Case Information

*1 Constitutionality of the Social Security Act Amendments of 1983 An amendment to the Social Security Act repealing the exemption for nonprofit organizations, including religious organizations, thereby requiring such organizations to pay and withhold tax with respect to the Social Security Fund, does not violate the First Am endment’s Free Exercise or Establishm ent Clauses. Assuming the tax payment and withholding requirement conflicts with the free exercise of religion in some cases, the government nevertheless has an overriding interest in securing the financial solvency of the fund and making sure that its coverage is comprehensive. The repeal of the exemption does not violate the Establishment Clause because it has a clear secular purpose, does not inhibit or advance religion because it is neutral in its general application, and does not excessively entangle the government with religion. Social Security taxes are like other business and income taxes to which religious organizations are already subject.

February 14, 1984 M e m o r a n d u m O p i n i o n f o r t h e A s s i s t a n t A t t o r n e y G e n e r a l ,

O f f i c e o f L e g i s l a t i v e A f f a i r s

This responds to the request for our opinion whether § 102 of the Social Security Amendments of 1983 (Act), Pub. L. No. 98- 21, 97 Stat. 65 (1983), violates the First Amendment. We do not believe that § 102 violates either the Free Exercise Clause or the Establishment Clause of the First Amendment.

I. Background The Act was passed in 1983 primarily in an effort to address certain financial problems facing the social security system. Section 102 of the Act, 97 Stat. 70, repealed the existing exemption applicable to employees of non-profit organi zations, 42 U.S.C. § 410(a)(8)(B) and 26 U.S.C. § 3121(b)(8)(B), including “religious” organizations such as churches.1 As a result, payment of social 1 Prior to the repeal, 42 U.S.C. § 410(a)(8)(B ) and 26 U .S.C. § 3121(b)(8)(B ) exem pted service fo r tax- exem pt organizations described in 26 U.S.C. § 501(c)(3) from the definition o f em ploym ent. However, the law perm itted such non- profit organizations to w aive their im m unity voluntarily so that they could p artici pate in the system if they wished. An estim ated 80 percent o f the non-profit organizations to w hich the exem ption applied had determ ined to participate in the system at the time the A ct was being considered. H.R. Rep. No. 25, Part 1,98 th Cong., 1st Sess. 15 (1983). Once an organization join ed the system , it had to rem ain Continued

security taxes by these institutions for most of their employees is now manda tory rather than voluntary. Congress made this change because it was “deeply concerned” that more and more non-profit organizations were terminating their voluntary inclusion in the system, thereby threatening the retirement benefits *2 of their employees. H.R. Rep. No. 25, Part I, 98th Cong., 1st Sess. 16-17 (1983). A larger concern, applicable generally to the coverage and financing provisions of the Act, was the restoration of the financial soundness of the Old Age and Survivor Insurance Program. Id. at 3,13. The mandatory inclusion of the non-profit organizations, for example, is expected to raise $2.3 billion dollars over the next two years, about half of which will come from religious organizations. Written Statement of John E. Chapoton, Assistant Secretary for Tax Policy, Department of the Treasury, Before the Senate Finance Committee (Dec. 14, 1983).

There was very little debate over § 102, beyond its inclusion in summaries of the Act’s provisions. See, e.g., 129 Cong. Rec. 4496 (1983) (statement of Rep. Rostenkowski); id. at 5470 (statement of Sen. Dole).2 The House Report, however, did note that Congress had made coverage voluntary when it ex tended the system to non-profit organizations in 1950 because of concerns by religious groups over “Federal influence over religious activities” and “separa tion of church and State.” H.R. Rep. No. 25, Part I, supra, at 16. These concerns had been addressed by at least one of the commissions examining reform of the system. R eport o f the Universal Social Security Coverage Study Group on the D esirability and Feasibility o f Social Security Coverage f o r Employees of Federal, State, and Local Governments an d Private, Nonprofit Organizations 258-59 (1980).3 Because the House Report noted that these concerns had been raised when optional coverage was extended to these groups in 1950 and then went on to explain the policy reasons for including the non-profit organization employees in the Act, we must assume that Congress was aware of the First Amendment considerations and issues which would be raised, but determined that the proposal was not unconstitutional. 1 (. . . continued)

in it fo r a m inim um o f ten years before it could term inate coverage fo r its employees. Id. The Act did not repeal the exem ption available for m inisters or m embers o f religious orders. 42 U.S.C. § 410(a)(8); 26 U.S.C. § 3121(b)(8). T hese classes o f persons m ay file for an exem ption from coverage for their self employment earnings, a choice they m ust generally m ake w ithin two years o f ordination. Only individuals w ho are neither m inisters n o r m em bers o f religious orders are covered by the change in the Act. 2 T h e re w as a short debate on what th e effective date o f § 102 should be. See 129 Cong. Rec. 69 1 4-16 (1983). 3 T his R eport, in turn, relied in part on an opinion from Professor N orm an Dorsen o f New York University Law School. at 2 6 1 -6 5 . Both the R eport and Professor D orsen concluded that an Establishm ent Clause attack w ould probably fail. However, P rofessor Dorsen d id not believe th at protecting the financial security o f the system w as a sufficiently compelling state interest to overcom e the Free Exercise interests o f those who had conscientious religious objections to paying into the system , id. a t 265, and therefore felt that an exem ption fo r those holding contrary religious beliefs had to be included to prevent a violation of the Free E xercise C lause. H ow ever, the Suprem e C ourt has subsequently m ade it clear that Professor D orsen’s evaluation o f the w eight that would be accorded the governm ent's interest in a strong social security system w as incorrect. See United States v. 45 5 U.S. 252 (1982) (discussed below).

Whenever called upon to judge the constitutionality of an Act of Congress — “the gravest and most delicate duty that this Court is called upon to perform,” Blodgett Holden, 275 U.S.

142,148 (1927) (Holmes, J.) — the Court accords “great weight to the decisions of Congress.” Columbia Broadcasting System, Inc. Democratic National Committee, 412 U.S. 94,102 (1973).

The Congress is a coequal branch of government whose Mem bers take the same oath we do to uphold the Constitution of the United States. As Justice Frankfurter noted in Joint Anti-Fascist Refugee Committee McGrath, 341 U.S. 123,164 (1951) (con curring opinion), we must have “due regard to the fact that this Court is not exercising a primary judgment but is sitting in judgment upon those who also have taken the oath to observe the Constitution and who have the responsibility for carrying on government.” The customary deference accorded the judgments *3 of Congress is certainly appropriate when, as here, Congress specifically considered the question of the Act’s constitutionality.

Rostker v. Goldberg, 453 U.S. 57, 64 (1981).

The constitutionality of § 102 has been raised in the discussion of S. 2099, a bill to postpone the effective date of § 102 for two years, that was introduced by Senator Jepsen and is now under consideration by the Senate Finance Commit tee. We discuss below the two possible First Amendment grounds of attack on § 102. We agree with Congress’ sub silentio conclusion that § 102 is constitutional.

II. Free Exercise Clause The Constitution provides that “Congress shall make no law . . . prohibiting the free exercise” of religion. U.S. Const, amend. I, § 1. Section 102 has been attacked, see 129 Cong. Rec. 32611-12 (1983), on the grounds that mandating contributions by individuals and organizations whose sincere religious beliefs prohibit participation in the social security system violates the free exercise of their religious beliefs. The Supreme Court has recently articulated the analyti cal framework for this question in 455 U.S. 252 (1982). The Lee opinion makes clear that the government’s interest in assuring manda tory and continuous participation in and contribution to the social security system is extraordinarily high. In an Amish farmer refused to withhold social security taxes from his Amish employees or to pay the employer’s share of such taxes because he believed that payment of the taxes and receipt of the benefits would violate the Amish faith.4 Id. at 254—55. He claimed, and the Court accepted his argument, that imposition of social security taxes violated his First Amendment free exercise rights and those of his Amish employees. Id. at 255, 257. 4 ‘T h e Amish believe that there is a religiously based obligation to provide for their fellow mem bers the

kind o f assistance contem plated by the social security system .... We therefore accept appellee's contention that both paym ent and receipt o f social security benefits is forbidden by the Amish faith." Id. at 257.

The conclusion that there is a conflict between the Amish faith and the obligations imposed by the social security system is only the beginning, however, and not the end of the inquiry. Not all burdens on religion are unconstitutional. See, e.g., Prince v. M assachusetts, 321 U.S. 158 (1944); Reynolds United States, 98 U.S. 145 (1879). The state may justify a limitation on reli gious liberty by showing that it is essential to accomplish an overriding governmental interest.

Id. at 257-58. The Court then identified the government’s compelling interest assuring “mandatory and continuous participation in and contribution to the social security system:”

The social security system in the United States serves the public interest by providing a comprehensive insurance system with a variety of benefits available to all participants, with costs shared by employers and employees. . . . The design of the system requires support by mandatory contributions from cov ered employers and employees. This mandatory participation is indispensable to the fiscal vitality of the social security system. . . . Moreover, a comprehensive national social security system providing for voluntary participation would be almost a contra diction in terms and difficult, if not impossible, to administer. at 258-59 (footnotes omitted). A remaining inquiry in the Lee case was

whether accommodating the Amish belief would unduly interfere with fulfill ment of the governmental interest. The Court focused on the fact that the social *4 security contributions are a tax and that in the area of taxation, religious practices must yield to the government’s interest in maintaining an organized society.

The tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief. See , e.g., Lull v. Commissioner, 602 F.2d 1166 (CA4 1979), cert, denied, 444 U.S. 1014 (1980); Autenrieth v. Cullen, 418 F.2d 586 (CA9 1969), cert, denied, 397 U.S. 1036 (1970). Because the broad public interest in maintaining a sound tax system is of such a high order, religious belief in conflict with the payment of taxes affords no basis for resisting the tax. at 260.5 The Lee decision was decided by the Supreme Court in a unanimous

judgment.6 The Court held that compelling an individual to participate in the 5 T hus, cases involving application o f taxes are distinguishable from those involving less com pelling governm ent interests such as education, see Wisconsin v. Yoder, 406 U.S. 205 (1972), or labor m anagement relations. Catholic Bishop NLRB, 5 59 F.2d 1112 (7th Cir. 1977), a ffd on statutory grounds, 440 U .S. 506 (1979). See Parker v. Commissioner, 365 F.2d 792, 795 (8th Cir. 1966), cert, denied, 385 U.S. 1026 (1967). See also Jaggard v. Commissioner, 582 F.2d 1189 (8th Cir. 1978), cert, denied, 440 U.S. 913 (1979); Graves C ontinued

social security system is not an impermissible interference with that individual’s constitutional right to the free exercise of his religion.7

Turning to § 102, we assume, as the Court did in that there are religious organizations whose tenets would be offended by payments on behalf of employees into the social security system. Because this is “only the beginning, however, and not the end of the inquiry,” id. at 257, the next issue is whether there is a compelling governmental interest that will overcome the imposition on the religious liberty of those individuals who would have conscientious objections to mandatory coverage by the system. We have little difficulty in concluding that the courts will find that the same interest at stake in Lee was implicated in passage of § 102. Congress, in discussing § 102, emphasized both its concern that employees of non-profit organizations not “forfeit the advantages of a nearly universal social insurance system,” H.R. Rep. No. 25, supra, at 16, and the need to protect the solvency of the system by spreading the coverage as broadly as possible to gain extra revenue. S. Rep. No. 23, 98th Cong., 1st Sess. 12 (chart detailing revenue gain).8 If the stability of the social security system and the administrative advantages of universal coverage were sufficient in 1982 to overcome free exercise rights as the Court determined in the Lee case, we believe that those interests have, if anything, become stronger given the broadly based and bipartisan consensus in 1983 that without the Act the financial soundness of the entire system was in jeopardy.

Finally, we believe that a court would conclude, as in that accommoda tion of those individuals and organizations with religious objections, while mandating coverage of others, including religious organizations, with no reli gious objection to the social security system, would unduly interfere with fulfillment of the governmental interest. The Supreme Court recognized that Congress grants exemptions to various taxing schemes, including the social security system. In fact, in Lee the Court noted that Congress had provided an exemption from the system for self employed Amish because of their religious objections. 26 U.S.C. § 1402(g). The Court stated that this was a reasonable accommodation,9 but did not draw from this conclusion any rule that Congress v. Commissioner, 579 F.2d 392 (6th Cir. 1978), cert, denied, Winters 440 U.S. 946 (1979); v. Commissioner, a ffd , 468 F.2d 778, 781 (2d C ir. 1972), Basic Unit Ministry v. United States, 511 F. Supp. 166, 169(D .D .C . 1981), Varga 670 F.2d 1210 (D.C. C ir. 1982); 608 F.2d 599 (5th Cir. 1979), , 467 F. Supp. 1113, 1118 (D. Md. 1979), a ff d mem., 618 F.2d 106 (4th Cir. 1980). Cf. Ward Commissioner, 446 U.S. 918 (1980). cert, denied, 459 U.S. 1086 (1982). the Social Security System.” 97 Stat. 65. C ongress’ ovem ding interest in expanding coverage, such as by Temple, Inc. v. Industrial Comm'n, 422 N.E.2d 819, 2 O hio App. 3d 418 (Ct. App.) (w orkm en’s com pensa including em ployees o f nonprofit groups and new federal em ployees and by preventing term inations by State reports. H.R. Rep. No. 47, 98th Cong., 1st Sess. 118-19 (1983); S. Rep. No. 23, 98th Cong., 1st Sess. 1, 12 455 U.S. at 261. v. cert, denied, tion), and local governm ents, to new sources o f revenue in order to shore up the system is evident in all three (1983); H.R. Rep. No. 25, Part I, 98th Cong., 1st Sess. 3, 13 (1983). readily identifiable.” ^[7] *5 6 Justice Stevens wrote a separate opinion concurring in the judgm ent. 5 ( . . . continued) at 261. See also Olsen 8 M oreover, § 102 is located in Title I o f the Act which is entitled "Provisions A ffecting the Financing of Commissioner, v. Victory Baptist 709 F.2d 278 (4th Cir. 1983) (se lf em ploym ent lax); 9 “C onfining the § 1402(g) exem ption to the self em ployed provided for a narrow category which was

27 was compelled to extend the exemption to all other Amish. Rather, the Court concluded the opinion by saying:

Congress and the courts have been sensitive to the needs flow ing from the Free Exercise Clause, but every person cannot be shielded from all the burdens incident to exercising every aspect of the right to practice religious beliefs. Granting an exemption from social security taxes to an employer operates to impose the employer’s religious faith on the employees . . . . The tax imposed on employers to support the social security system must be uniformly applicable to all, except as Congress provides explicitly otherwise.

455 U.S. at 261. Because of the government’s overwhelming interest in a social security system which is as uniform as possible, the Free Exercise Clause does not prohibit the non-discriminatory application of a standard tax to a religious organization or its employees. We therefore believe that the elimination by § 102 of the exemption for non-profit organizations, including religious ones, is permissible even if it does offend the religious convictions of some who will be required to participate.

III. Establishment Clause

The Constitution also provides that “Congress shall make no law respecting an establishment of religion.” U.S. Const, amend. I, § 1. Section 102 has been attacked on the grounds that compelling the participation of churches will inevitably entangle the government in the affairs of the churches, thereby violating the Establishment Clause.

Whether a statute violates the Establishment Clause is frequently analyzed under the three-part test articulated in Lemon Kurtzman, 403 U.S. 602, 612— 13 (1971). First, the challenged statute must have a secular purpose. Section 102 has at least two bona f id e secular purposes: providing income security for workers and their families by insuring that they are protected by the social security system and providing money to the underfunded system’s trust funds. Second, the primary effect o f the challenged statute must be one that neither advances nor inhibits a particular religion. The Social Security tax’s primary purpose raising revenue does not inhibit religion. Cf. United States 455 U.S. 252, 263 (1982) (Stevens, J., concurring) (concluding that “there is virtually no room for a ‘constitutionally required exemption’ on religious grounds from a valid tax law that is entirely neutral in its general application”).

Third, the statute must not foster excessive government entanglement with religion. Excessive entanglement involves some of the principal evils at which the Establishment Clause was aimed: government sponsorship, financial sup port or active involvement by the sovereign in a religion. Lemon Kurtzman, 403 U.S. at 612. For example, in Lemon the Supreme Court struck down a statute providing reimbursement to parochial schools for the salaries of teach *6 ers who taught non religious subjects. The Court held that the very effort by the state to ensure that the money was properly spent would require a degree of oversight and surveillance that would entangle the government. at 619-20. The churches would no longer be the exclusive judges of the teachers’ conduct. Thus, courts must examine whether enforcement of the law will impinge on the church’s substantive decisionmaking power or intrude on questions of church doctrine.

We do not believe that the mere transmission to the government of money for social security taxes will involve excessive entanglement of the churches and the federal government.10 Churches must presently pay some federal taxes, such as excise taxes on telephones and income taxes on unrelated business income. Moreover, they already are obligated to withhold income taxes from their employees. See Eighth Street Baptist Church, Inc. United States, 295 F. Supp. 1400 (D. Kan. 1969), a ffd , 431 F.2d 1193 (10th Cir. 1970) (per curiam). We are not aware of any case successfully challenging this essentially adminis trative duty as excessively entangling for the churches. The Act will not force the churches to share their decisionmaking power: they are free to allocate their resources as they see fit after they pay their taxes. Because it is permissible for Congress to impose non-discriminatory and uniform taxes on churches on the same basis as other entities and since churches already are required to withhold income taxes for their lay employees, we do not believe that requiring churches to pay the employer’s portion of applicable social security taxes or to withhold the employee’s portion violates the Establishment Clause.11

Conclusion Section 102 of the Act violates neither the Free Exercise Clause nor the Establishment Clause of the First Amendment. We will be glad to discuss this matter with you if you have any further questions.

T h e o d o r e B . O l s o n Assistant Attorney General Office o f Legal Counsel exem ption for church property against an Establishm ent C lause challenge. The Court pointed out that Subsidies and Religious Freedom After Walz Tax Exemptions, Note, see tors have argued that this m eans that exem ptions are constitutionally required, foreclosures and law suits w ould arise if the property were taxed. 397 U.S. at 674. A lthough som e com m enta rem oving the tax exem ption m ight lead to more church entanglem ent with the governm ent since liens, , 455 U.S. Lee C ourt’s summary distinguishing o f the exem ption for self-em ployed Amish in 45 N.Y.U. L. Rev. 876 (1970), the Supreme Tax Commission, Walz should be read for the proposition that tax exem ptions them selves are not unconstitutional. see supra note 1, w ithout any evidence o f im perm issible entanglem ent. 252, 261 (1982), lends little credence to this argum ent. Rather, , the Court upheld a state’s tax 397 U.S. 664 (1970), is not to the contrary. In Tax Comm 'n, ^[10] Walz Walz 11 It is also instructive that over the years a large num ber o f churches have opted into the system voluntarily,