Losing Our Religion: Reevaluating the 501(C)(3) Exemption of Religious Organizations that Discriminate

Abstract

INTRODUCTION In the last several decades, reUgious organizations have come occupy an enviable legal stature in American society, leading one legal scholar comment that separation of church and state is no longer the law of the land.1 According one analysis, religious organizations received over two hundred exemptions and regulatory benefits in federal legislation over the last eighteen years, covering wide array of areas such as pensions, immigration, and land use.2 One special break enacted prevent religious discrimination in local zoning not only eliminated the discrimination, but also provided churches with the ability discriminate against landowners.3 Beginning with policy shift in 1996 under President Bill Clinton and continuing under President George W. Bush's Faith Based Initiative, religious organizations' receipt of state and federal government grants and contracts has steadily increased.4 In addition these more recently bestowed benefits, religious organizations, including churches, enjoy longstanding exemption from federal income tax as organizations5 and are primary beneficiary ofthe charitable contributions deduction.6 In 2006, that deduction alone cost the federal government $40 billion in lost revenue and outweighed government expenditures on public lands' preservation, environmental protection, and new energy development.7 In addition the above benefits, additional exemptions and benefits have been proposed in pending congressional legislation. One such bill, the Houses of Worship Free Speech Restoration Act of 2005, would amend the Internal Revenue Code (Code) exempt churches and other houses of worship8 from the political campaign activity prohibition in § 501(c)(3).9 The Workplace Religious Freedom Act of 2005 would amend the Civil Rights Act of 196410 require employers to initiat[e] and engage] in an affirmative and bona fide effort, reasonably accommodate the religious practices of employees. Another congressional bill would amend the Higher Education Act prevent educational accreditation boards from requiring private religious schools comply with applicable state and local nondiscrimination laws.12 Most recently, religious organizations would be exempt from the prohibition on sexual orientation discrimination in the workplace under the Employment Non-Discrimination Act of 2007. 13 On the state and local levels, religious organizations also typically enjoy lucrative real property tax exemptions. 14 For example, in Colorado, religiously owned real property valued at more than $1 billion was exempt from local property taxes in 2006. 15 These exemptions are being extended as religious organizations expand their mission encompass multimedia operations, biblical theme parks, retirement communities, child care facilities, fitness centers, bookstores, and coffee shops.16 Considering these expanded missions, the propriety of religious organizations' tax exemption is being questioned17 given that these organizations still depend on, and consume, the same public services as taxpaying citizens, effectively shifting the cost of providing those public services onto those citizens.18 The propriety of the extensive tax and legal exemptions enjoyed by religious organizations must further be questioned when they maintain discriminatory policies or engage in discriminatory practices.19 Discrimination can be legally defined as a failure treat all persons equally when no reasonable distinction can be found between those favored and those not favored.20 Based on that definition, religious organizations discriminate not only in the employment context, which is legally sanctioned in certain circumstances,21 but also in services or activities considered part of their religious mission, such as education.22 Many of the discriminatory acts and policies involve affiliated schools and universities that (I) terminated employees for questioning or violating church doctrine on sexual orientation or marital status, (ii) expelled students for their alleged or announced gay sexual orientation, or (iii) maintained employment and admissions standards that discriminated on the basis of sexual orientation or marital status. …