Order Code RS20712
Updated October 21, 2002
CRS Report for Congress
Received through the CRS Web
Charitable Choice, Faith-Based Initiatives,
and TANF
Vee Burke
Domestic Social Policy Division
Summary
Efforts to pass tax incentives for charitable giving and to assure equal treatment for
non-governmental providers of social services, including religious ones, were renewed
in late September. Provisions of the original CARE bill (S. 1924) were included in a
manager’s amendment to the Senate Finance Committee CARE bill (its substitute for
the House-passed H.R. 7) and in a manager’s amendment to the Homeland Security bill,
filed September 24. However, when Senator Santorum on that date asked unanimous
consent to proceed on H.R. 7, the Assistant Majority Leader objected, saying some
Senators needed more time. The Charitable Choice Act of 2001 (Title II of the House-
passed bill) would apply its rules, which are significantly different from those in four
existing charitable choice laws, to nine new program areas. The House bill has aroused
dispute, especially over possible “voucherization” of social services and employment
discrimination. A large group of religious, civil rights, civil liberties, and education
organizations known as the Coalition against Religious Discrimination opposes
expansion of charitable choice. On January 8, 2002, a federal judge struck down as
unconstitutional direct government funding for a Wisconsin faith-based substance abuse
treatment program (Faith Works) that she found was indoctrinating participants in
religion. Later, on July 26, 2002, the judge ruled that a contract between the Wisconsin
Department of Corrections (DOC) and Faith Works for residential treatment services to
offenders did not violate the Establishment Clause because government funds were
received only when individual offenders chose to receive treatment there. For
background and selected legal issues on public aid and faith-based organizations, see
CRS Report RL31043. For a summary of the House-passed H.R. 7, see CRS Report
RS20948. This report will be updated for developments.
Charitable Choice Option in TANF Law. If a state chooses to administer and
provide TANF services or benefits through a contract with a nongovernmental entity or
to provide TANF recipients with certificates or vouchers redeemable with a private entity,
it must allow religious organizations to participate on the same basis as any other
nongovernmental provider without impairing the religious character of the organization
and without diminishing the religious freedom of TANF beneficiaries. The law (Section
104 of P.L. 104-193) imposes the following rules:
Congressional Research Service ˜ The Library of Congress

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! Direct government aid may not be used for sectarian worship, instruction,
or proselytization (Subsection j);
! Government is barred from discriminating against an organization that
applies to administer and provide services on the basis that it has a
religious character (c);
! The religious organization must implement the benefit/service program
in a manner “consistent with the Establishment Clause of the United
States Constitution” (c);1
! The religious grantee or contractor retains control over the definition,
development, practice, and expression of its religious beliefs (d)(1);
! Government is barred from requiring the organization to alter its form of
governance or to remove religious art and other symbols as a condition
of eligibility (d)(2);
! If a welfare recipient objects to the religious character of an organization
providing services, the state must provide an alternate and accessible
provider (e)(1);
! The religious organization retains freedom to hire on the basis of religion
(the organization’s exemption from Civil Rights Act rules about
employment practices is not affected by its administration of welfare
benefits) (f);
! Except as otherwise provided in law,2 a religious organization shall not
discriminate against a beneficiary on the basis of religion, a religious
belief, or refusal to actively participate in a religious practice (g); and
! Nothing in the charitable choice section of the law shall be construed to
preempt any provision of a state constitution or law that prohibits or
restricts expenditure of state funds in or by religious organizations (k).
Two other provisions are implicit: Religious contractors and grantees may use their
own funds for sectarian worship, instruction, and proselytization (an explicit rule against
using funds for sectarian purposes applies to public funds provided “directly” for welfare
benefits or services, but not to aid received in the form of vouchers). Government may
require religious grantees to be separately incorporated from their sponsoring institution.
P.L. 104-193 also applies charitable choice rules to other programs modified by its
Title I or Title II that permit contracts with organizations to provide services or permit use
1 The First Amendment says that “Congress shall make no law respecting an establishment of
religion, or prohibiting the free exercise thereof ... “It has long been interpreted to allow religious
organizations to participate in publicly funded social service programs. But in the past it has
generally been interpreted to forbid religious activities or proselytizing in the publicly funded
programs and to require religious providers to set up a corporation separate from their religious
sponsor and to remove religious symbols from the premises where services are provided (see
CRS Report RL30388, Charitable Choice: Background and Selected Legal Issues, by David
Ackerman).
2 Legal researchers say they have found no instance of a law providing “otherwise,” but this
phrase is regarded as a loophole by some; an effort to delete it failed during debate on H.R. 4678.

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of certificates, vouchers or other forms of disbursement to provide aid.3 However, other
provisions of law preclude use of private organizations to perform some basic
administrative activities. For example, eligibility determinations for food stamps and
Medicaid must be made by government personnel or by persons employed under federally
comparable “merit systems.”
Legislative Action in 2001. Introduced on March 28, 2001 as the Community
Solutions Act, H.R. 7 was referred to the House Committees on the Judiciary (which
acted on Title II on June 28) and on Ways and Means, which acted on Titles I (tax
incentives) and III (Individual Development Accounts) on July 11. House passage
occurred on July 19, without floor amendment. Six hearings (the first ever held on
charitable choice) were conducted in April-June by the House Judiciary subcommittee on
the Constitution, the House Government Reform Subcommittee on Criminal Justice, Drug
Policy, and Human Resources, the Senate Judiciary Committee, and the House Ways and
Means Subcommittees on Human Resources and on Select Revenue (jointly). For
testimony, see the committees’ Web sites.
Legislative Action in 2002. The Charity Aid, Recovery, and Empowerment Act
(CARE), introduced in February, 2002, by a bipartisan group, was welcomed by the White
House as representing an agreement “to move a faith-based initiative” out of the Senate.
This bill omitted the most disputed provisions of H.R. 7. Instead, in a Title called Equal
Treatment for Nongovernmental Providers, it provided that a nongovernmental
organization “involved” in the delivery of a federally funded social service could not be
required to remove art, icons, scripture, or other symbols, or to alter its name, because the
symbols or name were religious, or to alter or remove provisions in its chartering
documents that were religious, or to alter or remove religious qualifications of
membership on governing boards. These equal treatment provisions applied to all social
service programs administered by the federal government (excepting educational
assistance under major federal education acts) or by a state or local government using
federal financial assistance (not counting tax credits, deductions, or exemptions). The
original CARE bill also proposed to expedite application for tax-exempt status of an
organization organized and operated for the primary purpose of providing social services,
establish tax incentives for charitable giving more generous than those of the House bill,
establish a new Individual Development Account (IDA) program financed by business tax
credits to financial institutions, and authorize $150 million for FY2003 for technical
assistance to small nonprofit community groups.
Before scheduled Finance Committee markup in mid-June, the equal treatment title
of the original CARE bill was deleted. Thereafter, the Finance Committee incorporated
modified versions of some of the CARE provisions into its substitute for H.R. 7,
approving the bill on July 16 (S.Rept. 107-211) and entitling it Care Act of 2002. The
committee version of H.R. 7 includes tax incentives for private giving, establishment of
new tax credit-funded Individual Development Accounts, funding for the Social Services
Block grant, revenue measures, and other tax provisions. It does not contain provisions
3 These programs are food stamps, Medicaid, Supplemental Security Income (SSI), and child
support enforcement. In 1996, food stamps and medicaid generally allowed states to use private
organizations, including charitable and religious organizations, in providing services like nursing
home care and group living arrangements (Medicaid),outreach and training (food stamps).

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to expand charitable choice rules. However, as noted above, manager’s amendments (to
the Senate version of H.R. 7 and to the Homeland Security bill) propose to enact the equal
treatment provision title of the original CARE bill, along with many other provisions of
that bill.
Origin of Charitable Choice. In June, 1995, the Senate Finance Committee
reported an amended version of the House-passed Personal Responsibility Act, H.R. 4,
which proposed to replace the program of Aid to Families with Dependent Children
(AFDC) with a block grant. The Finance Committee bill added two sentences concerning
religious organizations. They provided that religious organizations who participated in
the new state block grant program were to retain their independence from government and
that the organizations could not deny aid to needy families with children “on the basis of
religion, a religious belief, or refusal to participate in a religious practice.” This language
was adapted from another AFDC block grant bill (S. 842, sponsored by Senator Ashcroft).
In August, 1995, Senator Dole introduced The Work Opportunity Act, the Republican
leadership alternative to the House-passed H.R. 4. Responding to growing interest in
“privatization” of welfare services,4 the section on provision of aid by religious
organizations was enlarged to deal with “services provided by charitable, religious, or
private organizations.” Also, it stated affirmatively that states had an option to administer
and provide block grant services through contracts with religious organizations and by
means of certificates, vouchers or other forms of disbursement redeemable with them.
Before passage the Senate adopted a two-part amendment proposed by Senator Cohen.
The first added the requirement that programs be implemented consistent with the
Establishment Clause of the Constitution; the second removed a provision that would
have barred government from requiring a religious organization to form a separate
nonprofit corporation in order to be eligible to provide assistance. Senate-House conferees
added a stipulation that religious organizations would not lose their right to consider
religion in their hiring practices because of participating in welfare programs or receiving
funds from them. H.R. 4 was vetoed, but the charitable choice rules of the final 1996
welfare reform law are virtually identical to those of the conference report on H.R. 4.
Use of Charitable Choice in TANF. TANF state plans are not required to
provide charitable choice information. However, in their 2000-2001 plans more than a
dozen jurisdictions mentioned plans to use religious or “faith-based” organizations,
usually along with other groups, in providing services (Arkansas, Delaware, District of
Columbia, Georgia, Indiana, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, South Dakota, Tennessee, and Washington). Some spoke of service
“partnerships” that included the “faith community” and community based/action agencies.
Dr. Amy Sherman, Hudson Institute, recently concluded a survey about
implementation of charitable choice in 15 states (for 9 states, this was a followup survey).
She told a research conference of the Roundtable on Religion and Social Welfare Policy
in April, 2002, that the survey found 726 contracts totaling about $124 million. She said
more congregations are “getting involved” in contracting to provide services, that roughly
4 A major proposal to “privatize” welfare administration emerged in Texas; the state developed
a plan for administration by a private contractor of an integrated state eligibility system for
TANF, Medicaid and food stamps. However, in May, 1997, the Clinton Administration held that
law required eligibility for Medicaid and food stamps to be determined by a public official.

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half of the faith-based organizations and congregations identified in the survey were “new
players,” and that some states showed a dramatic increase in contracting with faith-based
groups (for example, she said Michigan gave 129 contracts in the recent survey period,
compared with 9 in a survey ended in 1999). The survey found much more contracting
activity with faith-based groups under TANF than in the other programs covered by
charitable choice. She also said the new survey found a decline in the use of indirect
financial contracting by way of intermediary organizations.
An Urban Institute study of persons who left AFDC/TANF between 1995-1997
found that 72% did not seek help from nongovernmental sources. However, of those who
did, about one-third used a faith-based provider, about one-tenth used a secular provider;
and the rest relied on families and friends for help.
Welfare-to-Work TANF Grants. Congress in 1997 added special welfare–to-
work (WtW) formula and competitive grants to TANF for FY1998 and FY1999. As parts
of TANF, the new grants were subject to charitable choice rules. The Labor Department
awarded six competitive grants (out of 188) to faith-based groups. Most projects were to
provide employment services; some focused on persons with limited English proficiency.
Proposed Fatherhood Grants under TANF. In the 106th Congress, the House
twice voted (Fathers Count Act, H.R. 3073, and Child Support Distribution Amendments,
H.R. 4678) to establish grants under TANF to promote marriage and “successful
parenting,” but the Senate did not act on its companion bill (S. 3189). During House
debate, amendments were defeated to disallow fatherhood grants to any “pervasively
sectarian” faith-based institution (Congressional Record, November 10, 1999. H11895)
and to forbid a fatherhood grantee from subjecting “a participant in a program assisted
with the grant to sectarian worship, instruction, or proselytization” (Congressional
Record, September 7, 2000. H7316). Also defeated was a proposal to forbid religious
organizations from discriminating in their hiring on the basis of religion. The proposal
for TANF fatherhood grants has been reintroduced and passed by the House as a provision
of the TANF reauthorization bill (H.R. 4737). The Senate Finance Committee version
of H.R. 4737 also includes fatherhood grants, but it places them in a different section of
the Social Security Act (Title IV-D, child support), which is not subject to charitable
choice rules.
Faith-Based Initiative of President George W. Bush. President Bush on
January 29, 2001, launched his faith-based initiative with an executive order that
established Offices of Faith-Based and Community Initiatives in the White House and in
five Cabinet departments (Education, Justice, HHS, Labor, and Housing and Urban
Development). The President advocated expansion of charitable choice, tax incentives
to promote charitable giving and some specific faith-based projects, including creation of
a Compassion Capital fund.
On July 1, 2002, the Labor Department announced award of three sets of grants
designed “to link faith-based and grassroots community organizations” to the nation’s
One-Stop Career system under the Workforce Investment Act (WIA). $12 million was
awarded to 12 states to create partnerships with faith-based and community groups, $5
million to 9 non-profit intermediary organizations, and $500,000 to 20 small
organizations. On October 3, 2002, HHS announced awards under the Compassion
Capital Fund’s initial appropriation of $30 million, made for FY2002. HHS awarded

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matching grants totaling almost $25 million to 21 organizations (called intermediaries)
that are to provide technical assistance to faith-based and community-based organizations
and issue awards or sub-awards for start-up and operational costs to qualified faith- and
community-based organizations to expand or replicate promising or best practices. It also
awarded contracts to establish a CCF National Resource Center ($2.2 million), to support
research regarding best practices and services of intermediary organizations ($1.4
million), and to support field-initiated research grants (almost $1 million). The FY2003
budget requests $100 million for the Compassion Capital Fund, $11 million more than
the FY2002 request). For information about the HHS Center for Faith-Based and
Community Initiatives, see [http//www.gov/faith]
Constitutional Challenges. In July and October 2000, two court suits were filed
challenging the constitutionality of TANF charitable choice programs. One suit charged
that a job training and placement program for TANF recipients funded by the Texas
Department of Human Services and operated by the Jobs Partnership of Washington
County was “permeated” by Protestant evangelical Christianity in violation of both the
state and federal constitution (American Jewish Congress and Texas Civil Rights Project
v. Bost, filed July 24, 2000, but dismissed in February 2001 as moot after Texas
discontinued the program). However, a remaining issue is yet to be decided – whether the
training program should be required to return the funds it received. The second suit,
which resulted in an order to cease direct funding, charged that a job placement and
support services program for drug addicts in Milwaukee, Wisconsin, violated the state and
federal constitutions by giving welfare-to-work funds directly to a “pervasively sectarian”
organization [Faith Works] and using the funds to indoctrinate clients in the Christian
faith (Freedom from Religion Foundation, Inc. vs. McCallum, filed October 12, 2000.)
A federal judge on January 8, 2002 ordered Wisconsin to cease this direct funding as
unconstitutional, but she said her ruling did not deal with constitutionality of the 1996
charitable choice law, which does not authorize direct funding of religious activities.
Later, on July 26, 2002, the judge ruled on a second issue in the Faith Works case –
constitutionality of a contract with the Wisconsin Department of Corrections (DOC)
under which Faith Works provides residential treatment services. The judge found that
Faith Works receives government funds only when individual offenders choose to receive
treatment there. She held that the contract did not violate the Establishment clause
because this private choice “breaks the circuit” between government and the faith-
intensive program. Plaintiffs have appealed the decision.
Reports about Charitable Choice. The General Accounting Office has issued
two reports about charitable choice: GAO-02-337 and GAO-02-887. The first concerns
use of existing charitable choice laws; the second recommends that HHS issue guidelines
to clarify provisions that GAO says have been found to be unclear.
Conclusion. Advocates of charitable choice maintain that faith-based
organizations have special ability to help persons toward self-respect, healthy family
dynamics and independence. They maintain that existing charitable choice rules give
protection against religious discrimination both to religious organizations providing
welfare services and to beneficiaries of the services. However, many religious spokesmen
have expressed concerns that government grants could diminish their vitality and religious
commitment. For a discussion of areas of agreement and disagreement about charitable
choice issues, see In Good Faith at [http://www.temple.edu/feinsteinctr].

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