Ninth Circuit Explains Constitutionality of Religious Tax Exemption After Kennedy v . Bremerton School District

In Hunter vs. Department of Education, released last Friday, the Ninth Circuit Court of Appeals explained why religious tax exemption is constitutional. The opinion applies Kennedy v. Bremerton School District and marks an expansion of the rationale applied in Walz v. Tax Commissioner.  Walz relied on the Lemon test, one aspect of which requires the Government to prove that a neutral law incidentally impacting religion does not foster government’s “excessive entanglement” in religion.  Walz held that exempting religious organizations results in less entanglement than taxation, the only logical alternative.  Under Kennedy, as interpreted by the Ninth Circuit in Hunter, a Court need not find the Lemon factors if there is historical precedent for tax exemption existing on or around the date the Constitution was adopted.  If the same or similar law was ok with the Founders when they adopted the Constitution, it’s contemporary analog is presumed constitutional regardless of whether it is neutral, promotes or inhibits religion, or fosters excessive entanglement.

Hunter involved a challenge to a Title IX regulation permitting religious universities to discriminate based on gender if they are following their religious tenets.  The plaintiffs were LGBTQ+ students alleging that Title IX’s religious exemption amounted to government establishment of religion.  The lower court dismissed, finding that the Title IX religious exemption met the discarded Lemon test. That test states that a law affecting religious practice is constitutional if it  (1) has a secular purpose, (2) a primary impact that neither promotes nor inhibits religion, and (3) does not foster excessive government entanglement with religion.  Although the Supreme Court decided Walz v. Tax Commission of City of New York a year before setting out the Lemon test, it applied Lemon’s essence to find that NYC’s religious property tax exemption did not violate the Constitution. 

Walz found minimal entanglement via tax exemption especially by comparison to the only alternative.  Taxing, instead of exempting, would require much more government entanglement. But the Supreme Court discarded the Lemon test two years ago in Kennedy v. Bremerton School District (involving a high school football coach fired for silently praying at the 50 yard line after the game). 

Kennedy explained instead that the constitutionality of a law respecting religion should be determined by reference to historical practices and understanding existing around the time the Founders adopted the First Amendment. This “originalist” approach seeks to determine whether the Founding Fathers would have thought a law impacting religion intolerable.  If so or if things have changed since the Founders implicitly approved, the law violates the First Amendment.  The analysis implies it is no longer necessary to disprove excessive entanglement to justify religious tax exemption.  If exempting churches is something the Founders would have tolerated,  and things haven’t changed much, exemption is constitutional, regardless of the Lemon factors.  Which brings us to the Ninth Circuit’s upholding of Title IX’s religious exemption permitting gender discrimination. The Court did so after finding that the Founders thought religious tax exemption tolerable and thus constitutional.

Remember, the plaintiffs assert that the Title IX exemption “establishes” religion.  The Ninth Circuit noted that there were no historical antecedents to prove that the Founders would have approved the Title IX exemption for religious organizations.  So the Court said that the historical record of exempting churches from taxation is the next best evidence.  It concluded that tax exemption has historical precedent contemporaneous with the First Amendment; therefore the Founders would have approved of religious tax exemption under Title IX.  In the process, the Ninth Circuit restated the constitutional justification for exempting churches and religious organizations from income taxation. Tax exemption is constitutional, the Court stated, not because it involves a neutral law with minimal entanglement, but simply because the Founders approved and not much has changed since that original[ist] approval:

To determine whether government action violates the Establishment Clause, the panel must “focus[] on original meaning and history.”  Any practice that was “accepted by the Framers and has withstood the critical scrutiny of time and political change” does not violate the Establishment Clause.    

We begin with the historical practices that help to inform the original meaning of the Establishment Clause in its application to religious exemptions.  “As history must play such a vital part in understanding what the Bill of Rights requires, it is . . . appropriate to note that at the time this charter of freedom was written, no massive programs of federal aid to the public existed.”  Because no identical exemption existed at the Founding, we must use the historical analogues that are available. The Department contends that such historical analogues may be found in the “substantial evidence of a lengthy tradition of . . . exemptions for religion” at or near the time of the Founding.  Specifically, it refers us to tax exemptions for religious organizations as far back as 1802.  

Given the dearth of historical equivalents, tax exemptions are the most analogous case to Title IX’s statutory exemption.  As we described them in Kong, tax exemptions for religious institutions are really “[s]ubsid[ies] of buildings of worship,” which is “a universal practice of state and federal government.”  341 F.3d at 1139 (citing Walz v. Tax Comm’n, 397 U.S. 664 (1970)).  

Religious institutions are constitutionally exempted from paying property taxes.  Both the statutory exemption to Title IX and property tax exemptions operate as a financial benefit to non-secular entities that similarly situated secular entities do not receive.  And they were deemed constitutional without a requirement that the exemption only apply if the tax conflicted with a specific tenet of the religion.  Even if Title IX’s exemption is a “benefit” instead of a “burden,” “[a] variety of benefits have been bestowed by government on religious practices and either have been unchallenged or passed constitutional muster without fatal compromise of principle.”  Id. at 1139.  Absent additional historical evidence—and Plaintiffs point us to none here—the history of tax exemptions near the time of the Founding suggests that the statutory exemptions that operate as a subsidy to religious institutions do not violate the Establishment Clause according to its original meaning.

Though most of these cases were decided under the Lemon test, they evince a continuous, century-long practice of governmental accommodations for religion that the Supreme Court and our court have repeatedly accepted as consistent with the Establishment Clause.  The examples provided by the Department demonstrate that religious exemptions have “withstood the critical scrutiny of time and political change.”  

Darryll k. jones