Church Owned Business Has Same Religious Rights as Churches
By Raul Rivera
Main point: Closely held for profit corporations have the same religious protections as churches, and nonprofit coroprations.
In a landmark decision (June 30th, 2014), the Supreme Court ruled that a closely held for-profit business corporation has the same 1st Amendment rights and protections as churches and nonprofit religious corporations. This began in March of 2010, when the Patient Protection and Affordable Care Act was passed (this is the law that mandates every citizen to purchase health insurance or pay a tax). At issue was a provision in the law that mandated employers to provide and pay 100% of the costs for additional health care coverage to women, known as "preventive care and screenings" (42 U. S. C. §300gg-13(a)(4)). However, the law did not specify what types of "preventive care must be covered; it authorized the Health Resources and Services Administration, a component of HHS, to decide."
A much bigger issue at stake
HHS (Health and Human Services) decided that there were 20 drugs that employers had to pay for in complying with the "preventive care and screenings" mandate. In particular, four of those drugs have been considered by many professionals to induce an early abortion by "inhibiting its attachment to the uterus." It was this issue that led Hobby Lobby Stores, Inc. to fight for their 1st Amendment right to stop the government from forcing them, under penalty of law, to engage in activities that violated their long-held and sincere religious beliefs. Hobby Lobby believed that the government was forcing them to violate their religious beliefs by making them pay for drugs that could be used to induce abortions. Why is this case important? This case goes much further than the contraception issue. It is a big win for religious freedom that has been under attack for many years (Burwell v. Hobby Lobby Stores, Inc.).
Why it matters
For many years now, we at StartCHURCH have taught churches and ministries the strategies for creating for-profit arms that increase revenues to the church. However, as time has passed, a series of laws and court cases have made it difficult for Christians to operate their businesses in a manner consistent with their disciplines of faith. For example, a Christian baker in Colorado was convicted of discrimination for refusing to sell a same-sex couple "a wedding cake for their same-sex marriage." The same has happened to professional photographers who refused to provide services in Washington, New Mexico, and other states. The reason this case is so important is because it strikes down rulings of several lower courts, which held that for-profit corporations could not "engage in religious exercise."
Hobby Lobby's argument
Hobby Lobby was one of three for-profit corporations that brought their arguments to court. The owners of the three corporations held that they have "sincere Christian beliefs that life begins at conception and that it would violate their religion to facilitate access to contraceptive drugs or devices . . .that prevent a fertilized egg . . . from developing any further by inhibiting its attachment to the uterus." Hobby Lobby never argued against the other 16 USDA approved birth control drugs on the required list. In fact, they had already been providing that as part of their health insurance plan. They just objected to the new regulation added by HHS to force them to also provide the four drugs with which they had a religious objection.
The government's argument
HHS argued that for-profit corporations cannot engage in religious exercise and that they could not fight for their religious freedom because they are engaged in a for-profit activity. They also argued that the regulations applied to the corporations and not the owners, and because of that, the owners could not fight for their religious freedoms in court. In essence, the federal government argued that when someone engages in any for-profit activity they have to be untrue to their religious convictions as a person.
What the court ruled
The Supreme Court ruled that The Religious Freedoms Restoration Act of 1993 (RFRA) prevented the passage of any law that substantially burdened a person's free exercise of their religion unless there was a compelling government interest and it was the least restrictive way in which to further the government interest. At the core of the decision was whether a for-profit corporation was protected by the RFRA. The court answered that it was. In fact, the court stated that Congress intended to protect individuals, nonprofit corporations, and for-profit corporations. Moreover, the court also stated that if the RFRA did not protect for-profit corporations "it would leave merchants with a difficult choice: give up the right to seek judicial protection of their religious liberty or forgo the benefits of operating as corporations." What I found interesting was that the court also stated the following:
States, including those in which the plaintiff corporations were incorporated, authorize corporations to pursue any lawful purpose or business, including the pursuit of profit in conformity with the owners' religious principles.
This is the main reason why I find the case a big victory for the church and people of faith. For years, the legal trend has been slowly, but surely, restricting the rights of Christians in the work place. Many state legislatures, Congress, and courts had adopted the idea that no one could ever have a for-profit motive that was also governed by that person's religious convictions. The Supreme Court by a 5 to 4 ruling settled that matter. This is a big win for churches that have for profit arms.
How it affects the church
Ever since 2008, I have been teaching churches biblically based for-profit corporate structures that increase revenues and also allow the church to participate in the marketplace. As recently as November 2013, I wrote an article teaching church owned businesses the need to use unequivocal language that requires the for-profit arm to run itself in a manner that is consistent with the doctrines of the church.
Your dreams
It is likely that the dream in your heart is much bigger than the finances of the church can support. What if your church created a for-profit stock corporation that is owned and operated by the church and then used it to start a business that generates real income to the church? Many churches across America are beginning to do this and are realizing that the marketplace is another way in which the church can continue to gain influence in society. Not only does a for-profit arm create an income stream for the church, it also gives an opportunity for the church to participate in places usually foreign to churches. In the New Testament, Jesus entered the marketplace and used it as an opportunity to heal the sick (Mark 6:56). Most churches have no locality or standing in the marketplace. Yet, the marketplace is where most people spend the majority of their time. Today is the day to begin to strategize adding a for-profit arm to your church. This topic is covered with much greater detail at our Ultimate Church Structure Conference. I encourage you to register and attend.
How to do it
While the formation of a for-profit arm is a much deeper discussion than this article can provide, below are two important steps to follow when setting one up.
1. Begin to set aside a portion of the church's tithes and offerings to be used later for the purposes of investing in the for-profit arm.
2. Create the for-profit corporation with language that will make it a closely held corporation of the church. The Supreme Court in its ruling stated that the laws of all states authorize corporations to form and pursue any lawful purpose or business, including the pursuit of profit in conformity with the owners' religious principles, and that courts must honor a for-profit corporation's legal structure. By doing so, the corporation can establish its 1st Amendment right to the free exercise of its religious beliefs.
The pitfalls of the unknown
In the world of church planting and management there are many pitfalls that exist. Avoiding them is not as simple as it seems. Last year, over 85 changes occurred in the laws that govern churches and ministries. It is no wonder why many pastors feel that we live in a hostile legislative culture and that they might break the law even without trying. The best way to stay on top is to dedicate yourself and those around you that feel called to the ministry of helps in administration to a continued path of learning. It can begin with one of our StartRIGHT programs as well as one of our Ultimate Church Structure Conferences, and it can continue through the weekly blogs and software we offer. It is our passion to help your vision go from a dream to a reality.