Out of 51 U.S. jurisdictions, Arizona ranks #25 overall for its friendliness towards faith-based nonprofit organizations. Arizona has several laws that facilitate the contributions of faith-based nonprofits, including an automatic exemption from state corporate income tax for religious organizations that have 501(c)(3) status and strong protections for directors to rely on guidance from religious figures. Additionally, Arizona has no charitable solicitation registration or audit requirements. Arizona, however, has some policies that are burdensome to faith-based nonprofits operating in the state, such as a broad Blaine Amendment and nondiscrimination laws that restrict freedom for religious organizations that offer public accommodations.
The Arizona Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment (as currently interpreted by the US Supreme Court).
Arizona 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 the RFRA is a statute rather than a state constitutional provision, Arizona does not receive the highest score for this factor.
Arizona’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities and provide no meaningful religious accommodations or exemptions.
Arizona law provides that religious worship and the operation of religious organizations can only be prohibited or restricted by an emergency order that: (a) applies equally to all “essential” secular entities in the jurisdiction, (b) serves a compelling governmental interest, and (c) is narrowly tailored.
The Arizona 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.
Arizona nonprofit corporation law includes a provision that defers to ecclesiastical law or religious doctrine in the event that the religious law or doctrine conflicts with the nonprofit corporation law to the extent required by the Constitution of the United States or the Arizona constitution.
Arizona 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.
Arizona imposes a sales and use tax on religious organizations’ sales but a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ sales is generally available upon application.
Arizona 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, such as property used for religious worship.
