Yet another court ruling has been issued on a somewhat obscure regulatory requirement that highlights the tension between significant First Amendment rights and the state’s power to threaten them. The context is the power of the States’ Attorneys General, in regulating Section 501(c)(3) charitable organizations, to obtain otherwise confidential major donor information as disclosed on IRS Form 990 Schedule B. The case is Americans for Prosperity Foundation v. Becerra, previously Americans for Prosperity Foundation v. Harris, in which a three-judge panel of the federal Ninth Circuit Court of Appeals recently reversed a District Court Judge’s judgment that such requirement was unconstitutional as applied to the litigants’ specific circumstances. The Court’s ruling demonstrates a fundamental difference in perspective as to the government’s role in the face of compelling First Amendment free speech and freedom of association rights.
What is religious enough for the government to recognize a ministry’s tax exemption? Within the unemployment tax context, Illinois and other state laws exempt churches and “church-controlled” nonprofits “operated primarily for religious purposes.” If they meet either definition, then they are not “employers” for unemployment purposes and therefore need not participate in the state unemployment system. But how does the government determine whether the “primarily” religious element is met?
An Illinois court ruled recently that the state can’t tax a religious ministry to underprivileged children. The Illinois Department of Employment Security had attempted to assess unemployment compensation taxes to By the Hand Club For Kids, a ministry of The Moody Church, reversing the Department’s previous determinations that By the Hand was nontaxable since its creation in 2001.