Smith and Lukumi

The general rule under the Free Exercise Clause comes from Smith: "The right of free exercise does not relieve an individual of the obligation to comply with a 'valid and neutral law of general applicability on the ground that the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes)." Casebook at p.1865 The Court  said that the Free Exercise Clause does not apply to "an across-the-board criminal prohibition on a particular form of conduct" such as a generally applicable ban on an illegal drug such as peyote. p. 1867 On the other hand, a law that targets religion and only religion, such as a law banning "the casting of 'statues that are to be used for worship purposes'" would doubtlessly be unconstitutional. p. 1865

However, Lukumi states the principal exception to that general rule: "A law burdening religious practice that is not neutral or not of general application must undergo the most rigorous of scrutiny. To satisfy the commands of the First Amendment, a law restrictive of religious practice must advance 'interests of the highest order' and must be narrowly tailored in pursuit of those interests....The compelling interest standard that we apply once a law fails to meet the Smith requirements is not 'watered down' but 'really means what it says.'" 508 U.S. at 546

Other passages from Lukumi:

On the meaning of neutrality:
"At a minimum, the protections of the Free Exercise Clause pertain if the law at issue discriminates against some or all religious beliefs or regulates or prohibits conduct because it is undertaken for religious reasons." Id. at 532
"[t]he minimum requirement of neutrality is that a law not discriminate on its face." Id. at p.533

 
"Facial neutrality is not determinative. The Free Exercise Clause, like the Establishment Clause, extends beyond facial discrimination. The Clause “forbids subtle departures from neutrality,” ...and “covert suppression of particular religious beliefs,” .... Official action that targets religious conduct for distinctive treatment cannot be shielded by mere compliance with the requirement of facial neutrality. The Free Exercise Clause protects against governmental hostility which is masked, as well as overt. “The Court must survey meticulously the circumstances of governmental categories to eliminate, as it were, religious gerrymanders.” Id. at p.534
On the meaning of general applicability:
"All laws are selective to some extent, but categories of selection are of paramount concern when a law has the incidental effect of burdening religious practice." Id. at 542
"The Free Exercise Clause “protect[s] religious observers against unequal treatment,”... and inequality results when a legislature decides that the governmental interests it seeks to advance are worthy of being pursued only against conduct with a religious motivation." Id. at 542-543
"In this case we need not define with precision the standard used to evaluate whether a prohibition is of general application, for these ordinances fall well below the minimum standard necessary to protect First Amendment rights." Id. at 543

"Respondent claims that Ordinances 87-40, 87-52, and 87-71 advance two interests: protecting the public health and preventing cruelty to animals. The ordinances are underinclusive for those ends. They fail to prohibit nonreligious conduct that endangers these interests in a similar or greater degree than Santeria sacrifice does. The underinclusion is substantial, not inconsequential." Id. at 543

A law can be underinclusive either because it contains a narrow prohibition (e.g. a prohibition targeting only the "killing of animals in rituals") or because of a "pattern of exemptions" is attached to a broad prohibition (no killing of animals except "hunting, racing, fishing, euthanasia, and eradication of unwanted pests").

On the "individualized exemption" rule:

"Ordinance 87-40 incorporates the Florida animal cruelty statute, Fla.Stat. § 828.12 (1987). Its prohibition is broad on its face, punishing
“[w]hoever ... unnecessarily ... kills any animal.” The city claims that this ordinance is the epitome of a neutral prohibition. Brief for Respondent 13-14. The problem, however, is the interpretation given to the ordinance by respondent and the Florida attorney general. Killings for religious reasons are deemed unnecessary, whereas most other killings fall outside the prohibition. The city, on what seems to be a per se basis, deems hunting, slaughter of animals for food, eradication of insects and pests, and euthanasia as necessary. See id., at 22. There is no indication in the record that respondent has concluded that hunting or fishing for sport is unnecessary. Indeed, one of the few reported Florida cases decided under § 828.12 concludes that the use of live rabbits to train greyhounds is not unnecessary. See Kiper v. State, 310 So.2d 42 (Fla.App.), cert. denied, 328 So.2d 845 (Fla.1975). Further, because it requires an evaluation of the particular justification for the killing, this ordinance represents a system of “individualized governmental assessment of the reasons for the relevant conduct,” Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U.S., at 884, 110 S.Ct., at 1603. As we noted in Smith, in circumstances in which individualized exemptions from a general requirement are available, the government “may not refuse to extend that system to cases of ‘religious hardship’ without compelling reason.” Ibid., quoting Bowen v. Roy, 476 U.S., at 708, 106 S.Ct., at 2156 (opinion of Burger, C.J.). Respondent's application of the ordinance's test of necessity devalues religious reasons for killing by judging them to be of lesser import than nonreligious reasons. Id. at 537

Axson-Flynn (10th Cir) on "individualized exemptions [this case was not assigned]:

"We turn now to Axson-Flynn's argument that her case is covered by the second Smith exception, which holds that “in circumstances in which individualized exemptions from a general requirement are available, the government may not refuse to extend that system to cases of religious hardship without compelling reason.” Church of Lukumi Babalu Aye, 508 U.S. at 537, 113 S.Ct. 2217 (citing Smith, 494 U.S. at 884, 110 S.Ct. 1595) (internal quotation marks omitted). The Court has never explained with specificity what constitutes a “system” of individualized exceptions, and as with the hybrid rights exception, courts and commentators are divided on the question.

Our Circuit has held that a system of individualized exemptions is one that “give[s] rise to the application of a subjective test.” Swanson, 135 F.3d at 701. Such a system is one in which case-by-case inquiries are routinely made, such that there is an “individualized governmental assessment of the reasons for the relevant conduct” that “invite[s] considerations of the particular circumstances” involved in the particular case. Smith, 494 U.S. at 884, 110 S.Ct. 1595.

Perhaps the best example of such a system, and indeed the one in which this exception originated, is a system of unemployment benefits which requires claimants to show “good cause” as to why they are unable to find work."