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The Contraceptive Mandate and Corporate Personhood

2:16 PM, Dec 3, 2013 • By JIM SWIFT
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Corporate personhood may not be a new concept, but precedents regarding it have been slow to materialize, even as legal provision for how companies can organize has changed rapidly. “S corporations” are a relatively recent innovation. Subchapter S of the tax code was created in 1958.

The Freshway companies are closely held S corporations, of which Frank and Phil Gilardi are equal owners. They own the companies as individuals and pay their corporate taxes on their personal tax returns, at their individual income tax rates, as required by the IRS. But the government would draw a sharp distinction, insisting—as it has throughout the HHS litigation— that the mandate applies strictly to corporate entities, not the individuals who own them.

But can it be that the Gilardis’s right to free exercise of religion hinges on how they chose to structure their businesses? Even Judge Janice Rogers Brown of the D.C. Circuit Court of Appeals, who was not prepared to assert the corporate right to free exercise, called the government’s position: 

perplexing because we do not believe Congress intended important statutory rights to turn on the manner in which an individual operates his businesses. The government’s logic is also quite troubling because it would eventually reach First Amendment free-exercise cases. ... Thus, if the government is correct, the price of incorporation is not only the loss of RFRA’s statutory free-exercise right, but the constitutional one as well

Just a week after Rogers’s court handed down its decision in Gilardi , the Seventh U.S. Circuit Court of Appeals blocked the contraception mandate in another case, Korte v. Sebelius, on the grounds that it placed a “substantial burden” on the religious rights of two companies in violation of RFRA. Citing the example of a Kosher deli, Judge Diane Sykes wrote:

If the government’s view is correct, commonplace religious practices normally thought protected would fall outside the scope of the free-exercise right. The Jewish deli is the usual example. On the government’s understanding of religious liberty, a Jewish restaurant operating for profit could be denied the right to observe Kosher dietary restrictions. That cannot be right. There is nothing inherently incompatible between religious exercise and profit-seeking.

The Supreme Court’s verdict on the underlying issue should be known by next summer. If the justices grant companies free-exercise rights, the Gilardi brothers will enter legal history, at least as a footnote. Even if that doesn’t happen, they’ll be remembered in Sidney as principled men who fought for their beliefs and appealed their fight to the highest court in the land. That may not be any Nobel prize, but it’s something.

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