Last week's House passage of President Bush's faith-based initiative is a significant victory for the administration in its embattled effort to broaden religious organizations' involvement in providing social services. Two crucial pieces of the bill-protecting religious charities' freedom to hire those who share their beliefs, and allowing the voucherization of federal funds-survived intact, the former after heated debate, the latter largely unnoticed. But a third component, designed to encourage individuals' charitable giving, was gutted.

The Community Solutions Act, passed by a vote of 233 to 198, would greatly enlarge the stream of federal social-service dollars for which religious charities can compete. It would cover more than 80 federal programs worth $53 billion a year, ranging from juvenile delinquency to job training.

More important, it would change the rules by which government support is awarded. The legislation would make it unlawful for federal grantors to exclude groups from funding because of their religious character-a common complaint from charity leaders. While organizations like Lutheran Social Services and the Jewish Federation have long received federal grants, they mostly have been forced to keep their services free of religious influence. The House bill would protect their right to control the "definition, development, practice, and expression" of their religious beliefs.

The bill's preservation of faith-based groups' right to hire staff who share their religious mission proved the focus of controversy in the House. For months, liberals such as Bobby Scott, senior Democrat on the House Judiciary Committee, attacked this provision as a reversal of anti-discrimination laws. But defenders point to an exemption for religious groups under Title VII of the 1964 Civil Rights Act, along with several court rulings that have upheld and widened the protection. And it was written into the 1996 "charitable choice" law, which opened some anti-poverty funds to religious charities without requiring them to hide their religious character. "To bar a religious organization from hiring on a religious basis is to assail the very animating cause for which the organization was formed," says Carl Esbeck, who helped draft charitable choice.

"This is like mother's milk to Catholic Charities," says Sharon Daly, the agency's vice president for social policy. "I've never seen a fight like this about whether religious agencies can hire their own people. I'm appalled." Don Eberly, deputy director of the White House Office of Faith-Based and Community Initiatives, calls it "the bright line in the sand" for the president's initiative.

Virtually all of the bill's supporters say they will walk if their religious exemption disappears. The Senate may put them to the test. Majority leader Tom Daschle, who may not schedule debate before next year, told reporters, "I can't imagine that we could pass any bill that would tolerate slipping back into a level of tolerance that would be unacceptable in today's society."

How the Senate handles vouchers also bears watching. The House bill would allow federal administrators to create a voucher option wherever "feasible and efficient." This means that program funds, instead of being awarded to service providers, could be given to individuals eligible for assistance in the form of certificates they would use to pay for secular or religious services of their choosing. Faith-based groups accepting vouchers would be free to integrate religion into their programs-no questions asked. There is precedent for this. Since 1990, poor families have used federally funded certificates to pay for day care at church-run facilities, with no court challenges to slow them down.

Supporters see this as the sleeping giant of the initiative. The reason: Vouchers divert decision-making power from Washington bureaucrats to individuals in need, while shifting more responsibility for the poor to states and grass-roots groups. The House bill would give federal administrators discretion to convert all or part of the $53 billion to vouchers.

The voucher option arose because of doubts about the bill's ability to negotiate church-state landmines. Some religious charities, wary of the rules that come with government grants, are willing to consider vouchers. Shannon Royce, legislative counsel at the Ethics and Religious Liberty Commission of the Southern Baptist Convention-a denomination that historically has vigorously championed church-state separation-thinks many ministries would approve vouchers. Stephen Burger, executive director of the Association of Gospel Rescue Missions, says his program directors remain suspicious of direct federal assistance. But indirect aid is another matter: "The voucher system is the answer," he says. "A properly written voucher program would get some real attention."

Liberals meanwhile accuse the Bush initiative of ushering in the government establishment of religion. They argued in committee that charities would trample the rights of program participants by demanding they join religious activities in exchange for services. Bill supporters tried to quell these fears with rules previously approved by Congress under charitable choice: Whenever direct grants are involved, individuals must be allowed to choose a secular program.  And religious activities-such as Bible teaching, evangelism, and worship-must be funded privately.

But committee hardliners-including Scott, John Conyers, Barney Frank, and Jerrold Nadler-weren't satisfied. So the bill further stipulates that religious activities be "voluntary for the individuals receiving services and offered separate from the program funded." Clients who remain in faith-based programs can opt out of activities they don't like. An aide to House conservatives says they worried that too many organizations would bolt if an opt-out provision remained without a voucher plan. Under current law, organizations receiving indirect assistance-vouchers-need not segregate their secular and religious services. The provision, called "beneficiary choice," survived with virtually no Democratic opposition.

That's good news for the president, especially since little remains of another major feature of his initiative-incentives to boost charitable giving. The legislation allows tax-free contributions from individual retirement accounts, and establishes liability protection for corporate donors to charities. But Bush wanted taxpayers who don't itemize-about 70 percent of all taxpayers-to be able to deduct their charitable contributions. The White House had originally proposed that the charitable deduction equal the amount of the standard deduction-$4,300 for single returns, $7,350 for joint returns.

But the House Ways and Means Committee capped the deduction at $25 per person, $50 for joint filers-derisory sums, considering that the average non-itemizer gives $328 a year to charities. While the Bush plan would have cost $84 billion over 10 years, it was expected to boost giving by $15 billion annually. The legislation approved by the House would cost just $13.3 billion. No one expects it to cause hardly a ripple in charitable donations.

Joseph Loconte is the William E. Simon Fellow in Religion and a Free Society at the Heritage Foundation and editor of the forthcoming book, The End of Illusions: America's Churches and Hitler's Gathering Storm.