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Religious Freedom and the CARES Act

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April 6, 2020

By Justin Butterfield, Deputy General Counsel

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act[1] as it’s popularly called, promises to provide assistance to organizations struggling with the economic consequences of the novel Coronavirus.

Many of those organizations that the CARES Act promises to help are struggling religious non-profit organizations, including houses of worship. These religious organizations have seen their donations dwindle as their supporters or congregants are newly unemployed, underemployed, or simply have no way to give in the midst of the social distancing rules in place around the country.

Many of these faith-based organizations, though, have concerns about accepting CARES Act funding: will this mean losing religious freedoms? Some parts of the CARES Act, such as the $300 “above-the-line” tax credit for charitable donations,[2] pose no threat to religious freedoms. But other portions of the CARES Act have structural problems that have been giving those of us committed to protecting Americans’ religious freedom rights some heartburn.

On Saturday, the administration issued a Frequently Asked Questions document for religious organizations that have such concerns about the CARES Act and whether receiving funds under the Paycheck Protection Program or Economic Injury Disaster Loans will subject them to government regulation that infringes on their religious liberty rights. This FAQ does a good job of explaining how the Constitution and RFRA operate to protect the rights of religious organizations that choose to participate in these programs, even when some regulations seem to impose problematic requirements.

The administration has also issued two interim final rules that begin to address some of the structural concerns worrying religious organizations. These rules also recognize the role of the First Amendment’s Free Exercise Clause and Establishment Clause, as well as RFRA, in understanding the Paycheck Protection Program. The rules also exempt religious organizations from certain Small Business Administration (SBA) regulations that could have impermissibly resulted in government discrimination against religious organizations based on how the religious organizations are internally organized. These are all positive steps to ensuring that religious non-profit organizations can fully participate in the CARES Act without compromising their beliefs.

For an example of the types of structural concerns that were alarming to many religious organizations, let’s look at the CARES Act’s Paycheck Protection Program.[3] This program works through the Small Business Act’s section 7(a)[4] loan framework to provide special loans to help struggling organizations cover their payroll, rent, utilities, and a few other approved uses. If the recipient of the loan meets certain circumstances, such as not laying off staff for a period of time following receipt of the loan, then the loan is forgiven. The problem was that the SBA section 7(a) framework, historically, has not been open to religious non-profit organizations, so many of the normal protections that we see in law for religious organizations, such as a recognition that churches should be able to select their ministers without governmental intrusion, are not currently present under section 7(a)’s regulations.

In particular, section 7(a) loans are subject to a series of regulatory provisions, including 13 CFR § 113. These regulations include the following provisions that presently lack explicit religious accommodations such as those often found when statutes or regulations anticipate the involvement of religious organizations:

  • Restrictions on recipients engaging in any religious discrimination in the provision of services.[5] While many churches provide food and shelter to the needy regardless of the religious beliefs of the person seeking assistance, many churches also prioritize their members for food or shelter, which can constitute religious “discrimination.” Also, most churches have certain services, such as provision of the sacraments—the Lord’s Supper, baptism—that they limit to those who are believers. A church should not be banned from participating in a government program because they are only willing to baptize believers.
  • Restrictions on recipients’ making employment decisions.[6] While section 7(a) does—surprisingly, given religious non-profit organizations’ lack of access to section 7(a) loans prior to the CARES Act—have an exemption so that religious organizations can make employment decisions on the basis of religion,[7] there is no analogous exemption for other criteria, such as sex. Many religious organizations of many faiths believe that certain positions should be limited on the basis of sex. Section 7(a)’s regulations—and, therefore, the Paycheck Protection Program—have no such accommodations. The Supreme Court clearly stated in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC[8] that the government cannot place any limitations on religious organizations’ selection of their ministers, but this constitutional right should be recognized in regulations affecting religious organizations’ access to CARES Act relief.
  • The requirement that recipients of the Paycheck Protection Program loans display a poster that says:

We do not discriminate on the ground of race, color, religion, sex, age, disability or national origin in the hiring, retention, or promotion of employees; nor in determining their rank, or the compensation or fringe benefits paid them.
and
We do not discriminate on the basis of race, color, religion, sex, marital status, disability, age or national origin in services or accommodations offered or provided to our employees, clients or guests.[9]

This poster is apparently required to be posted even though religious organizations are explicitly permitted to consider religion in their employment decisions. Not only is this compelled speech, it becomes compelled false speech for religious organizations, and the regulations should take the special characteristics and protections that religious organizations have into account.

  • Finally, there is no reference in the application form[10] to the exception for religious organizations that section 7(a) does have.

While the administration has noted that the First Amendment and the Religious Freedom Restoration Act (RFRA)[11] provide answers to these concerns, these issues can be more cleanly resolved by incorporating religious accommodation language into SBA section 7(a) like that already present in many statutes and regulations. This will ensure that less sophisticated religious organizations who may be unaware of the extent of their rights under RFRA and the Constitution can read the relevant regulations and understand their rights.

Despite a troubling start, the administration has worked quickly in the past four days to assure religious organizations that they are welcome to participate in the CARES Act’s programs just like secular organizations, and they can do so without sacrificing their religious convictions or character. Hopefully, the SBA regulations can also be revised to explicitly incorporate the religious liberty protections mandated by the Constitution and RFRA, and religious organizations won’t, in the future, be expected to have to defend their rights in court for equal access that has already been promised.

[1] 116 Pub. L. 136

[2] CARES Act § 2204.

[3] CARES Act § 1102 et seq.

[4] 15 U.S.C. § 636(a).

[5] 13 CFR § 113.3(a).

[6] 13 CFR § 113.3(b) through (g).

[7] 13 CFR § 113.3–1(h).

[8] 565 U.S. 171 (2012).

[9] SBA Form 722.

[10] SBA Form 2483.

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