Category: Uncategorized

WE BUILT THIS CITY ON ROCK AND ROLL

Jefferson Starship’s 1985 tribute to rock’s influence on the “city by the bay” even today transports us to a part of our cultural history. If music can do that in a secular setting, can there be any doubt it can do so in a worship service? Indeed, would not a church seek catharsis wistful or inspired during worship services and use music to obtain it?

In Demikovich v St. Andrew the Apostle Parish, Memorandum and Order, (USDC, ND Ill. ED. September 29, 2017), the federal court dismissed the Plaintiff’s employment discrimination case based on the First Amendment Ministerial Exception. Plaintiff was a part-time employee that self-described his role as “music director, choir director and organist.” In those roles, Plaintiff explained that he selected music played during mass. His selections were not final and were subject to approval. Plaintiff alleged he was fired for entering into a same sex marriage and because of disability arising from overweight and diabetes.

The Court listed the extant “music director” cases and explained that the church “held out [Plaintiff] as a minister, with a role distinct from that of most of its members.” Thus, counsel faced with such a case may want to explore fully the authority the church employee had that a lay member did not. The Court declined to consider final decision-making authority, or its absence, as determinative of whether the church employee was a “minister.” The Court sanely recognized that everyone answers to somebody. The Court held that the fundamental right to marry does not guarantee freedom from private discrimination but only governmental discrimination. The Court did not reach the inquiry of whether “interference with the fundamental right to marry” included discrimination when the decision to marry or the marriage process was not affected by the adverse employment action but only penalized after the fact.

CHURCH BUILDING REPAIR AS A SECULAR PURPOSE

Reported in a prior posting on this website was the United States Supreme Court opinion in Trinity Lutheran Church of Columbia, Inc. v Comer, 137 S. Ct. 2012 (2017). In Comer, Missouri disallowed payment of a grant to a church to install a rubber surface on its otherwise concrete playground. The Supreme Court held that the neutral purpose, safeguarding playing children, was not a violation of the Establishment Clause. Indeed, the Supreme Court went on to point out that excluding an applicant just because the applicant was a religious organization was discriminatory. That decision was relied upon in Taylor v Town of Cabot, 2017 VT 92.

In Taylor, the Supreme Court of Vermont tentatively upheld a municipal vote that approved an award of $10,000 of building repair and restoration funds for repair of an “historic church” building against the Vermont equivalent of an Establishment Clause challenge. The decision was a reversal of a preliminary injunction issued by the trial court before Comer was issued. Thus, the case was returned to the trial court for further proceedings which still could eventually result in a decision against the church and in favor of the tax protestors.

While the decision might seem to be favorable to the church, and the Town of Cabot may have been defending the case, at some point someone may decide this much litigation over $10,000 is simply too much and the church might return the money. Indeed, the Vermont Supreme Court held that if the trial court on remand again decided the award violated the Vermont constitution the money might have to be repatriated by the church. Churches that take governmental money of any kind run such a risk. Historically important church buildings might not be economic to preserve. Nevertheless, just because an applicant for governmental funds is a church by itself should not result in denial as long as the funds have a secular purpose not reasonably related to establishment of worship.

FAIRWELL HOUSING ALLOWANCE TAX EXEMPTION

There may not be any housing tax exemption for pastors. Such an exemption has existed since 1954. Most pastors lived at the “parsonage” owned and provided by the church. As churches became more affluent, the involuntary vow of poverty became less appealing. Pastors wanted to build up equity and own their own home. The parsonage began to slip into history. To aid pastors in acquiring a home churches turned to the “housing allowance.” The “housing allowance” began to form a significant part of the compensation of pastors. The allowance allowed the minister to buy a home near enough to the church to allow rapid access to the church but not owned by the church. The “housing allowance” was not included in taxable income. The “housing allowance” will remain a viable tax exemption for anyone, including pastors, that are required to live at a certain place by their employer just like any other secular employee. But, the “housing allowance” may not continue in the absence of the employer’s mandate if this decision stands.

In Gaylor v Mnuchin, Opinion and Order (WD Wis. 2017), 26 USC §107(2) has again by the same federal court been held to be in violation of the Establishment Clause. The Court held that the statute discriminates against secular employees because they cannot qualify for the exemption. The Court held the exemption does not have a secular purpose. The argument that the statute was enacted to implement the constitutional entanglements clause was rejected. The Court held the legislative history indicated the motive behind the statute was a preference for ministers over secular employees. The Court noted that taxes have been held to be neutral and not a burden on free exercise of religion, otherwise every tax would have to be inapplicable to employees of religious organizations. Housing allowances for pastors required to live on church grounds will not be effected because that is governed by a different section of the statute. The opinion of the Court runs to 47 pages.

Tax preparers that try to apply this decision should be cautioned that the Court expressly omitted from its ruling the other sections of the statute. Only 26 USC §107(2) is the subject of the decision. The practical loss of the housing allowance will only occur in those situations in which the housing allowance is used to shelter part of the income of the pastor. It will not be lost under this decision if the religious organization requires its pastor to live in a certain location or in a church owned parsonage. Any housing allowance that would be permitted to a secular employer’s employee will still be allowed for a religious organization employee.

No doubt this decision will be appealed as it has been in the past. Ultimately, the issue will be decided by a federal appellate court and possibly someday by the US Supreme Court. Several if not many tax years will come and go before then. Technically, the reach of this decision is not outside of the Western District of Wisconsin. But, the IRS could chose to insist it be followed nationally.

TOO MUCH ECCLESIASTICAL ABSTENTION? – 2nd Ed.

In late 2016, and summarized in a post here March 11, 2017, in the case of Church of God in Christ, Inc. v L.M. Haley Ministries, Inc., Slip. Op. (Tenn. App. 2016), the Plaintiff was attempting to assert hierarchal control over church property of one of its daughter churches when the local church leadership “went rogue.” The founding Pastor of the church died and the presiding bishop installed a “speaker – rotation” system to prevent “dissension among those vying” to become the new Pastor. But, two years later the presiding bishop died and a new presiding bishop was appointed. The new bishop had the authority to appoint a new Pastor and appointed himself to be Pastor. But, when the new bishop in the role as the new Pastor tried to assume control of the church assets he was blocked by local church leaders. The opinion does not explain the motive. Because the church had not withdrawn from the denomination, and the denomination had not declared the church withdrawn (or excommunicated) prior to the dispute, the courts determined the dispute was internal and further court intervention was barred by the ecclesiastical abstention doctrine. The court would not declare the denomination’s rights to the assets of the affiliated church and the court would not confirm the new bishop as the new Pastor pursuant to the denomination’s governing documents.

On September 21, 2017, the Supreme Court of Tennessee opinion was issued reversing the intermediate appellate court and trial court, holding that the ecclesiastical abstention doctrine did not foreclose application of neutral principles of law. The Plaintiff denomination, pursuant to its control documents which were adopted by the local church prior to the dispute, was awarded control of the assets of the daughter church including its real property. It was interesting to note that the Supreme Court of Tennessee was careful to explain that the result would be the same if either the deed or the hierarchical control documents contained reversionary clauses, but that both were not required.

The better practice is for hierarchical churches to maintain reversionary clauses in both the denominational control documents and the local church deed. But, in some if not by now most states, failure to put the language in the deed does not impair denominational enforcement of the reversionary clause. Also, strategic (or fraudulent) related party transfers of the deed that attempt to strip the reversionary clauses of their impact are ineffectual.