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

INTRODUCTION In the last several decades, reUgious organizations have come to occupy an enviable legal stature in American society, leading one legal scholar to comment that "separation of church and state is no longer the law of the land."1 According to one analysis, religious organizations received over two hundred exemptions and other regulatory benefits in federal legislation over the last eighteen years, covering a wide array of areas such as pensions, immigration, and land use.2 One special break enacted to prevent religious discrimination in local zoning not only eliminated the discrimination, but also provided churches with the ability to discriminate against other landowners.3 Beginning with a 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 to these more recently bestowed benefits, religious organizations, including churches, enjoy a longstanding exemption from federal income tax as "charitable organizations"5 and are a 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 to 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) to exempt churches and "other houses of worship"8 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 to require employers "to initiat[e] and engage] in an affirmative and bona fide effort, to reasonably accommodate" the religious practices of employees. Another congressional bill would amend the Higher Education Act to prevent educational accreditation boards from requiring private religious schools to 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 to 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 other 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 to 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. …