The disagreement over this issue stems from the dispute I mentioned between ʿAlī and other Companions concerning Banū Taghlib. Al-Shāfiʿī—and Ahmad, according to one of the two reports from him—… (1), whereas the majority permitted eating the animals they slaughtered and marrying their women. This is the other position reported from Ahmad.
Those who disapproved of eating the animals slaughtered by Banū Taghlib then differed over the basis of ʿAlī’s position. Some supposed that ʿAlī prohibited eating the animals they slaughtered and marrying their women only because he did not know whether their forefathers had embraced the religion of the People of the Book before its abrogation and alteration. On this basis, they held that membership among the People of the Book is determined by ancestry, not by the individual’s own religious affiliation. Thus, if we are uncertain whether someone’s ancestors belonged to the People of the Book, we exercise caution: we spare his life upon payment of the jizya as a precaution, and likewise prohibit eating the animals he slaughters and marrying the women of his community as a precaution. This is the reasoning of al-Shāfiʿī and those of Ahmad’s followers who agreed with him.
Others said instead that ʿAlī disapproved of eating the animals slaughtered by Banū Taghlib only because they did not observe the obligations and prohibitions of the religion of the People of the Book. Rather, they adopted from it only permission to indulge in forbidden things. Hence his statement: “They have retained nothing of the religion of the People of the Book except drinking wine.” This understanding of ʿAlī’s statement is expressly reported from Ahmad and others, and it is correct.
In short, the claim that the People of the Book mentioned in the Quran are those whose ancestors embraced that religion before its abrogation and alteration is a weak position. The claim that this was what ʿAlī ibn Abī Tālib, may Allah be pleased with him, intended is likewise weak. Rather, the correct and certain view is that being