Religious freedom, state laws, and the need for local institutions
In the wake of a tumultuous presidential election cycle (admittedly the media turns every federal election into a tumultuous affair, but this one was special), it is time for the people to turn their attention elsewhere. A federal election and the accompanying tendency of the people to think of little else for months is always a good reminder to return our thoughts to what is local. Local institutions — from churches, pregnancy centers, and faith-based charities to classical schools and neighborhood associations — form the essential building blocks of a healthy society. Often, it is state and local laws that have the most effect on those local institutions.
For those who believe that religion in particular has a key role in promoting healthy local communities and a thriving society, a question about state and local policy arises: what is the proper role of government — particularly state governments — in promoting religion? How can governments support the good work of religion and religious institutions without improperly interfering in religious matters? The answer is a simple one and should be neither controversial nor problematic for those in favor of limited government: states should enact laws and regulations that leave religious institutions free to form and operate without unnecessary government interference or regulatory burdens.
What state laws are necessary to foster the work of religious institutions? The Napa Legal Institute recently released its second edition of the Faith and Freedom Index to address that very question. Some of the state laws the Index considers directly address religious freedom, while others are more focused on easing tax and regulatory burdens on faith-based nonprofit organizations. But before getting into the specific state law policy solutions needed to protect the work of religious organizations, perhaps it is worth addressing a common question: why are these state religious freedom protections necessary in the first place? Doesn’t the First Amendment to the United States Constitution guarantee a right to the free exercise of religion? Shouldn’t that be the supreme, overriding protection for religious organizations from burdensome government overreach?
Unfortunately, the First Amendment, has proven insufficient to fully safeguard religious freedom under current U.S. Supreme Court precedent. Understanding this requires some historical background.
In 1990, the US Supreme Court decided a case called Employment Division v. Smith, holding that if a neutral and generally applicable law burdens religious exercise in practice, that law does not violate the Free Exercise Clause of the First Amendment. This decision severely limits the ability of religious individuals or organizations from using the First Amendment to challenge laws that do not explicitly target religious exercise, even if said laws do in fact burden religious exercise. For example, a law stating, “Catholics may not purchase wine for sacramental use” would clearly violate the First Amendment because it targets religion and religious exercise. But a law stating, “no US citizen may purchase wine,” would be neutral and generally applicable, applying equally to both religious and secular purchasers. In the latter case, the law could be applied against Catholic priests seeking to purchase wine for Mass without running afoul of the First Amendment, even though it imposes a clear burden on religious exercise.
Doesn’t the First Amendment guarantee a right to the free exercise of religion?
In the early 1990s, there was a bipartisan backlash against the Smith decision: both sides of the political aisle were deeply troubled by this failure to interpret the First Amendment to protect religious exercise in a strong, broad way. In response, Congress passed the Religious Freedom Restoration Act (RFRA) in 1993. This federal statute steps in and does what Smith fails to do: RFRA prohibits the government from burdening religious exercise, even if the burden arises from a neutral and generally applicable law, unless the government can prove that the law “(1) furthers a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.” Thus, Congress restored the protections that many believe should be provided by the First Amendment but that were removed by the Smith case.
The federal RFRA statute is not the end of the story. In 1997, the US Supreme Court decided another case called City of Boerne v. Flores, holding that the federal RFRA statute could be applicable only when challenging federal laws, not state laws. Therefore, after Flores, state laws that are neutral and generally applicable are still able to burden religious exercise.
This background underscores the importance of advocating for state laws that safeguard religious freedom. In a legal world without Smith, the First Amendment would allow religious organizations to challenge laws — from “nondiscrimination” laws to burdensome regulations and tax regimes — as unconstitutional when they burden religious exercise. But since Smith remains on the books, there is much work to be done on the state policy level to ensure that religious individuals and organizations have the proper protections they need to exercise religion in the public square.
Let us return to the central thesis: religion and the work of local religious institutions are crucial to a healthy, thriving American society; state law plays a pivotal role in ensuring that religious institutions are free to form and operate in accordance with their faith to fulfill their missions. What laws, then, should state lawmakers, policy advocates, and voters prioritize to improve the legal landscape and foster the work of these faith-based nonprofit institutions?
After the Flores decisions, many states enacted their own state versions of RFRA. There are currently 28 states in the United States with a state RFRA on the books. This is an important legal backstop to ensure that religious individuals and organizations can challenge laws that burden their religious exercise.
But ideally, state laws will go beyond RFRAs and enact proper laws and religious exemptions to clearly, explicitly protect religious exercise in the first place. It is better for laws to clearly allow religious exercise and prevent litigation, rather than force religious organizations to file lawsuits based on RFRA to clarify and enforce their rights.
A primary example is the problem of “nondiscrimination” laws that prohibit discrimination on the basis of sex (often including sexual orientation and gender identity) or on the basis of religion. While avoiding discrimination is a good policy in general, the way these laws are structured and applied often create problems in the context of religious organizations. If a religious school, charity, or other faith-based institution wants to hire or serve members of its own religion or those who adhere to its creed, the government should not stand in its way. Many state “nondiscrimination” laws respond to this tension by simply excluding religious organizations from the definition of “employer” or “place of public accommodation,” while others offer the narrower solution of clarifying that religious organizations are exempt from certain aspects of these “nondiscrimination” laws, such as those prohibiting discrimination on the basis of religion, sexual orientation, or gender identity. These exclusions and exemptions are helpful because they clearly allow religious organizations to practice their faith without having to resort to litigation to decide what specific employment or public accommodation action is protected by free exercise rights.
State laws should also provide clear protections for religious worship and religious exercise during a state of emergency, so that churches and other religious institutions are not subject to the draconian shutdown orders that were so common during COVID.
On the regulatory side, state laws create serious difficulties that disproportionately burden small faith-based nonprofit organizations. For example, many states require any nonprofit that solicits or receives donations within that state to register with the state attorney general or a similar agency. These registrations often come with a hefty annual fee and pages of annual paperwork. Some states also require these registration renewals to be accompanied by financial statements audited by a CPA – which can cost an organization thousands of dollars a year to obtain. It is questionable how well these registration and audit requirements succeed in preventing fraud or mismanagement of donated funds; the burden placed on these organizations to comply seems to greatly outweigh any benefit. In most cases (except for sophisticated organizations that hire professional fundraisers), it seems the prudent task would be to completely eliminate these registration and audit requirements.
Finally, there are tax burdens. Religious organizations are nonprofit organizations; there are no shareholders who profit from their revenue, and they do not exist to make a profit at all. Their funds are raised and spent to accomplish various religious and charitable works, which serve the common good. The very purpose of corporate taxation is to use a portion of funds gained through private, profit-seeking business endeavors to fund services that help achieve the common good – infrastructure, public safety, etc. Since the funds raised by nonprofits come from charitable donations and program revenue that does not enrich anyone, and since those funds are already being spent for the common good, it seems obvious that these funds should not properly be the subject of taxation. States should recognize this distinction by offering broad exemptions to faith-based nonprofit organizations from state income, sales, and property taxes.
With the consuming presidential election cycle in the rearview mirror, this is a perfect time to turn our gaze back to the local issues that matter most. Religion is a necessary bedrock of American society: as John Adams told the Massachusetts militia: “Our constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.”Patriotic Americans should care deeply about a thriving culture of faith for the good of our communities and our nation. While the role of government in fostering religion is limited, state governments can do their part by ensuring that the laws they enact help rather than hinder the formation and operation of religious organizations.
State lawmakers should review the Faith and Freedom Index and use it as a starting point to evaluate where they can make their legal regime more friendly to the necessary work of religious organizations. Policy activists should identify ways to promote the improvement of these laws. And citizens should perhaps turn their attention away from global and national affairs and towards their state and local lawmakers, focusing on changes that can be made to improve their own communities and the local institutions that serve them. State governments should prioritize greater exemptions for religious organizations from laws, taxes, and regulations, laws that are more appropriate to the oversight of for-profit corporations than faith-based nonprofit organizations. This climate of freedom will empower religious institutions by freeing them from unnecessary burdens so they can do the needed work of evangelization, education, and charity so desperately needed for the betterment of society.
Frank DeVito serves as Counsel at Napa Legal.
