SALT LAKE CITY — The Rev. Tuesday Jane Rupp's new job came with an interesting perk: an invitation to live in an 181-year-old house. Like many faith communities, her new employer, Saint Paul's Episcopal Church in Woodbury, Connecticut, owns a parsonage and offers it to rectors as part of their compensation package.
"I had the option of living in it or receiving a housing allowance that would be financially equivalent," she said. At her previous job in New York City, she took the allowance, which eased the burden of navigating the city's pricey housing market.
Housing benefits help ensure clergy members can afford to live close to the churches they serve and reflect the congregation's partial claim on the space. Pastors are often expected to treat their home like a second office and host scripture study groups or parties.
"So much of my work is location-based," the Rev. Rupp said.
Because of these expectations, the Internal Revenue Service doesn't tax ministers' housing-related compensation, just as it doesn't tax similar benefits offered to members of the military or foreign service. The current exemption has been in place since 1954, but its days could be numbered if a legal challenge from the Freedom From Religion Foundation succeeds.
The foundation, which advocates on behalf of atheist and agnostic Americans and has filed multiple lawsuits contesting tax breaks for faith groups, argues the IRS unlawfully gives ministers special treatment, making it much easier for them to receive housing-related tax breaks than others who do a lot of work at home.
"Many of us could argue that we need to live close to our place of employment," said Annie Laurie Gaylor, one of the organization's co-presidents.
In Gaylor v. Mnuchin, the Freedom From Religion Foundation is pitted against the federal government and a group of faith leaders, represented by The Becket Fund for Religious Liberty, who both say current tax law prevents improper government meddling in church business. They argue that ministers don't seem special when compared to Army officers or university presidents.
"People hear about tax doctrine and think 'That's not fair. That's special treatment for ministers.' But, in reality, this is allowing ministers to receive the same tax treatment as hundreds of thousands of nonreligious workers," said Luke Goodrich, vice president and senior counsel at Becket.
What's at stake in the case, which was heard by the 7th Circuit Court of Appeals on Wednesday, is more than how easy it is for faith leaders like the Rev. Rupp to relocate. It could redefine how religious organizations are treated under the law, threatening any policy that singles out faith groups from others.
In general, housing-related tax benefits are only available to employees who meet a variety of eligibility requirements. They have to be full employees, not independent contractors, live in a house or apartment owned by their employer and show that habitation is a condition of employment.
"If your employer is providing your housing to enable you to carry out your job rather than to compensate you, the housing is not treated as income," Goodrich said. For example, a university president usually doesn't pay taxes on the home that comes with the job.
Religious leaders, on the other hand, like government workers overseas or members of the military, are automatically exempted from taxes on housing allowances. Congress decided that housing was so core to the work ministers do that they didn't need to evaluate individual circumstances, Goodrich said.
"It made sense as a matter of administrability to just say everybody qualifies," he said.
The Freedom From Religion Foundation has been fighting tax breaks for ministers for more than seven years. An earlier lawsuit was thrown out due to lack of standing, so foundation leaders filed amended tax returns requesting the tax benefits available to ministers just to prove they couldn't get them. The current lawsuit against Treasury Secretary Steven Mnuchin began in April 2016.
The goal of this legal wrangling isn't to expand the government's definition of a minister, explained Gaylor, who is one of the plaintiffs in the case. It's to ensure that faith leaders must jump through the same hoops as everyone else if they want tax-free housing.
"There's a disparity between 501(c)(3) churches and other 501(c)(3) groups," she said.
In Gaylor v. Mnuchin, which centers on pastors receiving housing allowances, not those who live in a church-owned house, the foundation argues that the tax code violates the First Amendment's establishment clause, which prohibits the government from privileging one faith group over others or religious Americans over nonreligious ones. The automatic tax exemption for ministers singles them out for special treatment, the lawsuit claims.
"It saves churches money, and they can use that money to further their religious aims," Gaylor said.
But the government and Becket claim just the opposite: that the blanket exemption prevents unlawful government entanglement with religious institutions. Without it, IRS workers would have to figure out how often pastors host Bible studies or write their sermons from home, determining how vital a house is to a church's religious mission, Goodrich said.
"The IRS deciding how important is what this minister is doing in his or her home to the mission of the church is a religious question. The Supreme Court has said we shouldn't have the government (asking) those sorts of religious questions," he said.
Or, as the brief from the federal government put it: "Permitting ministers to exclude parsonage allowances … rather than forcing them to rely on the generally available deduction for business use of the home … may also prevent more intrusive government inquiries into the church-minister relationship."
Tax exemptions for ministers who live in a house owned by their employer or receive a cash allowance for housing amount to around $800 million each year, according to data from the Treasury department.
If the federal government and Becket lose in Gaylor v. Mnuchin, houses of worship, which rarely have money to spare, would have to pay ministers higher salaries to help cover the new taxes. Or seminaries would need to start recruiting people with money to spare.
"Historically, salaries (for ministers) are very small," the Rev. Rupp said. Housing benefits boost the compensation package, easing the financial tensions that can arise when you dedicate your life to serving the Lord.
The Rev. Rupp's favorite part of her new home is the kitchen, which feels huge compared to the "teeny tiny" space she used in New York City. There's an old, large hearth along one wall and lots of counter space to use when she's baking bread, one of her favorite hobbies.
About two months after she and her husband moved in, they hosted an open house for congregation members. Members of the community chatted, shared snacks and drank wine, forming the connections that come to define a house of worship.
"We wanted to let (the congregation) know that we're taking good care of their beautiful property and that they are welcome guests in our home," she said.
Moving forward, the Rev. Rupp can't wait to further incorporate the house into her ministry, whether by having people over to sit and chat by the large hearth in the kitchen or hosting guests from churches around the world. Her housing benefits allow her to practice the spiritual art of hospitality, she said.
As the Rev. Rupp's recent party and future plans illustrate, a minister's home often becomes an extension of the church, enabling them to make deeper connections with the people they serve. The Freedom From Religion Foundation doesn't dispute that purpose, but it argues that similar arguments could be offered for a number of jobs, Gaylor said, noting that she lives close to the foundation's office so she's able to respond quickly to emergencies.
District Judge Barbara B. Crabb agreed with this assessment in October 2017, ruling in favor of Gaylor.
"Any reasonable observer would conclude that the purpose and effect of (the current tax code) is to provide financial assistance to one group of religious employees without any consideration to the secular employees who are similarly situated to ministers," she wrote. "That type of provision violates the establishment clause."
The federal government appealed to the 7th Circuit, which heard oral arguments Wednesday.
Goodrich compared the case to other religious freedom lawsuits in recent years, such as ones dealing with whether business owners who are religious objectors to birth control have to provide it to employees. Exemptions to the birth control mandate were presented like a special privilege for faith groups, even though many large, secular companies already had the same exemption for different reasons.
"It's common nowadays to look at only part of the picture and consider only the part of the picture that you might not like," he said. "We're trying to encourage everybody to look at the whole picture and view religious practice within the broader context of the entire legal system."
Gaylor clearly has a different take on the current tax code, and she's fighting for a different outcome in the case.
"We want them to find this unconstitutional," she said. "We've got so many needs and so much infrastructure that needs to be repaired. I think everybody should pay their fair share."
Dan Barker, who is also a co-president of the Freedom From Religion Foundation and a co-plaintiff in the case, said he felt that attorneys for both sides did a "very good job" explaining their views during oral arguments.
He added that members of the judicial panel seemed engaged and asked interesting questions, such as whether tax breaks for faith leaders have a secular purpose since church programs serve members and nonmembers.
"Some churches do a lot of good, but so do secular groups," Barker said.
In some brief remarks posted to Becket's Twitter account Wednesday, Goodrich said he's optimistic about the case.
"We were very encouraged by how the argument went today," he said. "We're confident that the court will do the right thing and ultimately uphold this housing allowance."