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TheStreet Open House

Arizona Weighs Unemployment Tax Break For Churches

By CRISTINA SILVA

PHOENIX (AP) â¿¿ Hundreds of private school teachers and day care workers employed by religious organizations wouldn't be eligible for unemployment benefits under a proposed law backed by Republicans in the Arizona Legislature.

The measure marks the latest Republican-led effort to expand tax subsidies for religious institutions and limit unemployment insurance at a time when the state's jobless benefits fund is millions of dollars in the hole because of the struggling economy.

House Bill 2645 would allow religious organizations to avoid paying unemployment taxes for educational and day care workers. The legislation advanced by the Arizona Senate on Wednesday has the support of religious schools and conservative groups. The Republican-led Arizona House passed the bill in a partisan vote in March.

Arizona law already allows organizations operating primarily for religious purpose to avoid paying unemployment taxes. Proponents argue that the proposed law is necessary after some state tax officials recently started interpreting the current religious exemption so that it only applies to church staff and not private school teachers. They predict religious schools will go bankrupt if they have to pay unemployment taxes.

"We just want it corrected and to go back to status quo," said Josh Kredit, a lawyer for the Center for Arizona Policy, a powerful conservative group. "These are tiny little preschools that would go out of business."

Democrats have rallied against the measure, arguing that churches should provide unemployment benefits to teachers.

Religious organizations can willingly offer unemployment benefits to employees and some do, said Nicole Moon, spokeswoman for the state's Department of Economic Security.

Federal law and court rulings have not clearly defined what constitutes operating primarily for religious purposes, so DES determined last year that schools and child care centers did not qualify under the exemption because their mission statements were to provide general education or adult supervision, Moon said.

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