Freedom from Religion Found., Inc. v. Lew

• Decision Date: 13 November 2014
• Docket Number: No. 14–1152.,14–1152.
• Citation: 773 F.3d 815
• Parties: FREEDOM FROM RELIGION FOUNDATION, INC., Annie Laurie Gaylor, and dan barker, Plaintiffs–Appellees, v. Jacob J. LEW, Secretary of the Treasury, and John A. Koskinen, Commissioner of Internal Revenue, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

773 F.3d 815

FREEDOM FROM RELIGION FOUNDATION, INC., Annie Laurie Gaylor, and dan barker, Plaintiffs–Appellees

v.Jacob J. LEW, Secretary of the Treasury, and John A. Koskinen, Commissioner of Internal Revenue, Defendants–Appellants.

No. 14–1152.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 9, 2014.

Decided Nov. 13, 2014.

Richard L. Bolton, Boardman & Clark, Madison, WI, for Plaintiff–Appellee.

Judith A. Hagley, Erin Healy Gallagher, Tamara W. Ashford, Department of Justice, Washington, DC, Defendant–Appellant.

Kenneth Alan Klukowski, Family Research Council, Washington, DC, for Amicus Curiae Liberty Institute.

Kimberlee Wood Colby, Center for Law & Religious Freedom, Springfield, VA, for Amicus Curiae Evangelical Council for Financial Accountability.

Nathan Lewin, Lewin & Lewin, Washington, DC, for Amicus Curiae National

Jewish Commission on Law and Public Affairs.

Laurence Arthur Hansen, Locke Lord LLP, Chicago, IL, for Amicus Curiae American Baptist Churches in the U.S.A.

Erik William Stanley, Alliance Defending Freedom, Scottsdale, AZ, for Amicus Curiae 624 Churches.

Michael W. Durham, Caplin & Drysdale, Washington, DC, for Amicus Curiae Diocese of Chicago and Mid–America of the Russian Orthodox Church Outside of Russia.

John Allen Eidsmoe, Foundation for Moral Law, Inc., Montgomery, AL, for Amicus Curiae Foundation for Moral Law Incorporated.

Nicholas James Little, Center for Inquiry, Washington, DC, for Amicus Curiae American Humanist Association.

Before FLAUM, ROVNER, and HAMILTON, Circuit Judges.

Opinion

FLAUM, Circuit Judge.

The Freedom from Religion Foundation and its two co-presidents (collectively “the”) filed this suit to challenge the constitutionality of § 107 of the Internal Revenue Code, also known as the parsonage exemption. The exemption excludes the value of employer-provided housing benefits from the gross income of any “minister of the gospel.” 26 U.S.C. § 107. The plaintiffs conceded in the district court that they did not have standing to challenge § 107(1), which applies to in-kind housing provided to a minister, but argued that they did have standing to challenge § 107(2), which applies to rental allowances paid to ministers. The district court agreed that the plaintiffs had standing to challenge § 107(2), and held that the subsection is an unconstitutional establishment of religion under the First Amendment.

We conclude that the plaintiffs lack standing to challenge § 107(2). We therefore do not reach the issue of the constitutionality of the parsonage exemption. The judgment of the district court is vacated and the case remanded with instructions to dismiss the complaint for want of jurisdiction.

I. Background

The parsonage exemption, codified at 26 U.S.C. § 107, allows a minister to receive tax-free housing from his church, whether the church provides it directly (by giving the minister access to a church-owned residence) or indirectly (by giving the minister a rental allowance to obtain housing).¹ Non-clergy must generally pay income tax on the value of their employer-provided housing unless they meet certain requirements, including that such housing be provided “for the convenience of the employer.” Id. § 119(a).

Freedom from Religion Foundation (FFRF) is a Wisconsin-based organization of atheists and agnostics. Annie Gaylor and Dan Barker, also plaintiffs in this case, are the co-presidents of FFRF; they receive a portion of their salaries from FFRF in the form of a housing allowance. Because Gaylor and Barker are not ministers, they paid income tax on this portion of their salaries. Neither taxpayer sought to exclude this income on their federal income tax returns and neither has filed a claim for a refund after payment. The plaintiffs brought suit in the Western District of Wisconsin, claiming that § 107 violates the First Amendment because it conditions a tax benefit on religious affiliation.

In the district court, the government contended that the court was without jurisdiction to decide the case because the plaintiffs lacked standing. The plaintiffs conceded that they did not have standing to challenge § 107(1) —the exemption for housing provided in-kind by a church—because Gaylor and Barker do not receive in-kind housing from FFRF. That part of their challenge was dismissed, and the plaintiffs have not appealed that determination. As to § 107(2) —the rental-allowance exemption—however, the plaintiffs argued that they did have standing; for reasons we discuss below, the district court agreed. The court then proceeded to hold § 107(2) unconstitutional under the three-part test established in Lemon v. Kurtzman, 403 U.S. 602, 612–13, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971). The government appeals both of these holdings.

II. Discussion

The jurisdiction of federal courts is limited by Article III of the Constitution to “Cases” and “Controversies.” U.S. Const. art. III, § 2. No “Case” or “Controversy” exists if the plaintiff lacks standing to challenge the defendant's alleged misconduct. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The plaintiff bears the burden of establishing the required elements of standing. Kathrein v. City of Evanston, Ill., 752 F.3d 680, 690 (7th Cir.2014). The standing inquiry is “especially rigorous” when plaintiffs claim, as they do here, that “an action taken by one of the other two branches of the Federal Government was unconstitutional.” Raines v. Byrd, 521 U.S. 811, 819–20, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997).

The “irreducible constitutional minimum of standing” requires the plaintiff to show that he has suffered (or is imminently threatened with) (1) a concrete and particularized “injury in fact” (2) that is fairly traceable to the challenged action of the defendant, and that is (3) likely to be redressed by a favorable judicial decision. Lujan, 504 U.S. at 560–61, 112 S.Ct. 2130. Especially important here is the requirement that the plaintiff's injury be “concrete and particularized,” meaning that “the injury must affect the plaintiff in a personal and individual way.” Id. at 560 n. 1, 112 S.Ct. 2130. A “generally available grievance about government—claiming only harm to ... every citizen's interest in proper application of the Constitution and laws” is not considered an “injury” for standing purposes. Id. at 573–74, 112 S.Ct. 2130.

“The concept of a ‘concrete’ injury is particularly elusive in the Establishment Clause context ... because the Establishment Clause is primarily aimed at protecting noneconomic interests of a spiritual, as opposed to a physical or pecuniary, nature.” Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1250 (9th Cir.2007) (citation omitted). It is clear, however, that a plaintiff cannot establish standing based solely on being offended by the government's alleged violation of the Establishment Clause. See Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, Inc., 454 U.S. 464, 485–86, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982) (concluding that plaintiffs lacked standing because they “fail[ed] to identify any personal injury suffered by them as a consequence of the alleged [violation of the Establishment Clause], other than the psychological consequence presumably produced by observation of conduct with which one disagrees”); Freedom From Religion Found., Inc. v. Obama, 641 F.3d 803, 807 (7th Cir.2011) (“[O]ffense at the behavior of the government, and a desire to have public officials comply with (plaintiffs' view of) the Constitution, differs from a legal injury.”).

Although psychic injury alone is insufficient, there are a variety of ways for plaintiffs to demonstrate standing in Establishment Clause cases. For example, the Supreme Court has said that “plaintiffs may demonstrate standing based on the direct harm of what is claimed to be an establishment of religion, such as a mandatory prayer in a public school classroom.” Ariz. Christian Sch. Tuition Org. v. Winn, ––– U.S. ––––, ––––, 131 S.Ct. 1436, 1440, 179 L.Ed.2d 523 (2011). Similarly, being exposed to religious symbols can constitute a direct harm. See Doe v. Cnty. of Montgomery, Ill., 41 F.3d 1156, 1159 (7th Cir.1994). The plaintiffs here, however, cannot rely on the direct harm doctrine, because § 107(2) does not require them to see or do anything.

Another way that plaintiffs in Establishment Clause cases often show standing is by relying on the special rule set forth in Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). As a general rule, standing to challenge the legality of a government expenditure “cannot be based on a plaintiff's mere status as a taxpayer.” Winn, 131 S.Ct. at 1442. Such suits are typically foreclosed because the harm is too widely shared, the financial injury to any given taxpayer is too slight, and the possibility of redress is too speculative to support standing under traditional principles. Id. at 1442–45. In Flast, however, the Supreme Court created an exception to this general rule: “[A] taxpayer will have standing ... when he alleges that congressional action under the taxing and spending clause is in derogation of [the Establishment Clause].” 392 U.S. at 105–06, 88 S.Ct. 1942. The Court, however, has since clarified the scope of Flast, holding that it only applies to taxpayer challenges involving specific government appropriations; Flast does not give taxpayers standing to challenge the constitutionality of tax credits or other “tax expenditures.” Winn, 131 S.Ct. at 1447 ; see id. at 1450 (Kagan, J., dissenting) (characterizing the majority's holding as creating a “distinction in standing law between appropriations and tax expenditures”). As the parsonage exemption is a tax expenditure, plaintiffs cannot rely on the Flast exception to establish standing. See Staff of Joint Comm. on Taxation, 110th Cong., Estimates of Federal Tax Expenditures for Fiscal Years 2007–2011, at 32 (Comm. Print 2007) (identifying the parsonage exemption as a “tax expenditure”).

A...