Alabama ranks #1 out of the 51 U.S. jurisdictions for its friendliness towards faith-based nonprofit organizations, making it one of the best places to operate a faith-based nonprofit in the United States. Alabama has several laws that facilitate the contributions of faith-based nonprofits, including strong constitutional protections for free exercise of religion, a state constitutional amendment requiring government burdens on religious exercise to satisfy strict scrutiny, and an automatic exemption from state corporate income tax for organizations with federal 501(c)(3) status. Additionally, Alabama does not impose audit requirements as a condition of maintaining authorization to fundraise in the state for those same organizations. Alabama, however, has some policies that are burdensome to faith-based nonprofits operating in the state, such as a broadly restrictive state Blaine Amendment and an imposition of state sales tax on religious organizations’ sales and purchases.
The Alabama Constitution, in the constitutional text itself, provides stronger protections for religious free exercise or worship than the federal First Amendment (as currently interpreted by the US Supreme Court).
Alabama has enacted a constitutional amendment that protects the religious free exercise of all individuals and entities by requiring government burdens on religious exercise to satisfy strict scrutiny, providing one of the highest standards for religious freedom protections in the country.
Alabama law provides that religious worship can only be prohibited or restricted by an emergency order that applies equally to all comparable secular entities in the jurisdiction, as required by Tandon v. Newsom.
The Alabama 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 in many cases, but it could become effective in the future if Court precedent changes.
Alabama nonprofit corporation law does not have any law deferring to religious beliefs and structures in governance matters and does not have any special provisions specific to the internal governance or operations of religious organizations.
Alabama law permits a director, in the fulfillment of the director’s fiduciary duties, to rely only on the opinions of certain individuals retained by the corporation and does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition.
Alabama imposes a corporate income tax but automatically exempts organizations with federal 501(c)(3) exempt status. Some exempt organizations may need to fill an annual “no tax due” form.
Alabama imposes property tax but, upon application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes.
