Except that Terran was not yet a theocracy. And as far as I know, it still isn't. The church had no obligations to it. If FR is rebuked because the game states it isn't a theocracy, than so should have Terran.
The elders are divided on the matter.
IMHO, if FR had wanted to be recognized as a theocracy, a majority of elders probably would have allowed it to fly, provided they were willing to actually call themselves a theocracy, etc, etc.
But let's be clear:
the Farronite Republic has never requested that they be recognized as a theocracy, or stated that they desire to become one. That is a VERY important point. The Farronite Republic requested an ARCHONSHIP, which is emphatically NOT the same as being recognized as a theocracy. They asked for the benefit without any of the cost.
Some elders are sticklers for the game title. But I think a majority probably aren't. They're only forcing it on Hireshmont because of the political situation regarding Terran and concerns about his personal, political ambitions: same reason the elders are forcing Hireshmont to step away from secular power in Terran on a pretty fixed timeframe.
The peculiar demands of game-mechanic government change are not an immutable rule of Sanguis Astroism's charter. According to the charter, theocracies are merely what the elders vote them to be, as they are not otherwise defined. FR has made no attempt to convince any elders they should be recognized as a theocracy: they've tried to convince the elders they should receive an Archonship, which is totally different.
Terran, however, as NOT requested an Archonship, but HAS lobbied to be recognized as a theocracy. And, surprise, we're pretty darn well recognized as a theocracy, except by some bitter loudmouths with previous histories with Hireshmont.