When Religious Organizations Should Lose Tax-Exempt Status

The First Amendment to the Constitution (by the way, the very fact of having 27 Amendments to the Constitution should clue us into the idea that the Constitution was not, from its founding, meant to be some perfect document handed down from on high, but, rather, a provisional and always-open-to-improvement piece of paper to guide us, but that is for another column) begins by stating: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof . . . .”

It is vital to separate this from this nation’s willingness to grant tax-exempt status to non-profit organizations and pubic charities–through which communities of worship and religious organizations have thus far been given automatic non-profit charity status and have been tax-exempt. This includes property taxes (granted by state laws), sales taxes and income taxes (granted by state and federal laws), and other similar and highly significant benefits such as the tax-deductibility of contributions made to them (both state and federal laws). The IRS has a set of indicia that it uses to determine if something qualifies as a “church”–a term it uses to include communities of all faiths:  https://www.irs.gov/charities-non-profits/churches-religious-organizations/churches-defined.

As to whether giving tax-exempt status to such organizations represents a governmental establishment of religion, the Supreme Court of the United States held, in Walz v. City Tax Commission of the City of New York, 97 U.S. 664 (1970), that taxation of religious organizations would result in more rather than less government entanglement in religion and therefore it is proper to maintain religious exemptions under the umbrella of the breaks afforded to charitable organizations. It’s a little like locking the barn door after the horse has escaped, in that the logic flows like this: think about all the prime real estate that religious organizations sit on now. If these were taxed at the going rates, for example, many if not most of these would have to file for bankruptcy or would forfeit their assets, as they could not afford these taxes. Therefore, the government would become much more deeply involved and entangled in religious affairs. Of course, if these benefits had not been conferred initially, this rationale would not apply.

The question that I raise is this: what should happen when religious organizations engage in activities that run counter to the anti-discrimination statutes that are part of the legislation of states or the federal government? The First Amendment forbids governmental intervention into the inner workings of strictly religious activities and beliefs, but should these organizations’ activities come with no consequences at all?

For example, it is one thing for the government to say to Roman Catholics and to Southern Baptists and to the Church of Jesus Christ of Latter-Day Saints that they need not ordain women or perform marriages for same-gendered couples. Yet these practices are violations of employment laws that prohibit discrimination against women based upon their gender and violate the now-constitutional right of lesbians and gay men to marry (other lesbians and gay men, respectively). So why, if any tax-exempt organization violates non-discrimination laws, for whatever reason, should it be allowed to maintain this massive governmental benefit?

I have worked for “secular” non-profits. Should any of them engage in similar discrimination, they would face civil penalties and the possible loss of their assets and even exemptions. They are not immune from following the law, even if they are provided certain taxation breaks. Why is there a carve-out for religious groups?

Again–I do not want the government at any level to interfere with the beliefs, rituals, or choices of religious groups with regard to what they will sacralize and what leadership qualifications they decide to set, or of what beliefs are necessary to belong to these groups–this would be a clear violation of the free exercise of religion that is vouchsafed in the First Amendment. Nevertheless, to punish secular non-profits who violate state and federal non-discrimination laws while allowing religious groups (not to mention for-profit endeavors such as Hobby Lobby!) to flout these laws (no matter how sincerely held their beliefs, which, as a matter of law, need not even be “reasonable”) is a clear violation of the principle that the government shall neither favor nor disfavor religion.

In short: “Fine. Feel free to discriminate against women and against sexual minorities in your religion: the government will not interfere. Just don’t expect the government to cut you any breaks when your practices otherwise violate its laws.”


One final FYI: One promising development on the state level, at least regarding claims by for-profits regarding religious exemptions, is a law currently being considered by Massachusetts:


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