I have just returned from an excellent conference at Cardozo on Employment Division v. Smith, decided 20 years ago. In that case, the Supreme Court held that, with a couple of exceptions, religious observers are not entitled to free exercise exemptions from laws that are both neutral and generally applicable. More particularly, even the sacramental use of peyote did not justify a free exercise exemption from the neutral, generally applicable drug laws banning its use. Previously, religious observers were entitled to a free exercise exemption from a law that imposed a substantial burden on their religious practice unless that law passed strict scrutiny.
The conference request was for short provocative arguments. Here’s mine: it would be perfectly constitutional for the government to condition tax breaks for nonprofit organizations on compliance with anti-discrimination law. In particular, it would not violate the free exercise clause to deny tax exempt status to churches or other religious institutions that argue that their religion requires them to discriminate on the basis of race and sex.
A law denying tax exempt status to nonprofits that invidiously discriminate would easily satisfy the Employment Division v. Smith standard. As long as the law did not target religion, as a law denying tax benefits to religious nonprofits might, and as long as it applies to all nonprofits without exception, so that it can be considered generally applicable, it should raise no free exercise problems.
In fact, the federal government already denies tax exempt status to religious organizations that invidiously discriminate on the basis of race. Indeed, even before Employment Division v. Smith was decided the Supreme Court rejected a free exercise challenge to the IRS’s revocation of tax exempt status of two religious schools, one of which banned interracial dating for religious reasons, and one of which refused to admit black students, also for religious reasons. In Bob Jones University v. United States, the Supreme Court held that the IRS regulation passed strict scrutiny. The policy has since been expanded to cover churches as well.
There is no good reason not to expand this policy to religious organizations that invidiously discriminate on the basis of sex. Just as the government does not subsidize religious institutions including churches that discriminate against blacks, nor should it subsidize those that discriminate against women.
This approach – which allows religious institutions to discriminate but denies them tax benefits – strikes a fair balance between religious freedom and equality. It respects religious liberty because it does not ban churches from fulfilling their religious requirements. But it also promotes equality by refusing to subsidize invidious discrimination, and by ensuring the state does not put its imprimatur on the message that is it acceptable to treat anyone as second class because of their race or sex.