement of religion achieved by the [exempt

religious organization] can be fairly attributed to the

Government, as opposed to the Church.”).

Under these precedents, the primary effect of § 107(2) is

not to advance religion on behalf of the government, but to

10 The Supreme Court tacitly reaffirmed this approach in its standing

discussion in Arizona Christian Sch. Tuition Org. v. Winn, 536 U.S. 125

(2011). There, it held taxpayers had no standing to challenge a tax credit

directed primarily towards sectarian schools because “[w]hen the government

declines to impose a tax, … there is no … connection between dissenting

taxpayer and alleged establishment.” Id. at 142.

24 Nos. 18-1277 & 18-1280

“allow[] churches to advance religion, which is their very purpose.”

Amos, 483 U.S. at 337 (emphasis in original). So § 107(2)

passes the second prong of Lemon.

C. Excessive Entanglement with Religion

The third prong of the Lemon test is whether the state “foster[

s] ‘an excessive government entanglement with religion.’”

Lemon, 403 U.S. at 613 (quoting Walz, 397 U.S. at 674). We have

addressed this prong in Part III.A above. Because some level

of church-state interaction is unavoidable, “[e]ntanglement is

a question of kind and degree.” Lynch, 465 U.S. at 684.

Section 107(2) avoids government inquiry into the use of a

minister’s home, but it still requires the IRS to determine who

qualifies as a minister eligible for the exemption. Even if the

IRS’s test for who qualifies as a minister involves entanglement,

it is of a nature approved by the Supreme Court in

Hosanna-Tabor. See Hosanna-Tabor, 565 U.S. at 190–95 (engaging

in a fact-bound analysis to determine whether the petitioner

qualified as a minister). The alternative would be to

force ministers to comply with the far more detailed and particular,

and thus more entangling, requirements of § 119(a)(2).

In answer to these concerns, Congress chose to enact

§ 107(2). Legislative determinations about the Establishment

Clause, while not binding, are entitled to deference. “We in

the Judiciary must be wary of interpreting [the Religion]

Clauses in a manner that negates the legislative role altogether.”

Texas Monthly, 489 U.S. at 28 (Blackmun, J., concurring).

Legislative deference is particularly great for

classifications in tax legislation. See, e.g., Regan v. Taxation with

Representation of Washington, 461 U.S. 540, 547 (1997) (“Legislatures

have especially broad latitude in creating classifications

and distinctions in tax statutes.”); Madden v. Kentucky,

Nos. 18-1277 & 18-1280 25

309 U.S. 83, 88 (1940) (holding that for tax classifications challenged

under the Fourteenth Amendment, “the presumption

of constitutionality can be overcome only by the most explicit

demonstration that a classification is a hostile and oppressive

discrimination against particular persons and classes”).

Congress decided § 107(2) is the less entangling option, so we

will not disturb it.

We conclude § 107(2) has a secular legislative purpose, its

principal effect is neither to endorse nor to inhibit religion,

and it does not cause excessive government entanglement.

Here, “[t]here is no genuine nexus between tax exemption

and establishment of religion.” Walz, 397 U.S. at 675. Section

107(2), then, does not violate the Establishment Clause under

the Lemon test.

IV.

We next examine whether § 107(2) passes the historical

significance test.11 The Supreme Court has held “the Establishment

Clause must be interpreted ‘by reference to historical

practices and understandings.’” Town of Greece v. Galloway,

572 U.S. 565, 576 (2014) (quoting Cty. of Allegheny v. Am. Civil

11 FFRF and amici curiae supporting appellees’ position offer no arguments

under the historical significance test, except to assert the test applies

only to legislative prayer. We find no such limitation. Though Town

of Greece addressed legislative prayer, it stated that “the Establishment

Clause must be interpreted ‘by reference to historical practices and understandings.’”

572 U.S. at 576 (quoting Cty. of Allegheny, 492 U.S. at 670

(Kennedy, J., concurring in judgment in part and dissenting in part)). This

language does not limit the application of the Town of Greece standard to

constitutional challenges to legislative prayer. As this part discusses, other

Supreme Court cases have examined relevant history as to monuments as

well as the ministerial exception.

26 Nos. 18-1277 & 18-1280

Liberties Union Greater Pittsburgh Chapter, 492 U.S. 573, 670

(1989) (Kennedy, J., concurring in judgment in part and dissenting

in part)). This fact-bound test was developed in three

cases. First, in Van Orden v. Perry, 545 U.S. 677 (2005) (plurality

opinion), the Court considered whether a monument

inscribed with the Ten Commandments on Texas government

property violated the Establishment Clause. Van Orden criticized

the Lemon test for ignoring the “strong role played by

religion and religious traditions throughout our Nation’s

history.” Id. at 683. Instead, the Court reviewed a number of

historical examples of governments referencing God and displaying

the Ten Commandments without issue. On that basis,

the Court held the monument did not violate the Establishment

Clause. Id. at 692.

Next, in Hosanna-Tabor, a unanimous Supreme Court held

that the Establishment Clause prevents governments from interfering

with the decision of a religious group to terminate

one of its ministers. In so deciding, the opinion explored the

history of church-state relations in the United States and England,

back to the Magna Carta. Hosanna-Tabor, 565 U.S. at 182.

From that history, the Court determined that the First

Amendment was adopted in part to prevent “the new Federal

Government—unlike the English Crown—[from a] role in filling

ecclesiastical offices.” Id. at 184. This determination

formed the basis of the Court’s decision.

Finally, in Town of Greece the Supreme Court applied the

historical significance test when it held legislative prayer does

not violate the Establishment Clause. The Court held that

“[a]ny test the Court adopts [for the Establishment Clause]

Nos. 18-1277 & 18-1280 27

must acknowledge a practice that was accepted by the Framers

and has withstood the critical scrutiny of time and political

change.” Town of Greece, 572 U.S. at 577.

We now apply the historical significance test to this case.

FFRF offers no evidence that provisions like § 107(2) were historically

viewed as an establishment of religion. The government

and intervenors, and amici curiae supporting their

position, have provided substantial evidence of a lengthy

tradition of tax exemptions for religion, particularly for

church-owned properties. For over two centuries, the states

have implemented church property tax exemptions in various

forms. See John Witte, Jr., Tax Exemption of Church Property:

Historical Anomaly or Valid Constitutional Practice?, 64 S. CAL.

L. REV. 363, 380 (1991) (“The colonial law exemption of church

property continued largely uninterrupted in the early decades

of the American republic.”); see also id. at 389–95 (detailing

state protections for religious tax exemptions from the late

19th to early 20th centuries). When challenged on establishment

grounds, such tax exemptions typically have been upheld.

See, e.g., Trustees of Griswold College v. State, 46 Iowa 275,

282 (1877) (ruling the state constitution’s Establishment

Clause “does not [implicate] the exemption from taxation of

such church property as the legislature may think proper”).

Congress has enacted federal tax exemptions for religious

organizations as far back as 1802, when it permitted the

County of Alexandria (then under federal control) to exempt

church property from taxation, see 7 Cong. Ch. 53, May 3,

1802, 2 Stat. 194, and as recently as 2002, the last time § 107

was amended. See Clergy Housing Allowance Clarification

Act of 2002, Pub. L. No. 107–181, 116 Stat. 583. As early as

28 Nos. 18-1277 & 18-1280

1885, the U.S. Supreme Court acknowledged and accepted religious

property tax exemptions in Gibbons v. District of

Columbia, 116 U.S. 404 (1886), “reflecting more than a century

of our history and uninterrupted practice.” Walz, 397 U.S. at

680. Today, more than 2,600 federal and state tax laws provide

religious exemptions. NINA J. CRIMM & LAURENCE H. WINER,

POLITICS, TAXES, AND THE PULPIT: PROVOCATIVE FIRST

AMENDMENT CONFLICTS 43 (2011).

The district court distinguished § 107(2) from this long

and continuing historical tradition of property tax exemptions

by noting the statute is an income tax exemption. We

find this too fine a distinction, as it ignores the impact of the

Sixteenth Amendment. Before 1913, Congress could not constitutionally

tax housing provided to ministers as part of their

income. See Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601,

637 (1895) (invalidating a state income tax). Within a few

years of income becoming taxable, Congress moved to

exclude parsonages from income, and a few decades later excluded

cash housing allowances as well. Congress was continuing

its “historical practice[]” of exempting certain church

resources from taxation. Town of Greece, 572 U.S. at 576. This

endeavor limits entanglement between church and state, see

supra at Part III.C. Given this history, we conclude § 107(2)

does not violate the Establishment Clause under the historical

significance test.

FFRF claims § 107(2) renders unto God that which is

Caesar’s. But this tax provision falls into the play between the

joints of the Free Exercise Clause and the Establishment

Clause: neither commanded by the former, nor proscribed by

the latter. We conclude § 107(2) is constitutional. The

judgment of the district court is REVERSED.