• Religious Privileges and Exemptions Questioned
  • April 16, 2015 | Author: Laura Bellotti Cardillo
  • Law Firm: Pullman & Comley, LLC - Hartford Office
  • Many states, including Connecticut, offer property tax benefits to houses of worship and the residences of their professional religious leaders. The Internal Revenue Code provides a panoply of preferences as well.

    In a 2013 Wisconsin federal court decision, US District Judge Barbara Crabb held that the tax-free housing allowance afforded clergypersons under Section 107(ii) of Internal Revenue Code violates the anti-establishment clause of the Constitution because only religious persons benefit - “to the exclusion of those with no faith at all.”

    A Kentucky federal court action seeking to invalidate Section 501(c)(3) of the Internal Revenue Code insofar as it extends preferential treatment to religions was denied in May 2014 even though a 1970 U.S. Supreme Court decision called Walz v. Tax Commission rejected an attack on religious property tax exemptions for many reasons, among which was the long history of providing such exemptions to non-profit religious organizations. Walz seems to have been placed on somewhat shaky ground 19 years later by the Supreme Court’s rejection of a sales tax exemption for religious publications.

    The nub of the present legal analysis seems to rest on the difference between a subsidy - a direct payment by government to a religious organization - and an exemption. As Jonathan T. McCants writes in the November/December 2014 issue of Taxation of Exempts, the distinction seems “tenuous.”

    It’s conceivable that an action will be brought in Connecticut challenging the extensive web of income, sales and property tax exemptions accorded to religious originations as the state struggles to match revenue with expenses in current and future budgets.