Kentucky ranks #6 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. Kentucky has several policies that facilitate the contributions of faith-based nonprofits, including a state RFRA statute and strong protections for religious exercise during a state of emergency. Additionally, Kentucky does not impose audit requirements as a condition of maintaining authorization to fundraise in the state. Kentucky, however, has some laws that are burdensome to faith-based nonprofits operating in the state, such as a Blaine Amendment and very limited exemptions from sales tax on religious organizations’ sales.
Religious Freedom:
State Constitutional Protection of Free Exercise:
0
/5
The Kentucky Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment.
State Religious Freedom Restoration Act:
3
/5
Kentucky 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, Kentucky does not receive the highest score for this factor.
Religious Freedom for Nonprofits with Public Programming:
3
/5
Kentucky’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities but provide accommodations or exemptions for the vast majority of religious organizations.
Religious Freedom for Faith-Based Employers:
3
/5
Kentucky’s nondiscrimination laws related to employment are broad but provide strong accommodations or exemptions to generally protect the autonomy of the vast majority of religious organizations.
Protections for Religious Exercise in State of Emergency:
3
/5
Kentucky law provides that religious worship 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.
Blaine Amendment:
-3
/5
The Kentucky Constitution contains a Blaine Amendment that could prevent the participation of faith-based schools in generally available public benefit programs on the same terms as similarly situated secular schools. This is not as broad as a general Blaine Amendment, which prohibits all aid to faith-based institutions, but is still detrimental to the work of faith-based 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:
0
/5
Kentucky’s nonprofit corporation law mentions the option for nonprofit corporations to incorporate for religious purposes. However, the law lacks both: (a) specific provisions to protect the right of nonprofits incorporated for religious purposes to self-government in internal affairs and (b) an option to incorporate expressly as a nonprofit religious corporation.
Standards of Conduct for Directors of Religious Organizations:
3
/5
Kentucky law permits a director, in the fulfillment of the director’s fiduciary duties, to rely on the opinion of individuals who can reasonably be assumed to have expertise on a certain matter, but does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition.
Charitable Registration Law:
3
/5
Kentucky generally requires charitable solicitation registration but, upon application, generally provides religious organizations with a registration exemption.
Audit Requirements Pursuant to Charitable Registration:
5
/5
Kentucky does not require the submission of reviewed or audited financials as a condition of maintaining authorization to fundraise in the state.
Corporate Income Tax:
3
/5
Kentucky imposes a corporate income tax and offers an automatic exemption only to a subset of organizations with federal 501(c)(3) exempt status.
Sales and Use Tax, Sales:
-3
/5
Kentucky 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
Kentucky 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:
3
/5
Kentucky imposes property tax but, upon application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes.
