September 29, 2016; The Hill

As the Supreme Court enters its next term, The Hill highlights several cases worth your attention. They are:

  1. Trinity Lutheran Church of Columbia Inc. v. Pauley
  2. Peña Rodriguez v. Colorado
  3. Samsung Electronics Co. v. Apple
  4. Fry v. Napoleon Community Schools
  5. McCrory v. Harris

Each of these cases is interesting in their own right. However, Trinity Lutheran v. Pauley and McCrory v. Harris may have a larger impact on nonprofits than the others, although Peña Rodriguez v. Colorado and Fry v. Napoleon Community Schools will surely have an impact in their particular sectors. For now, let’s stick with the cases sandwiching our list above.

Trinity Lutheran v. Pauley

What is it about? This case centers on a Missouri Department of Natural Resources program to give schools money to purchase recycled tires to refinish playground surfaces. Trinity Lutheran Church was denied access to these funds to resurface their playground, which is used by its licensed preschool and daycare. The organization argues this violates its First Amendment right to the free practice of religion and its Fourteenth Amendment right to equal protection under the law.

Why does it matter? State governments are among the biggest funders of schools, and this case will be a test of the boundaries of government funding. If religious entities with schools associated with them are able to secure government funding, this could lead to a growth in these sorts of situations: a church or religious institution seeking government money to build its school (in this case, preschool) infrastructure.

McCrory v. Harris

What is it about? This is one of two cases about racial gerrymandering in the drawing of political boundaries in North Carolina. A lower court ruled that the state’s drawing of Districts 1 and 12 were unconstitutional. Both representatives from those Districts are Democrats, while Governor Pat McCrory is Republican.

Why does it matter? The way districts are drawn can have an impact on electoral outcomes. This is particularly evident in state-level elections. It matters for nonprofits because states decide what to do when it comes to taxation of nonprofits. While 501(c)(3) organizations are exempt from federal income tax, it is left up to states to determine whether organizations are exempt from state sales taxes. States also define what a nonprofit organization must do to qualify for an exemption.

Take, for example, Oklahoma. As NPQ discussed earlier this year, Oklahoma has a hard-to-follow logic for granting exemptions. There are two costs associated with this policy. The first is the sales tax levied on the nonprofit, but less obvious is the second cost, the risk involved with starting up a nonprofit to begin with. On a shoestring budget, small things like sales tax can have a huge impact. When a nonprofit is unsure what its actual costs will be before it begins work, it may choose to scale back the scope of its mission—or, worse still, decide not to pursue its mission.

As a reminder, the Supreme Court is still down one member, as Senate Republicans have opted to not hold confirmation hearings for Merrick Garland, President Obama’s nominee to succeed Antonin Scalia.—Sean Watterson