Alabama and Texas offer the most faith-friendly regulatory environments in the nation for religious nonprofits, while Maryland and Virginia rank near the bottom, according to a new study.
The Napa Legal Institute, a D.C.-based nonprofit, on Wednesday unveiled its “Faith and Freedom Index,” which measures the “friendliness” of state regulation and tax policy as applied to faith-oriented nonprofits. The group said that scores for religious freedom and regulatory freedom in each state are combined to yield an overall total.
Faith-based nonprofits received 28% of charitable donations in 2020, or $131 billion in funding, according to the GivingUSA 2021 report.
A study by The Bridgespan Group that same year showed faith-based groups providing 40% of social safety-net spending.
“We’re in an era of division and conflict, and faith-based nonprofits offer opportunities for solutions, provide spiritual renewal, moral formation, and humanitarian aid,” said Mary Margaret Beecher, the group’s vice president and executive director, in a telephone interview.”Our society, and particularly our laws, should be supporting that.”
Maryland came in next-to-last at 50th out of 51 jurisdictions surveyed, while Virginia ranked 43rd. The District came in 24th. Alabama topped the list, followed by Texas at No. 2. Michigan was in last place.
The group said Maryland is “one of the worst states in which to operate a faith-based nonprofit” because it requires financial audits to maintain charitable solicitation registration, does not have a state-level Religious Freedom Restoration Act, or RFRA, and offers “no meaningful exemptions” to public accommodations laws for religious organizations.
The group’s report said the public accommodation question involves protecting the religious free exercise rights of faith-based organizations in relation to rules mandating nondiscrimination on the grounds of “sexual orientation and gender identity.”
Virginia, the Napa Legal Institute said, automatically exempts religious groups that hold 501(c)3 status from corporate income tax and has a RFRA statute on the books. But the commonwealth falls short on public accommodation exemptions for religious groups, has narrow sales tax exemptions for those groups, and still has a “Blaine Amendment” restricting state funds for religious organizations.
The District of Columbia has no “Blaine Amendment” and no audit requirements to solicit charitable donations, and it has “strong protections” directors of a nonprofit can use when “seeking guidance from religious figures,” the group said. However, they said the public accommodation exemption issue and sales tax exemptions are problems.
Ms. Beecher said the rankings had not been done previously but should be useful to both nonprofits and state legislatures.
She said, “We would like state legislators to see the index as something like an ‘annual physical.’ It’s an opportunity to view where the state is healthy, and where it needs to improve.”
Spokespersons for the Virginia, Maryland and D.C. attorneys general did not immediately respond to a request seeking comment on the study’s findings.
• Mark A. Kellner can be reached at mkellner@washingtontimes.com.