Corporations, Taxes, and Religion: The Hobby Lobby and Conestoga Contraceptive Cases

Beginning in 2013, the federal government mandates that general business corporations include contraceptive and early abortion coverage in employee health plans. Section 4980D of the Internal Revenue Code imposes a substantial excise tax on health plans violating the mandate. Indeed, for one company – Hobby Lobby – the expected annual tax is nearly one-half billion dollars. Dozens of “for profit” businesses have challenged the mandate on free exercise grounds, asserting claims under the First Amendment as well as under the Religious Freedom Restoration Act.

So far, courts have been reluctant to hold corporations have religious rights; as a result, standing of a corporation to assert the religious beliefs and rights of owners has become the primary issue in the twenty-six separate cases moving through the courts. Courts are splits on whether to grant standing; however, a large majority has used a variation of relational or associational standing to grant preliminary injunctions against enforcement of the tax.

This article discusses the relationship of morality and religion to general business corporations. It concludes that over the past few decades, movements for social justice and corporate social responsibility have intertwined business corporations and moral issues, blurring the line between religion and commerce. It also concludes that courts should permit associational standing for closely-held corporations – particularly those electing S status for tax purposes – if the owners have unanimous (or near-unanimous) beliefs.