Church Finances and Business: The Supreme Court and the Ministerial Exemption

The US Supreme Court recently ruled unanimously in favor of the so-called “ministerial exception” for churches in HOSANNA-TABOR EVANGELICAL LUTHERAN CHURCH AND SCHOOL v. EEOC.

The Americans with Disabilities Act (ADA) prohibits discrimination due to a disability. However, the courts hold that the First Amendment prohibits any governmental interference in the employment of “ministers” by a church.

In this case, a private school teacher was treated as a minister by the school, and as a result, the Supreme Court held that the minister has no right to sue for discrimination.

The EEOC and teacher challenged the propriety of calling the teacher a minister, as her job duties were primarily that of a school teacher, but the Supreme Court refused to even consider the merits of the claim.

The members of a religious group put their faith in the hands of their ministers. Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such action interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs. By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments.

Thus, the Supreme Court affirms for the first time that the First Amendment makes employment discrimination laws inapplicable to ministers. In short, a minister may not sue in state or federal court for discrimination.

The court declined to offer a rule for just how broadly “minister” may be defined, but found that the minister in this case certainly qualified. Although her job duties were very similar to a non-ministerial teacher, even at the same institution, she had to apply for and pass exams to be a minister. She was held out to the public as a minister.

It took Perich six years to fulfill these requirements. And when she eventually did, she was commissioned as a minister only upon election by the congregation, which recognized God’s call to her to teach.

She claimed the “housing allowance” that the Internal Revenue Code provides only for ministers of the gospel.

In fulfilling these responsibilities, Perich taught her students religion four days a week, and led them in prayer three times a day. Once a week, she took her students to a school-wide chapel service, and—about twice a year—she took her turn leading it, choosing the liturgy, selecting the hymns, and delivering a short message based on verses from the Bible. During her last year of teaching, Perich also led her fourth graders in a brief devotional exercise each morning.

The Supreme Court did conclude, however that the mere title “minister” is not enough.

Although such a title, by itself, does not automatically ensure coverage, the fact that an employee has been ordained or commissioned as a minister is surely relevant, as is the fact that significant religious training and a recognized religious mission underlie the description of the employee’s position.

Moreover, the fact that other “lay” teachers performed the same job functions does not change the conclusion —

We express no view on whether someone with Perich’s duties would be covered by the ministerial exception in the absence of the other considerations we have discussed. But though relevant, it cannot be dispositive that others not formally recognized as ministers by the church perform the same functions—particularly when, as here, they did so only because commissioned ministers were unavailable.

And the court found that it did not matter that her secular duties took up all but 45 minutes of each day. After all, most ministers have some secular duties.

Justice Thomas wrote a separate opinion to declare that the court had no business looking beyond the church’s designation of the teacher as a “minister.”

Justices Alito and Kagan wrote a separate opinion to affirm that “minister” is broader than ordained clergy and not limited to Christian ministers. However,

What matters is that respondent played an important role as an instrument of her church’s religious message and as a leader of its worship activities.

Moreover, they opined that the courts could not question the decision of her employer to fire her for filing suit in violation of the church’s doctrine opposing going to court!

Given that this concurrence is from authors reflecting both the left and right wings of the court, their concurring opinion may well be followed by lower courts, even though not technically precedent.

Now, what does this decision mean for the readers here? Well, several things —

1. If you’re a minister, you can’t sue for discrimination. Of course, 1 Corinthians 6 already says that, so it’s no loss of rights — not really.

2. If you claim a housing allowance as a minister, the courts may have little sympathy for a claim that you aren’t really a minister and so should be allowed to sue. But then, you weren’t going to sue anyway.

3. The Supreme Court grants very broad leeway for a church to designate who is a “minister” for First Amendment purposes. It’s probable that much the same considerations would apply to determine who is a “minister” for housing allowance purposes.

4. However, contrary to some press reports, the discretion is not unlimited. While the Supreme Court will clearly grant great deference to a church’s decision, the designation is not enough all by itself. The main opinion suggests (but doesn’t hold) that the test is “significant religious training and a recognized religious mission.”

The concurring opinion of Alito and Kagan probably sets the practical rule — a minister must be somehow significantly involved in teaching the church’s religious message and in leading worship.

Those who recall the earlier posts on the housing allowance (an exemption from income tax for money paid to provide housing for a minister) will recall that one key element of who is a “minister” is whether the minister performs “sacerdotal functions,” that is, corporate worship.

In the Churches of Christ, this is a challenging test because all male members can and often do lead communion services and baptize converts. Many churches allow women to perform private baptisms.

As a result, some of our universities allow faculty members to claim the housing allowance on the premise that “every member is a minister.” They accept a letter from the home church of the professor and reduce his tax withholdings.

It’s a tough question, but seems too good to be true, to me. In one sense, this case strengthens the argument for such an easy exemption, but it also places some serious constraints. After all, the teacher before the Supreme Court had to undergo a six-year ordination process to become a recognized minister. And she led her students in worship and in Bible instruction.

(Many of our preschool teachers come closer to meeting this test than many college professors!)

Finally, we’re dealing in a very gray area here. The IRS has not historically followed the exact analysis the Supreme Court does here. The Supreme Court was not directly addressing the tax issue, which is driven by a statute, whereas the Supreme Court was interpreting the First Amendment — which is not precisely the same question.

In short, don’t blithely assume that you have a free pass to claim a housing allowance just because you attend church, you have a letter from your elders, and your college is willing to cut your withholdings. It’s a much more subtle question.

I think you need to do something more minister-like, something that distinguishes you from the typical church goer, such as (a) being on a church’s staff as a minister or (b) regularly going into the mission field to spread the gospel or (c) preaching regularly for congregations, such as by preaching gospel meetings.

But those are not the only ways to be a “minister.” I just don’t think merely being a member in good standing gets you there — and that’s no disrespect to us members in good standing.


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About Jay F Guin

My name is Jay Guin, and I’m a retired elder. I wrote The Holy Spirit and Revolutionary Grace about 18 years ago. I’ve spoken at the Pepperdine, Lipscomb, ACU, Harding, and Tulsa lectureships and at ElderLink. My wife’s name is Denise, and I have four sons, Chris, Jonathan, Tyler, and Philip. I have two grandchildren. And I practice law.
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7 Responses to Church Finances and Business: The Supreme Court and the Ministerial Exemption

  1. Bob Brandon says:

    I appreciate your summation of the case; hadn’t had much of a chance to read it, knew it was unanimous, but was wondering where the mainstream opinion was. Thomas’ opinion is an outlier as you describe it: “minister” is a position accepted, not a title imposed, not like “assistant manager at the Kwik-E-Mart” which invariably increases overtime worked without a raise in the hourly wage rate. A church should not be allowed to everyone in the congregation as a “minister” to avoid liability: Thomas’ opinion would allow precisely that.

  2. James says:

    “A church should not be allowed to everyone in the congregation as a “minister” to avoid liability…”

    I would imagine that Church Mutual and Brotherhood Mutual would wholeheartedly concur. 😉

  3. Charles McLean says:

    I look forward to the day when the religious tax exemption goes away. Yes, I said it. We have taken a living spiritual thing and converted it into a file cabinet full of 501c(3) corporations, accepted federal rules and limitations, all in order to get our members a discount coupon for their taxes every January. Or in the case of the “ministerial housing allowance”, so the preacher can get a tax break that the plumber in the next pew cannot have, because that plumber’s service to the kingdom of God does not meet federal exemption guidelines. In our petty mendacity, we have insisted that if we didn’t give folks a tax break, they would stop giving. Would to God we had a higher opinion of one another– and deserved it.

    We have taken what is God’s and rendered it to Caesar, if not in whole, then at least in part. For nothing more nor less than money. I know too many preachers who took the money and signed the form exempting them from Social Security, even when they never qualified. (As a preacher, I never took the exemption, even when I was encouraged to do so. Why? Because signing the form would have been a lie. Whether the IRS knew it or not, we knew it.) Now, these same preachers are scrambling to get side income, so as to build up some credit with the SS system they fleeced for years.

    But it’s all okay! We comfort ourselves when the Supremes rule for the church in ways we like and which protect our interests, as they have just done. Things will continue to be great until the day they aren’t. And while the world cannot buy OUR principles, the IRS continues to try to rent them from us for petty cash. As long as they tell us (with cold hard cash) that it is praiseworthy to pay against the principal on the church mortgage, but not so praiseworthy to fix the roof of the widow’s house next door, we will unfortunately continue to be led around not by the Spirit, but by our wallets.

  4. Todd Collier says:

    Wow, so tempted to not comment, yet again what can I do? Charles, I both agree and disagree with what you have to say. I agree that the tax exemption for religious institutions should go away – because they do in fact violate the establishment clause as we understand it. There is no way to see the exemption of large chunks of real estate from taxation which would otherwise provide substantial revenues to the government as anything but the government subsidizing religion. And it is a short walk from receiving a subsidy to allowing yourself to be manipulated to keep that subsidy. It also fosters everything that is wrong withour modern church. Private family assemblies would be impossible if the thirty or forty people who maintained them were stuck with hefty tax bills each year. It would force more cooperation and perhaps even help us break our attachment to theese gods of stone, brick and wood that eat up so much of our budgets anyway.

    The dangers of this are also seen in the way the IRS attempts to control political speech from the pulpit. Now I for one would seldom be in much danger because I just don’t think politics belongs in many of my sermons, but it is undeniable that many of the major turning points in our national existence have arisen and been driven from the pulpit. Just north of here is one of the more famous examples: in 1776 Pastor Muhlenburg was preaching on Christian liberty and segued into a discussion of the rights of all men and stated that at some point those rights had to be defended. He then removed his preaching frock to reveal his Continental officer’s uniform and rallied the men of the congregation to follow him to war. A repeat performace today would see the church shuttered as their exempt status was revoked.

    The housing allowance is also unconstitutional for the same reasons. It turns every minister into an instrument of the government should the government ever choose to use them. (Read Bonhoeffer’s take on how government pay corrupted the German clergy).

    As for the Social Security opt out, have you read that form? I signed and submitted mine in total good faith as I feel that the idea of social security is wrong. My personal belief and practice is to lay aside a portion of what God has provided for our future. Good grief, isn’t half of our political problem right now that we have so many enthralled to government checks?

  5. Charles McLean says:

    Todd, I certainly am in no place to judge another man’s servant. And I think you are technically correct in your view of the IRS rule. This rule has legally approved a basic hypocrisy for many years. That is, a clergyperson may claim that on one hand, his conscience does not allow him to accept public insurance based on what he earned as a clergyperson, but his conscience is just fine with accepting that very same money based on his part-time earnings writing books or selling insurance. Ethically, this does not pass the sniff test. I don’t think I ever heard a preacher hold forth on how his preaching salary is somehow more holy than any other money he makes, or than the money his parishioners makes. Legally, however, this duplicity is completely acceptable.

    Ethically, I find it troubling. This tax exemption was intended to help the religious man who sincerely believed that God would not have him accept public insurance benefits. Since he could not in good conscience collect the benefit, the exemption was created to free him from paying premiums for insurance he could never collect.

    The CoC preacher is making some unspoken assertions about his religious beliefs in Form 4361 that he should consider carefully. He is saying, in essence that:

    >God sees the money I make from preaching as different from the money I make mowing lawns.
    >I would never accept Social Security or Medicaid on my preaching salary, even if withholding was made and I was eligible to get a check.

    The CoC has never taught against receiving public insurance, so I am unsure about where all these preachers are getting a religious conviction never publicly taught or accepted as doctrine.

    Here is the clincher, in my opinion: How many CoC preachers were introduced to Form 4361 because of their objection to receiving Medicare? And how many of them were introduced to Form 4361 as a way of saving money?

    In my experience, the average preacher’s lately-arrived-at conviction against Medicare is much too coincidental with finding out he can keep a few thousand dollars in his pocket. Show me the fellow who had already preached that he would never accept Medicare, no matter what, long BEFORE he learned about the tax deal. That sounds more like religious conscience to me.

    I am reminded of the early days of Islam, where Muhammad’s fighters would sweep into a city and take it over. The first thing the locals realized was that Muhammad levied heavy taxes on non-Muslims. So it was, “Convert, or pay a high tax rate!”

    Lots of conversions happened with the implemention of that policy. But I am sure that this was just another coincidence.

  6. Johnny says:

    Based on what most CoC Churches I have been around pay their professional staff, I wonder how any of them have the ability to lay aside for their retirement and medical care in old age? On a purely practical basis, they might want to think long and hard before foregoing it.

  7. Charles McLean says:

    What was the traditional saying? “You keep him humble, Lord, and we’ll keep him broke.”

    Or as Tevye said to God, “I know, it is no disgrace to be poor. But it’s no great honor, either.”

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