H.R. 8117 — Fair Treatment of Religious Organizations Act of 2026

This section establishes criteria under new IRC §501(s) for determining whether an organization's purpose qualifies as religious for tax-exempt status, requiring such determinations to disregard the organization's beliefs or practices concerning marriage, sexuality, or gender identity—even if inconsistent with law or public policy—and treating any belief as religious regardless of whether it is compelled by or central to a religious system. The provision applies to taxable years beginning after December 31, 2025.

This section prohibits any federal branch, department, or agency from discriminating against or disadvantaging religious employers—defined as religious corporations, associations, educational institutions, or societies—that apply for or receive federal grants, loans, or other financial assistance via contracts, subcontracts, purchase orders, or cooperative agreements due to employment practices consistent with their right to hire persons who share their religious beliefs and comply with their religious standards. Such protected practices include exemptions under sections 702(a) and 703(e)(2) of the Civil Rights Act of 1964 (i.e., religious employment preferences), section 103(d) of the Americans with Disabilities Act of 1990 (i.e., religious entity exemptions from certain disability requirements), the Religious Freedom Restoration Act of 1993, and the First Amendment.