Justice Department Declares Decades-Old Rules Barring Faith Groups From Full Participation in Federal Aid Programs Unconstitutional

In a landmark opinion, the Office of Legal Counsel finds that longstanding restrictions on the use of federal funds by religious charities — bans on prayer, worship, and religious instruction inside government-funded soup kitchens, shelters, and child-care programs — violate the Free Exercise Clause and must give way to the Constitution’s guarantee of equal treatment for people of faith.

For nearly three decades, faith-based charities that accepted federal grant dollars to run soup kitchens, homeless shelters, addiction-recovery centers, and child-care programs have lived under a quiet but powerful restriction: no prayer, no scripture, no gospel witness, no religious instruction — not on the government’s dime. Houses of worship that wanted to serve the poor with federal help had to leave their faith at the door, segregating “sectarian” activity into a separate time and place, under threat of losing funding altogether.

That era may now be ending. In a memorandum opinion dated August 25, 2026, the Department of Justice’s Office of Legal Counsel (OLC) — the executive branch’s chief legal interpreter — concluded that the federal statutes underpinning those restrictions, enacted through the 1996 welfare reform law, the Public Health Service Act, and the Child Care and Development Block Grant Act, are not required by the Establishment Clause and, in fact, violate the Free Exercise Clause of the First Amendment.

The opinion, signed by Assistant Attorney General T. Elliot Gaiser and Deputy Assistant Attorney General Joshua J. Craddock, was issued in response to a formal request from the Department of Health and Human Services, which administers billions of dollars annually in grants that flow through faith-based and secular providers alike.

■ A Wall Built on Since-Discarded Precedent

The restrictions at issue trace back to the “Charitable Choice” movement of the mid-1990s, championed by lawmakers including then-Senator John Ashcroft, who sought to open the door for religious organizations to compete for federal social-service contracts on equal footing with secular nonprofits. But that inclusion came with a catch: funds could never be spent on “sectarian worship, instruction, or proselytization.” HHS regulations went further still, requiring that any religious activity be offered at a different time or in a different location from the federally funded service — and that the separation be “completely clear to the consumer.”

OLC’s opinion traces those restrictions to the Supreme Court’s now-abandoned Lemon v. Kurtzman test and its progeny — a framework the Court itself buried in its 2022 decision in Kennedy v. Bremerton School District, which held that Establishment Clause questions must instead be answered by looking to history and the original meaning of the First Amendment.

“Like some ghoul in a late-night horror movie that repeatedly sits up in its grave… Lemon continued to stalk the Court’s Establishment Clause jurisprudence” — until Kennedy “drove a stake through Lemon’s heart.” DOJ Office of Legal Counsel, quoting Justice Scalia

Measured against history rather than the discarded Lemon framework, the opinion finds, the funding restrictions bear none of the hallmarks of an actual “religious establishment” that the Founders sought to forbid — no coercion, no government control of church doctrine, no monopoly over civil functions, and no compelled tithe favoring one denomination over another. To the contrary, OLC notes that the First Congress funded church-run schools, that Congress paid for missionary work “propagating the gospel” among Native American tribes in 1796, and that a Jefferson-negotiated 1803 treaty funded a Catholic priest’s salary and the construction of a church.

■ From “Status” to “Use” — A Distinction the Court Has Erased

For years, the government defended these restrictions by drawing a line between discriminating against a religious organization because of what it is (its “status”) and declining to fund what it does with the money (its “use”). OLC’s own 2019 opinion on a similar restriction affecting historically Black colleges and universities relied on exactly that distinction, treating status-based restrictions as presumptively unconstitutional while giving use-based restrictions more constitutional breathing room.

The new opinion says that framework “no longer reflects the current state of the law.” In Carson v. Makin (2022), the Supreme Court flatly rejected the status-use distinction, holding that “the prohibition on status-based discrimination under the Free Exercise Clause” is not “permission to engage in use-based discrimination.” And in 2025’s Catholic Charities Bureau v. Wisconsin Labor & Industry Review Commission, the Court unanimously struck down a Wisconsin rule that tried to define which religious activities counted as “worship” or “proselytization,” calling that kind of line-drawing a “paradigmatic form of denominational discrimination.”

■ What Changes for Faith-Based Charities

The practical stakes are significant. Under the old rules, a church-run soup kitchen receiving federal support could not offer a communal prayer before serving a meal unless it was held at a separate time. A faith-based job-training program could not root its curriculum in religious teaching about the dignity of work. A religious substance-abuse recovery center could not integrate faith into its treatment model without walling it off from the federally funded portion of the program.

OLC’s opinion concludes that this bifurcation “imposes special burdens” on religious providers that secular organizations never face, and does so without any compelling government interest — since the Establishment Clause, properly read, never required the restrictions in the first place.

A state or federal “interest in separating church and state more fiercely than the Federal Constitution cannot qualify as compelling in the face of the infringement of free exercise.” Carson v. Makin, quoted in the OLC opinion

■ A Constitutional Order to HHS

The opinion does not merely offer legal commentary — it directs action. OLC advises that the religious restrictions in PRWORA, the PHSA, and the CCDBGA are severable from the rest of those statutes, meaning the underlying grant programs can continue to function even with the unconstitutional provisions removed. Should HHS decide not to enforce the restrictions and its related regulations, federal law requires the Department to notify Congress within 30 days of adopting that policy.

The opinion is careful to note that the Religion Clauses are not at war with one another. Removing the use-based restrictions does not open the door to government-run religious coercion — beneficiaries who object to a provider’s faith-based approach remain entitled under existing law to an alternative, secular provider of equal value. What changes is that religious charities will no longer be forced to hide their faith to receive support for feeding, housing, or healing the same neighbors that secular charities serve.

■ The Bigger Picture

For faith communities that have long argued the modern administrative state treats religious charity as a legal liability rather than a public good, the opinion reads as vindication two decades in the making. It also fits a broader pattern this year of the executive branch revisiting Lemon-era assumptions across federal policy — from religious displays on government property to, now, the terms on which churches, synagogues, mosques, and ministries can partner with Washington to serve the poor.

Whether Congress moves to formally strike the restrictions from the U.S. Code, or HHS simply declines to enforce them administratively, the message from the Justice Department is unambiguous: religious charities do not forfeit their constitutional identity the moment they accept a federal grant to do what they have always done — serve those in need, in the name of their faith.