Tax Exemptions of Religious Property

Every State and the District of Columbia provide for tax exemptions for religious institutions, and the history of such exemptions goes back to the time of our establishment as a polity. The only expression by a Supreme Court Justice prior to 1970 was by Justice Brennan, who deemed tax exemptions constitutional because the benefit conferred was incidental to the religious character of the institutions concerned.¹³¹ Then, in 1970, a nearly unanimous Court sustained a state exemption from real or personal property taxation of "property used exclusively for religious, educational or charitable purposes" owned by a corporation or association which was conducted exclusively for {Page 998} one or more of these purposes and did not operate for profit.¹³² The first prong of a two-prong argument saw the Court adopting Justice Brennan's rationale. Using the secular purpose and effect test, Chief Justice Burger noted that the purpose of the exemption was not to single out churches for special favor; instead, the exemption applied to a broad category of associations having many common features and all dedicated to social betterment. Thus, churches as well as museums, hospitals, libraries, charitable organizations, professional associations, and the like, all non-profit, and all having a beneficial and stabilizing influence in community life, were to be encouraged by being treated specially in the tax laws. The primary effect of the exemptions was not to aid religion; the primary effect was secular and any assistance to religion was merely incidental.¹³³

¹³¹ "If religious institutions benefit, it is in spite of rather than because of their religious character. For religious institutions simply share benefits which government makes generally available to educational, charitable, and eleemosynary groups." Abington School Dist. v. Schempp, 374 U.S. 203, 301 (1963) (concurring opinion).

¹³² Walz v. Tax Comm'n, 397 U.S. 664 (1970). Justice Douglas dissented.

¹³³ Id. at 672-74.

For the second prong, the Court created a new test, the entanglement test,¹³⁴ by which to judge the program. There was some entanglement whether there were exemptions or not, Chief Justice Burger continued, but with exemptions there was minimal involvement. But termination of exemptions would deeply involve government in the internal affairs of religious bodies, because evaluation of religious properties for tax purposes would be required and there would be tax liens and foreclosures and litigation concerning such matters.¹³⁵

¹³⁴ Supra, p.973.

¹³⁵ 397 U.S. at 674-76.

While the general issue is now settled, it is to be expected that variations of the exemption upheld in Walz will present the Court with an opportunity to elaborate the field still further.¹³⁶ For example, the Court determined that a sales tax exemption applicable only to religious publications constituted a violation of the Establishment Clause,¹³⁷ and, on the other hand, that application of a general sales and use tax provision to religious publications violates neither the Establishment Clause nor the Free Exercise Clause.¹³⁸

¹³⁶ For example, the Court subsequently accepted for review a case concerning property tax exemption for church property used as a commercial parking lot, but state law was changed, denying exemption for purely commercial property and requiring a pro rata exemption for mixed use, and the Court remanded so that the change in the law could be considered. Differderfer v. Central Baptist Church, 404 U.S. 412 (1972).

¹³⁷ Texas Monthly, Inc. v. Bullock, 489 U.S. 1 (1989).

¹³⁸ Jimmy Swaggart Ministries v. California Bd. of Equalization, 493 U.S. 378 (1990). Similarly, there is no constitutional impediment to straightforward application of 26 U.S.C. Sec. 170 to disallow a charitable contribution for payments to a church found to represent a reciprocal exchange rather than a contribution or gift. Hernandez v. Commissioner, 490 U.S. 680 (1989).

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{Page 999}

Exemption of Religious Organizations from Generally Applicable Laws.

The Civil Rights Act's exemption of religious organizations from the prohibition against religious discrimination in employment¹³⁹ does not violate the Establishment Clause when applied to a religious organization's secular, nonprofit activities. The Court held in Corporation of the Presiding Bishop v. Amos¹⁴⁰ that a church-run gymnasium operated as a nonprofit facility open to the public could require that its employees be church members. Declaring that "there is ample room for accommodation of religion under the Establishment Clause,"¹⁴¹ the Court identified a legitimate purpose in freeing a religious organization from the burden of predicting which of its activities a court will consider to be secular and which religious. The rule applying across-the-board to nonprofit activities and thereby "avoid[ing] . . . intrusive inquiry into religious belief" also serves to lessen entanglement of church and state.¹⁴² The exemption itself does not have a principal effect of advancing religion, the Court concluded, but merely allows churches to advance religion.¹⁴³

¹³⁹ Section 703 of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e-2, makes it unlawful for any employer to discriminate in employment practices on the basis of an employee's religion. Section 702, 42 U.S.C. Sec. 2000e-1, exempts from the prohibition "a religious corporation . . . with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation . . . of its activities."

¹⁴⁰ 483 U.S. 327 (1987).

¹⁴¹ 483 U.S. at 338.

¹⁴² Id. at 339.

¹⁴³ "For a law to have forbidden ‘effects' . . . it must be fair to say that the government itself has advanced religion through its own activities and influence." 483 U.S. at 337. Justice O'Connor's concurring opinion suggests that practically any benefit to religion can be "recharacterized as simply ‘allowing' a religion to better advance itself," and that a "necessary second step is to separate those benefits to religion that constitutionally accommodate the free exercise of religion from those that provide unjustifiable awards of assistance to religious organizations." Id. at 347, 348.

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Sunday closing laws

The history of Sunday Closing Laws goes back into United States colonial history and far back into English history.¹⁴⁴ Commonly, the laws require the observance of the Christian Sabbath as a day of rest, although in recent years they have tended to become honeycombed with exceptions. The Supreme Court rejected an Establishment Clause challenge to Sunday Closing Laws in McGowan v. Maryland.¹⁴⁵ The Court acknowledged {Page 1000} that historically the laws had a religious motivation and were designed to effectuate concepts of Christian theology. However, "[i]n light of the evolution of our Sunday Closing Laws through the centuries, and of their more or less recent emphasis upon secular considerations, it is not difficult to discern that as presently written and administered, most of them, at least, are of a secular rather than of a religious character, and that presently they bear no relationship to establishment of religion. . . ."¹⁴⁶ "[T]he fact that this [prescribed day of rest] is Sunday, a day of particular significance for the dominant Christian sects, does not bar the State from achieving its secular goals. To say that the States cannot prescribe Sunday as a day of rest for these purposes solely because centuries ago such laws had their genesis in religion would give a constitutional interpretation of hostility to the public welfare rather than one of mere separation of church and State."¹⁴⁷ The choice of Sunday as the day of rest, while originally religious, now reflected simple legislative inertia or recognition that Sunday was a traditional day for the choice.¹⁴⁸ Valid secular reasons existed for not simply requiring one day of rest and leaving to each individual to choose the day, reasons of ease of enforcement and of assuring a common day in the community for rest and leisure.¹⁴⁹ More recently, a state statute mandating that employers honor the Sabbath day of the employee's choice was held invalid as having the primary effect of promoting religion by weighing the employee's Sabbath choice over all other interests.¹⁵⁰

¹⁴⁴The history is recited at length in the opinion of the Court in McGowan v. Maryland, 366 U.S. 420, 431-40 (1961), and in Justice Frankfurter's concurrence. Id. at 459, 470-551 and appendix.

¹⁴⁵ 366 U.S. 420 (1961). Decision on the establishment question in this case also controlled the similar decision on that question in Two Guys from Harrison-Allentown v. McGinley, 366 U.S. 582 (1961), Braunfeld v. Brown, 366 U.S. 599 (1961), and Gallagher v. Crown Kosher Super Market, 366 U.S. 617 (1961). On free exercise in these cases, see infra, pp.1011-12.

¹⁴⁶McGowan v. Maryland, 366 U.S. 420, 444 (1961).

¹⁴⁷Id. at 445.

¹⁴⁸Id. at 449-52.

¹⁴⁹Id. Justice Frankfurter, with whom Justice Harlan concurred, arrived at the same conclusions by a route that did not require approval of Everson v. Board of Education, from which he had dissented.

¹⁵⁰Estate of Thornton v. Caldor, Inc., 472 U.S. 703 (1985).

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Conscientious Objection

Historically, Congress has provided for alternative service for men who had religious scruples against participating in either combat activities or in all forms of military activities; the fact that Congress chose to draw the line of exemption on the basis of religious belief confronted the Court with a difficult constitutional question, which, however, the Court chose to avoid by a somewhat disingenuous interpretation of the statute. ¹⁵¹

{Page 1001}

In Gillette v. United States,¹⁵² a further constitutional problem arose in which the Court did squarely confront and validate the congressional choice. Congress had restricted conscientious objection status to those who objected to "war in any form" and the Court conceded that there were religious or conscientious objectors who were not opposed to all wars but only to particular wars based upon evaluation of a number of factors by which the "justness" of any particular war could be judged; "properly construed," the Court said, the statute did draw a line relieving from military service some religious objectors while not relieving others.¹⁵³ Purporting to apply the secular purpose and effect test, the Court looked almost exclusively to purpose and hardly at all to effect. Although it is not clear, the Court seemed to require that a classification must be religiously based "on its face"¹⁵⁴ or lack any "neutral, secular basis for the lines government has drawn"¹⁵⁵ in order that it be held to violate the Establishment Clause. The classification here was not religiously based "on its face," and served "a number of valid purposes having nothing to do with a design to foster or favor any sect, religion, or cluster of religions."¹⁵⁶ These purposes, related to the difficulty in separating sincere conscientious objectors to particular wars from others with fraudulent claims, included the maintenance of a fair and efficient selective service system and protection of the integrity of democratic decision-making.¹⁵⁷

¹⁵¹In United States v. Seeger, 380 U.S. 163 (1965), a unanimous Court construed the language of the exemption limiting the status to those who by "religious training and belief" (that is, those who believed in a "Supreme Being"), to mean that a person must have some belief which occupies in his life the place or role which the traditional concept of God occupies in the orthodox believer. After the "Supreme Being" clause was deleted, a plurality in Welsh v. United States, 398 U.S. 333 (1970), construed the religion requirement as inclusive of moral, ethical, or religious grounds. Justice Harlan concurred on constitutional grounds, believing that the statute was clear that Congress had intended to restrict conscientious objection status to those persons who could demonstrate a traditional religious foundation for their beliefs and that this was impermissible under the Establishment Clause. Id. at 344. The dissent by Justices White and Stewart and Chief Justice Burger rejected both the constitutional and the statutory basis. Id. at 367.

¹⁵²401 U.S. 437 (1971).

¹⁵³Id. at 449.

¹⁵⁴Id. at 450.

¹⁵⁵Id. at 452.

¹⁵⁶Id.

¹⁵⁷Id. at 452-60.

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Regulation of Religious Solicitation

Although the solicitation cases have generally been decided under the free exercise or free speech clauses,¹⁵⁸ in one instance the Court, intertwining establishment and free exercise principles, voided a provision in a state charitable solicitations law that required only those religious organizations that received less than half their total contributions {Page 1002} from members or affiliated organizations to comply with the registration and reporting sections of the law.¹⁵⁹ Applying strict scrutiny equal protection principles, the Court held that by distinguishing between older, well-established churches that had strong membership financial support and newer bodies lacking a contributing constituency or that may favor public solicitation over general reliance on financial support from the members, the statute granted denominational preference forbidden by the Establishment Clause.¹⁶⁰

¹⁵⁸Infra, p.1182.

¹⁵⁹Larson v. Valente, 456 U.S. 228 (1982). Two Justices dissented on the merits, id. at 258 (Justices White and Rehnquist), while two other Justices dissented on a standing issue. Id. at 264 (Chief Justice Burger and Justice O'Connor).

¹⁶⁰Id. at 246-51. Compare Heffron v. ISKCON, 452 U.S. 640, 652-53 (1981), and id. at 659 n.3 (Justice Brennan, concurring in part and dissenting in part) (dealing with a facially neutral solicitation rule distinguishing between religious groups that have a religious tenet requiring peripatetic solicitation and those who do not).

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Religion in Governmental Observances

The practice of opening legislative sessions with prayers by paid chaplains was upheld in Marsh v. Chambers,¹⁶¹ a case involving prayers in the Nebraska Legislature. The Court relied almost entirely on historical practice. Congress had paid a chaplain and opened sessions with prayers for almost 200 years; the fact that Congress had continued the practice after considering constitutional objections in the Court's view strengthened rather than weakened the historical argument. Similarly, the practice was well rooted in Nebraska and in most other states. Most importantly, the First Amendment had been drafted in the First Congress with an awareness of the chaplaincy practice, and this practice was not prohibited or discontinued. The Court did not address the lower court's findings,¹⁶² amplified in Justice Brennan's dissent, that each aspect of the Lemon v. Kurtzman tripartite test had been violated. Instead of constituting an application of the tests, therefore, Marsh can be read as representing an exception to their application.¹⁶³

¹⁶¹ 463 U.S. 783 (1983). Marsh was a 6-3 decision, with Chief Justice Burger's opinion for the Court being joined by Justices White, Blackmun, Powell, Rehnquist, and O'Connor, and with Justices Brennan, Marshall, and Stevens dissenting.

¹⁶²Chambers v. Marsh, 675 F.2d 228 (8th Cir. 1982).

¹⁶³School prayer cases were distinguished on the basis that legislators, as adults, are presumably less susceptible than are schoolchildren to religious indoctrination and peer pressure, 463 U.S. at 792, but there was no discussion of the tests themselves.

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Religious Displays on Government Property

Inclusion of religious symbols in governmentally sponsored holiday displays was twice before the Court, with varying results. In 1984, in Lynch v. Donnelly,¹⁶⁴ the Court found no violation of {Page 1003} the Establishment Clause occasioned by inclusion of a Nativity scene (crèche) in a city's Christmas display; in 1989, in Allegheny County v. Greater Pittsburgh ACLU,¹⁶⁵ inclusion of a crèche in a holiday display was found to constitute a violation. Also at issue in Allegheny County was inclusion of a menorah in a holiday display; here the Court found no violation. The setting of each display was crucial to the varying results in these cases, the determinant being whether the Court majority believed that the overall effect of the display was to emphasize the religious nature of the symbols, or whether instead the emphasis was primarily secular. Perhaps equally important for future cases, however, was the fact that the four dissenters in Allegheny County would have upheld both the crèche and menorah displays under a more relaxed, deferential standard.

¹⁶⁴465 U.S. 668 (1984). Lynch was a 5-4 decision, with Justice Blackmun, who voted with the majority in Marsh, joining the Marsh dissenters in this case. Again, Chief Justice Burger wrote the opinion of the Court, joined by the other majority Justices, and again Justice Brennan wrote a dissent, joined by the other dissenters. A concurring opinion was added by Justice O'Connor, and a dissenting opinion was added by Justice Blackmun.

¹⁶⁵492 U.S. 573 (1989).

Chief Justice Burger's opinion for the Court in Lynch began by expanding on the religious heritage theme exemplified by Marsh; other evidence that "[w]e are a religious people whose institutions presuppose a Supreme Being"¹⁶⁶ was supplied by reference to the national motto "In God We Trust," the affirmation "one nation under God" in the pledge of allegiance, and the recognition of both Thanksgiving and Christmas as national holidays. Against that background, the Court then determined that the city's inclusion of the crèche in its Christmas display had a legitimate secular purpose in recognizing "the historical origins of this traditional event long [celebrated] as a National Holiday,"¹⁶⁷ and that its primary effect was not to advance religion. The benefit to religion was called "indirect, remote, and incidental," and in any event no greater than the benefit resulting from other actions that had been found to be permissible, e.g. the provision of transportation and textbooks to parochial school students, various assistance to church-supported colleges, Sunday closing laws, and legislative prayers.¹⁶⁸ The Court also reversed the lower court's finding of entanglement based only on "political divisiveness."¹⁶⁹

¹⁶⁶465 U.S. at 675, quoting Zorach v. Clausen, 343 U.S. 306, 313 (1952).

¹⁶⁷465 U.S. at 680.

¹⁶⁸465 U.S. at 681-82. Note that, while the extent of benefit to religion was an important factor in earlier cases, it was usually balanced against the secular effect of the same practice rather than the religious effects of other practices.

¹⁶⁹465 U.S. at 683-84.

Allegheny County was also decided by a 5-4 vote, Justice Blackmun writing the opinion of the Court on the crèche issue, and {Page 1004} there being no opinion of the Court on the menorah issue.¹⁷⁰ To the majority, the setting of the crèche was distinguishable from that in Lynch. The crèche stood alone on the center staircase of the county courthouse, bore a sign identifying it as the donation of a Roman Catholic group, and also had an angel holding a banner proclaiming "Gloria in Exclesis Deo." Nothing in the display "detract[ed] from the crèche's religious message," and the overall effect was to endorse that religious message.¹⁷¹ The menorah, on the other hand, was placed outside a government building alongside a Christmas tree and a sign saluting liberty, and bore no religious messages. To Justice Blackmun, this grouping merely recognized "that both Christmas and Chanukah are part of the same winter-holiday season, which has attained a secular status" ¹⁷² to concurring Justice O'Connor, the display's "message of pluralism" did not endorse religion over nonreligion even though Chanukah is primarily a religious holiday and even though the menorah is a religious symbol.¹⁷³ The dissenters, critical of the endorsement test proposed by Justice O'Connor and of the three-part Lemon test, would instead distill two principles from the Establishment Clause: "government may not coerce anyone to support or participate in any religion or its exercise; and it may not, in the guise of avoiding hostility or callous indifference, give direct benefits to religion in such a degree that it in fact "establishes a state religion or religious faith, or tends to do so."¹⁷⁴

¹⁷⁰Justice O'Connor, who had concurred in Lynch, was the pivotal vote, joining the Lynch dissenters to form the majority in Allegheny County. Justices Scalia and Kennedy, not on the Court in 1984, replaced Chief Justice Burger and Justice Powell in voting to uphold the crèche display; Justice Kennedy authored the dissenting opinion, joined by the other three.

¹⁷¹492 U.S. at 598, 600.

¹⁷²Id. at 616.

¹⁷³Id. at 635.

¹⁷⁴Id. at 659.

From the 1998 Supplement:

In Capitol Square Review Bd. v. Pinette, ¹⁹ the Court distinguished privately sponsored from governmentally sponsored religious displays on public property. There the Court ruled that Ohio violated free speech rights by refusing to allow the Ku Klux Klan to display an unattended cross during the Christmas season in a publicly owned plaza outside the Ohio Statehouse. Because the plaza was a public forum in which the State had allowed a broad range of speakers and a variety of unattended displays, the State could regulate the expressive content of such speeches and displays only if the restriction was necessary, and narrowly drawn, to serve a compelling state interest. The Court recognized that compliance with the Establishment Clause can be a sufficiently compelling reason to justify content-based restrictions on speech, but saw no need to apply this principle when permission to display a religious symbol is granted through the same procedures, and on the same terms, required of other private groups seeking to convey non-religious messages.

---

¹⁹515 U.S. 753 (1995). The Court was divided 7-2 on the merits of Pinette, a vote that obscured continuing disagreement over the proper analytical approach. The portions of Justice Scalia's opinion that formed the opinion of the Court were joined by Chief Justice Rehnquist and by Justices O'Connor, Kennedy, Souter, Thomas, and Breyer. A separate part of Justice Scalia's opinion, joined only by the Chief Justice and by Justices Kennedy and Thomas, disputed the assertions of Justices O'Connor, Souter, and Breyer that the "endorsement" test should be applied. Dissenting Justice Stevens thought that allowing the display on the Capitol grounds did carry "a clear image of endorsement," and Justice Ginsburg's brief opinion seemingly agreed with that conclusion.

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Miscellaneous

In Larkin v. Grendel's Den,¹⁷⁵ the Court held that the Establishment Clause is violated by a delegation of governmental decision making to churches. At issue was a state statute permitting any church or school to block issuance of a liquor license to any establishment located within 500 feet of the church or school. While the statute had a permissible secular purpose of protecting churches and schools from the disruptions often associated with liquor establishments, the Court indicated that these purposes could be accomplished by other means, e.g. an outright ban on liquor outlets within a prescribed distance, or the vesting of discretionary authority in a governmental decision maker required to consider the views of affected parties. However, the {Page 1005} conferral of a veto authority on churches had a primary effect of advancing religion both because the delegation was standardless (thereby permitting a church to exercise the power to promote parochial interests), and because "the mere appearance of a joint exercise of legislative authority by Church and State provides a significant symbolic benefit to religion in the minds of some."¹⁷⁶ Moreover, the Court determined, because the veto "enmeshes churches in the processes of government," it represented an entanglement offensive to the "core rationale underlying the Establishment Clause"--"[to prevent] "a fusion of governmental and religious functions."¹⁷⁷

¹⁷⁵459 U.S. 116 (1982).

¹⁷⁶459 U.S. at 125-26. But cf. Marsh v. Chambers, 463 U.S. 783 (1983), involving no explicit consideration of the possible symbolic implication of opening legislative sessions with prayers by paid chaplains.

¹⁷⁷459 U.S. at 126-27, quoting Abington, 374 U.S. 203, 222.

From the 1998 Supplement:

Using somewhat similar reasoning, the Court in Board of Education of Kiryas Joel Village v. Grumet, ²⁰ invalidated a New York law creating a special school district for an incorporated village composed exclusively of members of one small religious sect. The statute failed "the test of neutrality," the Court concluded, since it delegated power "to an electorate defined by common religious belief and practice, in a manner that fails to foreclose religious favoritism." It was the "anomalously case-specific nature of the legislature's exercise of authority" that left the Court "without any direct way to review such state action" for conformity with the neutrality principle. Because the village did not receive its governmental authority simply as one of many communities eligible under a general law, the Court explained, there was no way of knowing whether the legislature would grant similar benefits on an equal basis to other religious and nonreligious groups.

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²⁰ 512 U.S. 687 (1994). Only four Justices (Souter, Blackmun, Stevens, and Ginsburg) thought that the Grendel's Den principle applied; in their view the distinction that the delegation was to a village electorate rather than to a religious body "lack[ed] constitutional significance" under the peculiar circumstances of the case.

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