Fair Treatment of Religious Organizations Act of 2026

Summary

This legislation changes how the federal tax code and federal agencies treat religious organizations. It requires that determinations of a group’s "religious purpose" for tax-exempt status ignore the organization’s beliefs or practices about marriage, sexuality, or gender identity, and says a belief does not have to be central to a religion to be considered "religious." It also bars federal branches and agencies from disadvantaging religious employers when they seek or receive federal grants, loans, contracts, subcontracts, purchase orders, or cooperative agreements for employment practices that favor hiring people who share the employer’s religious beliefs, while preserving existing statutory religious exemptions and defenses.

• Requires tax-exempt determinations to ignore an organization’s beliefs or practices on marriage, sexuality, and gender identity when deciding if the purpose is "religious."
• Says a belief qualifies as "religious" even if it is not central to an organized religion.
• Applies the tax-change provision to taxable years beginning after Dec 31, 2025.
• Bars federal agencies from disadvantaging religious employers seeking or receiving federal grants, loans, contracts, subcontracts, purchase orders, or cooperative agreements over faith-based hiring practices.
• Specifically preserves use of Title VII exemptions, the ADA defense, RFRA, and First Amendment claims and protections.
• Affects how the IRS and federal agencies evaluate religious purpose and eligibility for tax-exempt status and federal funding.
• Could reduce enforcement options for workers or applicants who challenge faith-based hiring policies tied to sexual orientation or gender identity.
• Is narrow in length but intersects tax law, employment law, and federal contracting rules, raising potential litigation and administrative questions.