Opinion ID: 1129212
Heading Depth: 1
Heading Rank: 4

Heading: THE CONSTITUTIONALITY OF ORS 657.072(1)(a)

Text: If Oregon wishes to retain its unemployment tax credit, it must charge unemployment taxes to all religious organizations which do not fit the 26 U.S.C.A. section 3309(b)(1) exclusions. However, nothing in FUTA prohibits Oregon from taxing even excluded organizations. As far as FUTA is concerned, Oregon may require the Catholic church to pay unemployment taxes for the work performed by nuns and monks. The State of Oregon can draw its tax line anywhere it desires, so long as it does not exclude religious organizations FUTA requires be included. See Salem College & Academy, Inc. v. Emp. Div., supra, 298 Or. at 476-77, 695 P.2d 25. Moreover, the legislature intended to draw the line at the same point as does FUTA. The Oregon exemption statute, ORS 657.072(1)(a), is, word for word, the same as 26 U.S.C.A. section 3309(b)(1). The overriding intent of the legislature notwithstanding, however, the question is whether the Oregon Constitution permits excluding the organizations specified in ORS 657.072(1)(a) from the payment of unemployment taxes while other very similar religious organizations which do not fit the statutory definitions are taxed. It does not. The core problem involves the definition of the word church. Defining church too narrowly  including, for example, only hierarchical churches such as the Roman Catholic Church,  might comply with FUTA, but it would violate the Oregon Constitution because the protections of the Oregon Constitution extend to worship even outside organized churches. Salem College & Academy, Inc. v. Emp. Div., supra, 298 Or. at 495, 695 P.2d 25. On the other hand, if church is defined too broadly, organizations would be exempted from the unemployment tax when FUTA requires that they be included. It may be possible to expound a judicial test for church consistent with both the intent of the Oregon legislature and with FUTA. Any such definition, however, would still face the problem discussed in Salem College  that is, Oregon would still be put in the position of treating unequally what, at least for Oregon constitutional purposes, are religious organizations. Creating such a distinction contravenes the equality among pluralistic faiths and kinds of religious organizations embodied in the Oregon Constitution's guarantees of religious freedom. Salem College & Academy, Inc. v. Emp. Div., supra, 298 Or. at 495, 695 P.2d 25. Therefore, we hold that Oregon must treat all religious organizations similarly whether or not they would qualify as churches under FUTA or OAR 471-31-090(1)(a). Our conclusion requires us to address a second question: If the legislature's distinction between churches and other religious organizations will not withstand scrutiny, which of the following would it have chosen  complete exemption of all churches and religious organizations, in order to save the clearly expressed exemption for churches; or exemption for neither, in order to save Oregon's eligibility for tax credits under FUTA? The inquiry is made even more challenging by the fact that taxing all religious organizations creates potential constitutional problems involving the free exercise of religion. Although the answer is by no means obvious, we believe that the legislature would have chosen to include all religious organizations in the unemployment compensation program. ORS 657.030(2) expresses a clear intention that the requirements of FUTA be met. We find no similar clear expression of preference for an exclusion for churches, no matter what the consequences. We turn to the free exercise issue raised by our identification of FUTA adherence as the touchstone of the legislative policy.