Texas ranks #2 overall out of the 51 U.S. jurisdictions for its friendliness towards faith-based nonprofit organizations, making it one of the best states in which to operate a faith-based nonprofit. Texas has several policies that facilitate the contributions of faith-based nonprofits, including strong constitutional protections for free exercise of religion, constitutional language protecting religious exercise during a state of emergency, strong protections for directors to rely on guidance from religious figures, and a broad exemption from charitable registration laws. Additionally, Texas does not impose audit requirements as a condition of maintaining authorization to fundraise in the state. Texas, however, has some policies that are burdensome to faith-based nonprofits operating in the state, such as a broad Blaine Amendment and very limited exemptions from sales tax on religious organizations’ sales.
Religious Freedom:
State Constitutional Protection of Free Exercise:
5
/5
The Texas Constitution, in the constitutional text itself, provides stronger protections for religious free exercise or worship than the federal First Amendment, as incorporated.
State Religious Freedom Restoration Act:
3
/5
Texas has enacted a RFRA that protects the religious free exercise of all individuals and entities by requiring government burdens on religious exercise to satisfy strict scrutiny. Since these protections originate in a statute rather than the state constitution, Texas does not receive the highest score for this factor.
Religious Freedom for Nonprofits with Public Programming:
5
/5
Texas has no nondiscrimination laws related to public programming and facilities.
Religious Freedom for Faith-Based Employers:
-3
/5
Texas’ nondiscrimination laws related to employment have only a narrow exemption allowing religious organizations to hire co-religionists.
Protections for Religious Exercise in State of Emergency:
5
/5
Texas has constitutional language protecting religious exercise during a state of emergency.
Blaine Amendment:
-5
/5
The Texas Constitution contains a Blaine Amendment that broadly restricts faith-based organizations’ freedom to participate in public benefit programs on the same terms as similarly situated secular institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes.
Regulatory Freedom:
Nonprofit Religious Corporation Act:
3
/5
Texas’ nonprofit corporation law expressly: (a) acknowledges an option for nonprofit corporations to incorporate for religious purposes and (b) includes specific provisions to protect the right of nonprofits incorporated for religious purposes to self-government in internal affairs. The law does not include an option to incorporate expressly as a nonprofit religious corporation.
Standards of Conduct for Directors of Religious Organizations:
5
/5
Texas law permits a director to rely on guidance from religious figures within his or her faith tradition in the fulfillment of the director’s fiduciary duties.
Charitable Registration Law:
5
/5
Texas generally requires charitable solicitation registration but provides a broad, automatic exemption for religious organizations.
Audit Requirements Pursuant to Charitable Registration:
5
/5
Texas does not require the submission of reviewed or audited financials as a condition of maintaining authorization to fundraise in the state.
Corporate Income Tax:
1
/5
Texas imposes a corporate income tax but offers an exemption to organizations with federal 501(c)(3) exempt status upon application.
Sales and Use Tax, Sales:
-3
/5
Texas imposes a sales and use tax on religious organizations’ sales and only provides limited exemptions for certain items.
Sales and Use Tax, Purchases:
3
/5
Texas imposes a sales and use tax on religious organizations’ purchases but generally provides a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ purchases upon application.
Property Tax:
1
/5
Texas imposes property tax and provides only fragmented property tax exemptions that include only a narrow subset of religious organizations or that apply only to a narrow category of religious and/or charitable property uses.
