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The Grassley staff report and the First Amendment

One of the things that really jumped out at me when I was reading the Grassley staff memo [PDF] was the way in which it deals with Constitutional questions, particularly First Amendment [link] questions, before focusing on narrow tax-related questions. The pertinent language is familiar to most Americans:

Congress shall make no law respecting the establishment of religion, or prohibiting the free exercise thereof;

The first clause, before the comma, is referred to as the Establishment Clause; the second as the Free Exercise Clause. “Establishment” traditionally meant there was a state church, but has come to mean something broader today. I think we as conservative Christians tend to focus more on the Free Exercise Clause; our traditional legal adversaries tend to focus more on the Establishment Clause, so we mean different things when we say “separation of Church and State.” We sort of take our interpretation for granted, as if somehow the Free Exercise Clause came down off a mountain with Moses, or as if it were a magic formula that guarantees freedoms we’ve grown accustomed to.

In particular I think we’ve assumed that the tax-exempt status churches enjoy (and the rather liberal reporting requirements mentioned in the Grassley staff report) were guaranteed by the Free Exercise Clause, not least because donations to churches are tax-deductible. Without tax-deductible donations many churches would receive smaller donations, fewer large one-time donations, etc., their churches would fail to function financially, and the freedom to practice their religion would be moot.

Unfortunately Pattara and Barnett, the report authors, don’t see it that way. While they note on a couple of occasions that they lacked a Constitutional scholar, so they felt ill-equipped to judge the Constitutional issues involved, but they deal with the Constitutional issues anyway. Here are some quotes:

Unlike the tax law, the U.S. Constitution does not distinguish churches from other religious organizations. The word “church” does not appear in the Constitution; the First Amendment refers to “religion,” not “church.”
The Constitution does not require the government to exempt churches from federal income taxation or from filing tax and information returns. Although tax exemption for religious institutions has been incorporated into American income tax statutes since the inception of the modern income tax in 1894, such exemption is a privilege, not a constitutional right. (page 17-18)

Also, in the context of whether the government can require religious organizations to file the IRS Form 990, they cite an older case that deals with the Establishment Clause but not the Free Exercise Clause:

The only constitutional problem we would foresee … would be if a statute differentiated between religious denominations in filing requirement in a manner that favored one denomination over another. (page 20)

It is popular in some circles today to ask why churches should be tax-exempt at all [link], and it is troubling for some accustomed to seeing these issues examined from a Free Exercise perspective to see them instead examined from an Establishment perspective, given that it is also popular today to consider any tax break a government subsidy, e.g.

Both tax exemptions and tax-deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income. (page 50)

If we think of tax breaks this way it’s hard to avoid the impression that the Grassley staffers, at least, would be inclined to think in terms of questions like “what does the Government get for its money when it gives a church a tax break?” rather than in terms of Constitutionally guaranteed freedoms and the legal structures required to preserve them.

I think the takeaway for me from this report on this particular question is that when we see a document like this, generally disposed to distinguishing between well-run, well-monitored religious organizations and a few bad actors, but still viewing tax-exempt status this way, we should take it as read that at some point in the future the tax-exempt status we’re accustomed to is at the very least up for reconsideration.

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