The Twentieth Anniversary of Employment Division v. Smith

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.

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8 Responses

  1. Ken Rhodes says:

    Your legal argument seems simple and sound.

    What chance, if any, do you suppose such a propoaed law would survive the political arena?

  2. Sam Brunson says:

    Two responses: first, I’m not sure that Bob Jones University does the work you want it to: specifically, Bob Jones says that the IRS could deny tax-exempt status to a university, albeit a religiously-affiliated one. It’s not at all clear to me that the decision can be expanded to cover churches. In fact, in fn 29, the court essentially says that, because it’s a school and not a church, preventing discrimination is a compelling government duty.

    That said, and as a tax person, I’m generally opposed to using the Internal Revenue Code to police distasteful behaviors. If you want churches not to discriminate in their doctrines and practices, I’d prefer that it be done in a more direct manner, and allow the Code to raise revenue and permit some degree of redistribution.

  3. Paul Horwitz says:

    Caroline, what counts as invidious discrimination in such a case? Clergy selection?

  4. Sergio Campos says:

    Maybe you can update it with a link to a fabulous article making this argument?

  5. Caroline Mala Corbin says:

    Hi all,

    Thanks for your comments!

    Ken: slim to none

    Sam: You are quite right that Bob Jones fn 29 distinguishes religious schools from churches. Nonetheless, the policy in Bob Jones has been expanded to cover churches.
    As to the wisdom of using the tax code: I do think there is a difference between distasteful behavior and invidious discrimination that is condemned by equal protection.
    Also, whatever the advantages of direct regulation, for freedom of association reasons, it may not be constitutionally permissible to bar churches from discriminating.

    Paul: I would include what we would count as invidious discrimination in a secular context e.g. you cannot become a professor or doctor if you are black or a woman. So yes, clergy selection.

  6. Carolyn says:

    Your argument certainly qualifies as provocative, and in my view is untenable – for both constitutional and policy reasons.

    First, the immediate effect of your proposal would be to essentially mandate that all churches and non-profits, which are by definition private actors under the First Amendment, fully comply with at least the Equal Protection clause of the Fourteenth Amendment. The Fourteenth Amendment is a limitation on state action, not private action. The blanket-imposition of “suspect class” standards across religion would have a detrimental effect on their free exercise. It’s an excessive entanglement with religious doctrine to effectively require them to be mini-clones of state policy. Corporation of the Presiding Bishopric v. Amos, 483 U.S. 327 (1987) is highly relevant in this context. (Although admittedly that was decided pre-Employment Division v. Smith).

    In essence your argument would be paving the way to say that any religious organization with a predominantly male- clergy (Catholics, Lutherans (Missouri), Mormons, Muslims, Orthodox Judaism, etc.) would lose their tax exemptions. As would, given the current direction of judicial analysis on this issue, any religion refusing to recognize same-sex benefits or marriage . (Dale v. Boy Scouts of America would thus be partially overturned). It is readily conceivable that your proposal would ultimately limit any religion from taking any official stance on any politically salient issue, a vast extension of the current law, which only forbids official support of political candidates.

    I recognize that your proposal would not target religions specifically, but all non-profits who discriminate or advocate such discrimination. But non-profits are tax-exempt for a reason. By granting them the tax-exemptions, government encourages their creation across a multiplicity of service areas, charitable aims, policy goals, and other causes vital to a vibrant democracy. Denying the tax exemptions would have the effect of either reducing the total number of nonprofits (as they could not remain liquid without the exemptions), or incentivizing the nonprofits to tone down and/or eliminate their advocacy and mission goals in order to remain eligible.

    Nonprofits are not intended to be everything for everyone. They have limited resources to make decisions, and some of those decisions smell of discrimination – even harmless discrimination. Would, for example, a non-profit charity which only employs Mexican-Americans in granting a handful of $20,000 college scholarships a year exclusively to Mexican-American high school seniors lose it’s tax-exempt status? Would every organization formed to employ or benefit limited sets of “suspect” classified groups no longer be a 501©(3) – like “Women in Engineering!” programs? Eliminating tax exemptions would massively dis-incentivize the private philanthropy and grassroots community involvement which helps make America great, as a lesser portion of donated funds would find its way to the ultimate goals.

    Your proposal would also be dampening free speech as less organizations were able to engage in contentious issues. This limits the diversity of factions engaging in the public sphere. Federalist 10 saw such proposals to limit factions as problematic – “There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.” As James Madison aptly summarized, those remedies are worse than the disease. In a large republic, there really is no need for state action to limit factions, because all the competing coalitions of interests will effectively check each other. The majority of society may not like the institutional systems or “discriminatory” practices established by many non-profits and religions, but that’s not a strong enough reason, in light of the competing constitutional provisions and policy considerations, to require all of them to comply with the Fourteenth Amendment in order to gain tax exemptions.

    If we really are so troubled by government subsidies for non-profit organizations engaged in advocacy or practices which the state itself could not engage in, then we could eliminate tax exemptions for all non-profits across the board. (If concerned about the costs of that, we could then simply decrease their overall tax liability). But creating a bureaucratic monster whereby all non-profits are annually audited for compliance with a wide range of policies intended to limit government action would only serve to chill their free expression, free association, free speech, philanthropic activity and community engagement. Non-profits have flourished under a broad definition of “public interest” that recognizes their diverse contributions to their local communities and their encouragement of civic engagement. Let’s at least preserve that status quo.

    As an aside, note that whether tax exemptions / tax credits actually constitute “state funding” remains an open question – a case on the current Supreme Court docket ( Arizona Christian Tuition Organization v. Winn ) may help clarify that issue this term.

  7. Caroline Mala Corbin says:

    Sergio: Alas, no complete article exists — only a four year old unfinished draft.

    My proposal would not mandate anything. If religious institutions wanted to invidiously discriminate, they could. They would, however, forfeit government subsidies.
    You are right that this proposal might influence organizations to change their discriminatory practices. The loss of tax exempt status may well have been a factor in Bob Jones University ending its racist policies. I do not consider this a bad outcome.
    You are also right that providing a diversity of opinions and viewpoints is an important role for nonprofit organizations (though notably the Supreme Court relied on the public benefit approach in Bob Jones). I do not think my proposal jeopardizes this function for several reasons. First, all groups, including discriminatory ones, are allowed and are well protected by freedom of association. Second, the proposal regulates conduct, not beliefs. Third, to the extent that conduct and viewpoint are intertwined, the views embodied by invidious discrimination are already well-represented if not overrepresented in the marketplace of ideas. Indeed, depending on your baseline, one might view my proposal as making a market correction in the marketplace of ideas.

  8. Rick Garnett says:

    Caroline and I have talked about this project several times, and so I won’t inflict my reservations on her again. But, it does seem worth noting that “invidiously” is doing a lot of work in the proposal. And, it seems to me, a secular political authority (like ours) has no good reason to condemn as “invidious” the criteria that a church employes in clergy selection. That is, a church or religious tradition that treats men and women differently in one way or another is not doing anything that the government is competent to declare “invidious.” At bottom, as I think Carolyn suggested, the proposal is to require, as a condition of tax exemption, that the tax-exempt entity act in accord with (and only in accord with) those criteria that the government is permitted to consider in its own operations. But, there is no good reason to require this. I assume we would not extent this proposal to the home-mortgage deduction? But, why not?