Gaylor v. Peecher, No. 18-1277 (7th Cir. 2019)Annotate this Case
Freedom From Religion Foundation (FFRF), a nonprofit organization, “[t]akes legal action challenging entanglement of religion and government, government endorsement or promotion of religion.” FFRF paid its co-presidents a portion of their salaries in the form of a housing allowance, seeking to challenge 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. Having unsuccessfully sought refunds from the IRS based on section 107 they sued. The district court granted FFRF and its employees summary judgment, finding that the statute violates the Establishment Clause of the First Amendment. The Seventh Circuit reversed, applying the “Lemon” test. The law has secular purposes: it is one of many per se rules that provide a tax exemption to employees with work-related housing requirements; it is intended to avoid discrimination against certain religions in favor of others and to avoid excessive entanglement with religion by preventing the IRS from conducting intrusive inquiries into how religious organizations use their facilities. Providing a tax exemption does not “connote sponsorship, financial support, and active involvement of the [government] in religious activity.” FFRF offered no evidence that provisions like section 107(2) were historically viewed as an establishment of religion.