Church Finance and Tax Issues
Fri, 20 Jul 2012 - 12:15 PM CST
Charitable Choice: Government Funding for a Social Ministry
BY KERT G. PARSLEY
"The Lord secures justice for the poor and upholds the cause of the needy" (Psalm 140:12, NIV). We are admonished to remember and care for the poor and needy, yet America’s social and welfare status has reached a crisis.
Churches now face one of the greatest opportunities and challenges to use federal funds in the arena of social ministry, but with little government regulation. This opportunity is accompanied by two impassioned buzzwords of the 1990s: reform and choice.
Recently, Congress passed federal welfare reform legislation. This reform, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996,1 was signed by President Clinton on August 22, 1996. PRWOR includes in Section 104 a provision known as Charitable Choice.
Senator John Ashcroft (R–Missouri) is the sponsor of Section 104. One of his goals behind Charitable Choice is to see faith-based organizations expand their services to the public by cooperating with governmental officials. This cooperative effort would allow faith-based organizations to receive governmental funds yet maintain their religious character, integrity, and autonomy.2
PRWOR applies to state programs created under the Temporary Assistance for Needy Families—the replacement for Aid to Families with Dependent Children. TANF expands AFDC, hoping that states will implement a range of services to help individuals become self-sufficient. This coincides well with activities of many faith-based organizations. Funds are available for: "job search, job-readiness, and job-skills training programs; community service positions; GED and ESL programs; nutrition and food-budgeting advice; second-chance or maternity homes for expectant unmarried minors who cannot live with their own parents; abstinence education; drug-treatment services; and health clinics."3
States can enter into two types of assistance with providers, either through direct contracts with the provider or indirectly through certificate or voucher programs. If the programs are direct contracts, then none of the funds expended can be used for "sectarian worship, instruction, or proselytization" Section 104 (j).
Just as state government may not discriminate against providers or require them to discard or censor their religious emphasis, a faith-based provider may not discriminate against beneficiaries of those services. Their faith, or lack of it, may not be a precondition to receiving services, nor may a provider require beneficiaries to actively participate in religious practices.
This discrimination limitation applies only to PRWOR funds directly received in a purchase-of-services contract. If funds are indirectly received through the vehicle of certificates or vouchers, the provider may precondition services. The prohibition on expending funds for religious activities does not apply because it is the recipient who is free to choose among many providers—and chooses a faith-based one.
A state can use federal welfare funds to provide services, either through its own governmental agencies or by using independent providers. If the state chooses to involve nongovernmental organizations, then, under Charitable Choice, the state is not permitted to discriminate against providers, based on their religious nature.
Charitable Choice does not guarantee that a faith-based organization will be selected as a service provider. If, however, the state has allowed for the use of independent providers, faith-based organizations will have the opportunity to compete for contract or voucher arrangements. Thus, Charitable Choice may open the door for religious providers, who regularly provide services to the poor or needy, to do so with the assistance of federal funds.
Although allowing for governmental assistance, Section 104 of PRWOR does not bring what is perceived as the accompanying threat of governmental intervention. Such intervention has arisen previously, and regulations were so pervasive as to include controlling "church policy, hiring of personnel, and the content of religious programming."4 Faith-based providers neither have to cleanse their property of religious symbols or artwork nor alter their form of internal governance to participate under Charitable Choice.5
The primary extent of government intervention is in the area of fund accountability. The provider, faith based or not, is subject to account in accordance with generally accepted auditing principles for the use of federal funds. If the provider creates a separate account for those funds, then only that account shall be subject to the audit. An alternative is to create a separate corporation to manage/direct the funds.
Charitable Choice widens the ability for faith-based providers to use federal funds in providing welfare services, while maintaining their own integrity and autonomy.
Charitable Choice refers to the use of federal funds. States with their own welfare funds do not have those moneys subject to Section 104, to the extent the state authorities segregate state funds from federal funds. If state and federal funds are commingled, then they must all be administered under Section 104 standards.
Remember, PRWOR is still in its infancy. Many state governments have had little opportunity to review the impact of the entire act, let alone the charitable choice provision of Section 104. After prayerfully preparing to work with a state government, I encourage you to contact the welfare office, specifically the individual charged with oversight of federal welfare block-grant funds. I further encourage you to seek legal counsel, skilled in the area of constitutional law and tax counsel, regarding possible implications.
Congress has taken the necessary steps to permit churches and other faith-based providers the opportunity to compete for federal funds. These particular funds can be used to assist in providing for the poor and needy in various ways. Government regulation of the faith-based provider is very minimal. The provider must be permitted to retain its religious expression and identity, without censorship. There are additional requirements and guidelines upon a state, which do not fit within the parameters of this article.
The door is open. Faith-based entities are invited to increase involvement in providing social services, while retaining their religious nature. Will you take the challenge and opportunity open to you?
Kert G. Parsley, J.D., is the president of the Assemblies of God Loan Fund, Springfield, Missouri.
- The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, H.R. 3734, 104th Congress, 2d Session P.L., 104–193.
- The Honorable Senator John Ashcroft, introductory letter to A Guide to Charitable Choice: The Rules of Section 104 of the 1996 Federal Welfare Law Governing State Cooperation with Faith-Based Social Service Providers (Washington D.C.: The Center for Public Justice, and Annandale, Va.: The Christian Legal Society’s Center for Law and Religious Freedom, January 1997), iii.
- A Guide to Charitable Choice, 4. Can be ordered from the Center for Public Justice, $5. (See sidebar for address.)
- Carl H. Esbeck, The Regulation of Religious Organizations as Recipients of Governmental Assistance (Washington,D.C.: The Center for Public Justice, August 1996), 12. Can be ordered from the Center for Public Justice, $11. (See sidebar for address.)
- Although the exemption under Title VII of the Civil Rights Act of 1964 (which permits employment discrimination) continues, other federal antidiscrimination laws, as well as state and local antidiscrimination laws, may apply.
RELATED INFORMATION ON CHARITABLE CHOICE
For implementing Charitable Choice contact:
Center for Public Justice
P.O. Box 48368
Washington, DC 20002–0368
Other related publications: (See Endnotes 3,4, for other suggestions.)
Carlson-Thies, S. and J. Skillen, eds. Welfare in America: Christian Perspectives on a Policy in Crisis. Grand Rapids, Mich.: Eerdmans, 1996. Order from Eerdmans, 800–253–7521, $24.
Esbeck, Carl H. "A Constitutional Case for Governmental Cooperation with Faith-Based Social Service Providers" with responses by Douglas Laycock and John Garver. Emory Law Journal, Winter 1997.
—Kert G. Parsley