Indiana ranks #2 overall 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. Indiana 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 nonprofit religious corporation laws, as well as exemptions upon application from state sales and property tax. Additionally, Indiana has no charitable solicitation registration requirements. Indiana, however, has some policies that are burdensome to faith-based nonprofits operating in the state, such as a broad Blaine Amendment and restrictive nondiscrimination laws related to public accommodations that provide no meaningful exemptions for religious organizations.
The Indiana Constitution has been interpreted by the Indiana Supreme Court to provide stronger protections for religious free exercise or worship than the federal First Amendment (as currently interpreted by the US Supreme Court) by providing strict scrutiny review when neutral laws burden religious exercise.
Indiana’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities, but Indiana caselaw excludes certain religious organizations from the statute.
Indiana’s nondiscrimination laws related to employment protect religious freedom by excluding organizations operated exclusively for religious purposes from the definition of “employer.”
Indiana 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 Indiana Constitution contains Blaine Amendment-like language 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.
Indiana nonprofit corporation law includes certain provisions to protect religious nonprofits’ right to self-government in internal affairs in some situations, including 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 Indiana constitution.
Indiana 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.
Indiana imposes a sales and use tax on religious organizations’ sales but (a) provides a broad and comprehensive, entity-based tax exemption for sales by churches, monasteries, hospitals, and schools upon application; and (b) provides a tax exemption for sales up to $100,000 per year for 501(c)(3) religious organizations’ sales upon application.
Indiana 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.
Indiana imposes property tax but, upon an initial application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes.
