Reexamination of Church Property Tax Exemptions
by Courtney A. Kirkland
Table of Contents
I. INTRODUCTION............................................................................................................................ 1
II. HISTORICAL TRADITIONS OF TAX EXEMPTIONS FOR CHURCH PROPERTY ............................ 2
A. TAX EXEMPTIONS UNDER COMMON LAW .................................................................................. 3
B. TAX EXEMPTIONS UNDER EQUITY LAW...................................................................................... 5
C. TAX EXEMPTIONS FOLLOWING THE DISESTABLISHMENT OF RELIGION ...................................... 7
D. MADISON, JEFFERSON AND THE ESTABLISHMENT CLAUSE ........................................................ 8
III. THE SUPREME COURT AND RELIGIOUS TAX EXEMPTIONS .................................................. 10
A. THE ESTABLISHMENT CLAUSE: 3 ANALYTICAL THEORIES ....................................................... 11
B. THE LEMON TEST ................................................................................................................... 11
C. THE ENDORSEMENT ANALYSIS .............................................................................................. 12
D. THE COERCION ANALYSIS ..................................................................................................... 12
E. ESTABLISHMENT CLAUSE RATIONALES ................................................................................... 13
F. THE WALZ COURT RATIONALE: BENEVOLENT NEUTRALITY .................................................. 13
G. THE MITCHELL COURT RATIONALE: LEGITIMATE PUBLIC PURPOSE ...................................... 15
H. THE BOB JONES UNIVERSITY COURT RATIONALE: PUBLIC BENEFIT BALANCED BY PUBLIC
POLICY ....................................................................................................................................... 15
I. THE TEXAS MONTHLY COURT RATIONALE ............................................................................. 18
IV. DIFFICULTIES IN DETERMINING THE ACTUAL BURDEN CAUSED BY CHURCH PROPERTY
TAX EXEMPTIONS ON STATES AND INDIVIDUAL TAXPAYERS .................................................... 20
MODERN DEVELOPMENTS IN THE RELIGIOUS REALM ............................................................... 20
A. NEWLY EMERGING RELIGIOUS GROUPS ................................................................................... 21
B. NEWLY ENLARGED CONGREGATIONS...................................................................................... 22
C. EXPANDING USES AND EXPANDING TAX BREAKS FOR RELIGIOUS ORGANIZATIONS ................. 23
V. NECESSARY CHANGE ............................................................................................................... 24
A. TAX EXEMPTIONS FOR CHURCH PROPERTY ARE NOT REQUIRED BY THE CONSTITUTION .......... 24
B. STATE REPEAL OF CHURCH PROPERTY TAX EXEMPTION STATUTES .......................................... 26
VI. CONCLUSION ..................................................................................................................... 27
I. INTRODUCTION
1
Under current law many churches and other nonprofits are exempt from income and real
property taxes. The issue of religiously based property tax exemptions begs to be revisited as the
rise of multi-million dollar mega churches continues. This paper will consider the inconsistencies
seen in Establishment Clause jurisprudence and focus on the effect the inconsistencies of the
court decisions have had on religiously based property tax exemptions. This paper will evaluate
the various justifications for such exemptions and ultimately call for change.
This paper considers whether churches should be exempt from property taxes, Part II of
this paper offers historical background of tax exemptions for religiously based properties in this
country, including origin, purpose, and importance of such exemptions. Part III analyzes the
relevant tests and rationales applied by the Court to deal with Establishment Clause violations.
Part IV examines the modern developments of the church in comparison with a historical view of
churches.
Finally, Part V suggests alternatives for necessary change; including the best alternative
which concludes that there is no constitutional backing for church property tax exemptions and if
the First Amendment is to be fully respected these exemptions must be done away with.
Although this conclusion might be a difficult one to swallow in light of the admirable intentions
and long history of granting such exemptions, historical practices and good intentions cannot be
placed above respect and preservation of the Constitution.
II. HISTORICAL TRADITIONS OF TAX EXEMPTIONS FOR CHURCH PROPERTY
The two traditions of common law and equity law form the foundation that the modern
American laws of tax exemption for church property have grown upon. It is important to look at
each tradition separately as they both have made unique contributions to the development of laws
2
that exempt church property from taxation. However, there are “strong tensions between these
two traditions that manifest themselves in both historical and contemporary property tax
exemption laws.”1 The following section examines each of the two traditions of property tax
exemptions under common law and equity law separately, addresses the tensions between them
and provides a foundational understanding of church property tax exemptions.
A. TAX EXEMPTIONS UNDER COMMON LAW
The prevailing law in most seventeenth century American colonies was modeled after the
British common law that “treated religion as an affair of law and the church as an agency of the
state.”2 Churches and religions were bound, at common law, by “comprehensive ecclesiastical
laws enforceable by both common law and commissary courts.”3 The common law ruled over
nearly every aspect of the church.4 For example, the common law established the churches’
location, duties and compensation of clerics and the structure of the church corporation including
how the church was to spend its endowments.5
In addition, to overseeing the church’s function, the common law oversaw the taxation of
church properties and did not provide any automatic tax exemptions to churches.6 Rather, any
property that was, “within the jurisdiction of the Crown and its colonial delegates, including
church property, was presumptively taxable at common law, unless it had been specifically
1
John Witte, Jr., Tax Exemption of Church Property: Historical Anomaly or Valid Constitutional Practice?, 64
CAL. L. REV. 363, 368-69 (1991).
2
Id.
3
Id. at 369.
4
Id. at 370.
5
Id. at 371.
6
Id.
3
exempted by legislative act.”7 Colonial church properties were limited by three restrictions
before they could be granted these specific exemptions.8
The first restriction established that not all church properties were eligible for the
exemption. Eligibility required property of an incorporated established church devoted to
acceptable “religious uses” dictated by ecclesiastical laws.9 Certain types of church property that
were not eligible for the exemption included: (1) established churches that were unused or used
for nonreligious purposes, (2) churches owned by unincorporated religious groups, (3) churches
of dissenting religious bodies, and (4) churches owned personally by ministers or political
officers.10
The second restriction limited the exemption to taxes that would be collected for the
upkeep and use of the church itself.11 The established church still had to pay other property taxes
such as: “quitrents, poll taxes, land taxes, special assessments, hearth taxes, window taxes, and
other occasional rates on realty.”12
The third restriction held that the tax exemptions could be temporarily suspended in times
of emergency or even relinquished completely if the tax burden on the other properties in the
community became too much to bear.13 Consequently, “in times of war, pestilence, poverty, or
7
Id. at 371.
Id. at 372.
9
Id.
10
Id. at 373.
11
Id.
12
Id. at 373-74.
13
Id. at 374.
8
4
disaster, established churches and their clergy were required to contribute to the public coffers
regardless of their eligibility for exemption.”14
In light of historical context, these exemptions made sense because the churches were
essentially state agencies. By using their church property for the acceptable religious uses
defined by the common law the church was taking over the state’s responsibility for the
established religion, and, in return, the church received tax support and exemptions like any other
state agency.15 Even still, church property tax exemptions were not automatic; and if the church
could gain eligibility the exemption was still limited in scope. These restrictions to eligibility
and limits on the exemption were a safeguard against the established church growing rich at the
expense of the people, like it had before the Reformation.16
B. TAX EXEMPTIONS UNDER EQUITY LAW
The law of equity approached church property tax exemptions from a different
standpoint. Like the common law courts, equity courts held that church property was
presumptively taxable and this presumption was only rebutted with a specific statutory
exemption.17 Unlike the common law courts, equity courts exempted churches from property tax
based on the “charitable uses” the church was devoted to, rather than the church’s “religious
uses.”18
Equity courts’ definition of charity stemmed from the Elizabethan Statute of Charitable
Uses of 1601 and was further developed over time to include any activity that contributed to:
14
Id. at 374
Id. at 375.
16
Id.
17
Id.
18
Id.
15
5
the benefit of an indefinite number of persons, either by bringing their minds or hearts
under the influence of education or religion, by relieving their bodies from disease,
suffering or constraint, by assisting them to establish themselves in life or by erecting or
maintaining public buildings or works or otherwise lessening the burdens of
government.19
In equity courts it did not matter if a churches activity was motivated by religious belief
or simple human sympathy. To be charitable the equity courts were only concerned with the
effect achieved by the activity. If a church was found to be devoted to charitable uses it was not
given an across the board property tax exemption, but; instead, the tax exemption was
proportional to the part of the property used for the charitable actions.20
Most churches properties were used, in addition to holding religious services, for town
meetings, political events, auctions, and education courses. In fact, many were used as the
community library in addition to their other public functions.21 Under equity law, unlike the
common law, both established churches and nonconformist churches were eligible to receive a
tax exemption since the equity requirement had nothing to do with religious belief.
Thus, there was great tension in the different ways the courts ruled on churches. The
common law benefited established churches only, whereas equity courts provided exemptions to
any church devoted to charitable uses regardless of religious uses. In some of the American
colonies, “the sharp contrasts between these two traditions had begun to soften.”22 Unfortunately
for the nonconformist churches the “softening” favored established churches at their expense. In
Everson v. Board of Education, the Supreme Court remarked that “these practices became so
19
Jackson v. Phillips, 96 Mass. (14 Allen) 539, 556 (1867) (clarifying several earlier definitions given by both
English and American equity courts).
20
Witte, at 377.
21
Id. at 378.
22
Id. at 379.
6
commonplace as to shock the freedom-loving colonials into a feeling of abhorrence.”23 This was
the status of church property tax exemptions going into the American Revolution.
C. TAX EXEMPTIONS FOLLOWING THE DISESTABLISHMENT OF RELIGION
Many early state constitutions typically directed that “all the laws which have heretofore
been adopted, used and approved... and usually practiced on in the courts of law shall still remain
and be in full force, until altered or repealed by the legislature.”24 Thus, in most of the states,
churches that were already established continued to receive the traditional tax exemptions
granted by the common law and equity law courts.25 This colonial law continued until the
movement toward the disestablishment of religion became prominent. At this point the states
traded in their early state constitutional provisions for a new provision that stated “taxation shall
be equal and uniform throughout the State, and all property, both real and personal, shall be taxed
in proportion to its value.”26 Thus the presumption was that all property was to be taxed and tax
exemptions were exceptions to the general rule. Tax exemptions were only to be granted to
advance “public welfare” or if some other “good and compelling reasons” could be discerned.27
With this advancement in the laws of church property tax exemption, it will be helpful to look
more closely at the movement surrounding the development of the Establishment Clause of the
United States Constitution.
23
Everson v. Board of Education, 330 U.S. 1, 11 (1947).
Witte, at 380.
25
Id.
26
Id. at 385.
27
Id.
24
7
D. MADISON, JEFFERSON AND THE ESTABLISHMENT CLAUSE
Religious liberty was not discussed at the Constitutional Convention, but was
considered in the subsequent proposal for the Bill of Rights.28 The Virginia experience is the
most informative place to look when deciphering the original meaning of the First Amendment’s
Religion Clauses because “Virginia . . . provided a great stimulus and able leadership for the
movement” towards disestablishment.29 The able leadership was a reference to James Madison,
“the leading architect of the religion clauses of the First Amendment”30 and Thomas Jefferson,
who along with Madison played “leading roles in the events leading to the adoption of the First
Amendment.”31
Madison wrote Memorial and Remonstrance Against Religious Assessments in opposition
of the renewal of a tax levy that would support the established church.32 Through this work,
Madison was able to create such a protest amongst the people of Virginia that the law was not
renewed. In considering the meaning behind the First Amendment, and ultimately the legitimacy
of the modern church property tax exemption, it is important to consider Madison’s beliefs on the
effect of state interference with religious liberty. In Memorial and Remonstrance he wrote:
True religion did not need the support of law; that no person, either believer or nonbeliever, should be taxed to support a religious institution of any kind; that the best
interest of a society required that the minds of men always be wholly free; and that cruel
persecution were the inevitable result of government-established religions.33
Madison recognized that even if the amount of government funding for religion was
minimal it could, and would, only lead to more support. Madison had seen the common law’s
28
Ryan at 2145.
Everson, 330 U.S. at 11.
30
Walz v. Tax Comm’n,397 U.S. 664, 705-06 (1970) (Douglas, J., dissenting).
31
Everson, 330 U.S. at 11-12.
32
Ryan at 2145.
29
8
restriction of liberty and did not want that continue. In Walz, Justice Douglas agreeing with
Madison’s beliefs stated, “The present involvement of government in religion may seem de
minimis. But it is, I fear, a long step down the Establishment path.”34
Jefferson, although also concerned with government established religion, focused in on
the individual’s freedom of liberty and choice of religion. The Virginia Assembly enacted
Jefferson’s Virginia Bill for Religious Liberty which served as “the precursor for the creation of
the First Amendment.”35 In his statement accompanying the bill Jefferson directed that:
To compel a man to furnish contributions of money for the propagation of opinions which
he disbelieves is sinful and tyrannical; that even forcing him to support this or that teacher
of his own religious persuasion, is depriving him of the comfortable liberty of his giving
his contributions to the particular pastor, whose morals he would make his pattern.36
This bill not only freed Virginia from established religion and provided for freedom of
religious conscience, but also enumerated both Madison and Jefferson’s ideals and laid the
groundwork for the First Amendment. The religion clauses, based on the foundation laid by the
Virginia experience, states that “Congress shall make no law respecting an establishment of
religion, or prohibiting the free exercise thereof.”37 With this language and an understanding of
the beliefs of Madison and Jefferson that were its basis, it seems simple enough to conclude that
after the Revolution the colonies prized religious liberty and saw the importance of
disestablishing the church. From this one might think it is obvious that the logical path moving
forward would be one where churches were not given property tax exemptions, so as to not
33
Id. at 2146.
Walz, 397 U.S. 664, 716 (1970) (Douglas, J., dissenting).
35
Ryan, at 2147.
36
12 HENING, STATUTES OF VIRGINIA 85 (1823).
37
U.S. Const. amend. I
34
9
violate the establishment clause, however, this would not be the case. Forgoing logic and
freedom for tradition, tax exemptions for church property were continued in the new America.
III. THE SUPREME COURT AND RELIGIOUS TAX EXEMPTIONS
A single sentence contained in the First Amendment establishes two religion clauses:
“Congress shall make no law (1) respecting an establishment of religion, or (2) prohibiting the
free exercise thereof.”38 This one sentence is found in every legal issue rising from a government
action that involves religion, including issues of church property tax exemptions. Such tax
exemptions must comply with both the Establishment Clause and the Free Exercise Clause by
way of the 14th Amendment making these clauses applicable to the States.
The Supreme Court has expressed that the absolute terms of the two clauses are so
sweeping that it is a problem for any court that desires to honor them both.39 In Texas Monthly
Inc. v. Bullock, Justice Blackmun in his concurring opinion stated, “the Free Exercise Clause
value suggests that a State may not impose a tax on spreading the gospel,” yet “the Establishment
Clause value suggests that a State may not give a tax break to those who spread the gospel that it
does not also give to others who actively might advocate disbelief in religion.”40 Thus,
Blackmun concluded that a special exemption for religion is required by the Free Exercise Clause
while a special exemption for religion is also forbidden by the Establishment Clause.41
In reconciling these two competing and conflicting clauses the Supreme Court has
remained rather quiet. But the Court has consistently rejected the claim that an exemption is
38
U.S. Const. amend. I
Walz, 397 U.S. 664, 668-69.
40
Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 26 (1989) (Blackmun, J., concurring).
41
Id. at 27.
39
10
required because taxing a church would violate the Free Exercise Clause.42 So, while Free
Exercise Clause issues are worth examining, this paper will follow the Supreme Court’s lead of
analyzing in depth the Establishment Clause.
A. THE ESTABLISHMENT CLAUSE: 3 ANALYTICAL THEORIES
Pursuant to the Establishment Clause, no law can be made by the government “respecting
an establishment of religion.”43 This clause is fairly ambiguous and the Supreme Court has
attempted to stifle that ambiguity with the development of standards used to evaluate government
action. There are many theories in applying the Establishment Clause, but this paper will focus
on three analytical devices: the Lemon test, the endorsement analysis, and the coercion analysis.
B. THE LEMON TEST
The “Lemon test” is a three-pronged test and was developed by the Supreme Court in
1972 and is currently the primary analysis used to determine if a state action is unconstitutional
under the First Amendment Establishment Clause.44 To survive the “Lemon test” a state action
must surmount three factors: (1) the action must have a secular purpose, (2) the action’s
“principal or primary effect” cannot advance nor inhibit religion, and (3) the action must not
create an excessive government entanglement with religion.45 In the Lemon case, the court
applied these factors focusing mainly on the final excessive entanglement factor and found that
statutes providing for state-sponsored financial aid violated the Establishment clause and thus
were unconstitutional.46
42
Id. at 19-20.
U.S. Const. amend. I
44
Lemon v. Kurtzman, 403 U.S. 602, 612-613 (1971).
45
Lemon, 612-613
46
Lemon, 612-613
43
11
C. THE ENDORSEMENT ANALYSIS
This theory is an offshoot of the Lemon test and was first laid out in Justice O’Connor’s
concurring opinion in Lynch v. Donnelly.47 It purports that the Establishment Clause prohibits
any state action that is: (1) an excessive entanglement with religion and (2) endorses or
disapproves of religion.48 O’Connor believes that excessive entanglement is an indirect
interference with religious groups and endorsing or disapproving is a direct violation of the
Establishment Clause.49 Endorsing a religion sends a “message to nonadherents that they are
outsiders, not full members of the political community” and also sends “an accompanying
message to adherents that they are insiders, favored members of the political community,” while
disapproving a religion sends the opposite type of message.50
D. THE COERCION ANALYSIS
The coercion analysis calls for the Lemon test and its progeny the endorsement analysis to
be abandoned and in place focus completely on deciding if a government’s action “coerced an
individual to believe in or act in accordance with a religion against the individual’s will.”51
Although this analytical test is viewed by the majority of the Court as invalid, it is discussed
frequently in dissenting opinions and scholarly articles.52 This test was supported by Justice
Kennedy in his opinion in County of Allegheny v. ACLU.53 The analysis looks to see if the
government action “further[ed] the interests of religion through the coercive power of
47
Lynch v. Donnelly, 465 U.S. 668 (1984) (O’Connor, J., concurring).
Lynch, 687-88 (O’Connor, J., concurring).
49
Lynch, 688
50
Lynch, 688
51
Stephen G. Gay, Religious Coercion and the Establishment Clause, 1994 U. ILL. L. REV. 463, 464.
52
Id.
53
County of Allegheny v. ACLU, 492 U.S. 574, 655 (1989) (Kennedy, J., concurring in part and dissenting in part).
48
12
government.”54 If the answer to that is yes, then the action is invalidated, but if the action was
noncoercive and “within the realm of flexible accommodation or passive acknowledgment of
existing symbols,” then it would not be a violation of the Establishment Clause.55
E. ESTABLISHMENT CLAUSE RATIONALES
The Supreme Court first addressed the constitutional issue regarding tax exemptions for
religious property in 1970.56 The Court has struggled since then to establish one workable
rationale to grant such exemptions. The following rationales are only some of the many used
over the past 30 years to carve out a safe constitutional niche for exemptions to live in harmony
with the Establishment Clause.
F. THE WALZ COURT RATIONALE: BENEVOLENT NEUTRALITY
In Walz v. Tax Commission, the Supreme Court addressed, for the first time, the
constitutionality of property tax exemptions given to religious organizations.57 The taxpayer
argued that such an exemption “indirectly requires the taxpayer to make a contribution to
religious bodies and thereby violates provisions prohibiting the establishment of religion.”58 The
Court rejected the taxpayer’s argument using this two pronged analysis: (1) Was the legislation
aimed at establishing or supporting religion; and (2) was the effect an excessive government
entanglement with religion.”59
54
Id. at 660.
Id. at 662-63.
56
Walz, U.S. 664.
57
Walz v. Tax Commission, 397 U.S. 664, 666 (1970).
58
Id. at 667.
59
Id. at 672-74.
55
13
First, the Court, examined the legislative purpose of exempting religious property from
taxation, then discussed the tradition and history of such exemption and concluded that “the
legislative purpose of a property tax exemption is neither the advancement nor the inhibition of
religion; it is neither sponsorship nor hostility.”60 The Court held that by “sparing the exercise of
religion from the burden of property taxation levied on private profit institutions” the government
was exhibiting “benevolent neutrality.”61 The Court also pointed out that the purpose of the
legislation was non-discriminatory in nature because it did not single out one church or religious
group.62
Next, the Court turned its attention to examining whether the statute created excessive
entanglement between the government and religion.63 The Court espoused the belief that:
Either course, taxation of churches or exemption, occasions some degree of involvement
with religion. Elimination of exemption would tend to expand the involvement of
government by giving rise to tax valuation of church property, tax liens, tax foreclosures,
and the direct confrontations and conflicts that follow in the train of those legal
processes...Tax exemptions...[give] rise to some, but yet a lesser, involvement than taxing
them.”64
The Court decided that basically it was not possible to completely remain untangled,
regardless if the government decided to tax the church property or to grant exemption, but
granting exemptions was just less of an involvement between church and state.
Then, the Walz Court spent some time attempting to distinguish subsidy from
exemption.65 It claimed that a “direct money subsidy would be a relationship pregnant with
60
Id. at 672.
Id. at 673-676.
62
Id. at 673.
63
Id. at 675.
64
Id. at 674-75.
65
Id. at 675.
61
14
involvement,” but granting a “tax exemption is not sponsorship since the government does not
transfer the part of its revenue to churches but simply abstains from demanding that the church
support the state.”66
The Walz Court also stressed the importance of the long history of tax exemptions for
churches. While not enough on its own to validate tax exemptions for church property, the
“history is not something to be lightly cast aside.”67
G. THE MITCHELL COURT RATIONALE: LEGITIMATE PUBLIC PURPOSE
In Mitchell v. Helms, the Supreme Court upheld state and federal programs that provided
aid to schools, both public and private.68 Placing importance on the neutrality of the statute,
Justice Thomas asserted that if the government provides aid to “religious, irreligious, and
areligious” alike, then it is not endorsing any specific religion.69 Accordingly, if the government,
without taking religion into account, offers aid to those who “further a legitimate public
purpose,” then the effect of a benefit given to a religious organization will only further the
secular public purpose.70
H. THE BOB JONES UNIVERSITY COURT RATIONALE: PUBLIC BENEFIT
BALANCED BY PUBLIC POLICY
In Bob Jones University v. United States, a private religious school challenged an IRS
policy change that stripped them of their tax-exempt status because of racially discriminatory
practices.71 Bob Jones University had rules in place that forbade interracial dating.
66
Id.
Id. at 678.
68
Mitchell v. Helms, 530 U.S. 793 (2000).
69
Id. at 809.
70
Id. at 810.
71
Bob Jones University v. United States, 461 U.S. 574 (1983).
67
15
Consequently, the IRS revoked their tax exempt status because these rules were against public
policy.72 Bob Jones University argued that this revocation violated the Free Exercise Clause of
the First Amendment.73 Its argument was that the IRS policy was not constitutional because the
university engaged in racial discrimination on the basis of “sincerely held religious beliefs.”74
In rejecting this argument, the Court stated that “not all burdens on religion are
unconstitutional... The state may justify a limitation on religious liberty by showing that it is
essential to accomplish an overriding governmental interest.”75 And every once in a while the
Court has determined certain governmental interests to be “so compelling as to allow even
regulations prohibiting religiously based conduct.”76
Thus, the Court held that the governmental interest in discouraging racial discrimination
in an education setting was sufficiently compelling to justify revocation of Bob Jones
University’s tax exempt status.77 The Court emphasized its rationale, holding that this
“fundamental policy substantially outweighs whatever burden denial of tax benefits places on
Bob Jones University’s exercise of its religious beliefs.”78
Not only does the Court here stray from its prior rationale of “benevolent neutrality,” but
it is essentially promoting governmental entanglement with religion by comparing national
public policy with religious beliefs.79 By requiring religious beliefs to conform with the
72
Id. at 581.
Id. at 603.
74
Id. at 602.
75
Id. at 603.
76
Id.
77
Id. at 592.
78
Id. at 604.
79
John W. Whitehead, Tax Exemption and Churches: A Historical and Constitutional Analysis,
22 CUMB. L. REV. 52, 557 (1992).
73
16
government’s understanding of public policy in order to remain tax exempt, the Court went
around Walz and down an even more slippery path. It is easy to see why prior decisions warned
of excessive entanglement, as now the government looks more and more like the government
Americans fought so hard to be free of. In addition, now the church has to make a difficult
decision: whether to abandon its sincerely held religious beliefs or to give up its exemption.
The Court, in Bob Jones University, also contradicted the way it had previously
characterized tax exemptions. Recall the Walz Court stated that tax exemptions for churches
were not subsidies given by the government because no money went from the hands of the
government to the church.80 In Bob Jones University, the Court, did not say explicitly that tax
exemptions are subsidies, but instead explained that “When the Government grants exemptions
or allows deductions all taxpayers are affected; the very fact of the exemption or deduction for
the donor means that other taxpayers can be said to be indirect and vicarious ‘donors’.”81
The rationale used in Bob Jones University is a complete and contradictory approach to
that of the Walz Court. It is notable, that Bob Jones University was dealing only with religious
schools thus it is not clear if the Court will apply this rationale to churches or other religious
institutions.82 Regardless, the constitutional “infirmities and difficulties in applying this
precedent” are apparent in the Court’s subsequent decision in Texas Monthly, Inc. v. Bullock.83
80
Walz, 397 U.S. at 675.
Bob Jones Univ., 461 U.S. at 591.
82
Id. at 604 n. 29.
83
Whitehead, 559.
81
17
I. THE TEXAS MONTHLY COURT RATIONALE
In Texas Monthly, the court found that a Texas statute that gave tax exempt status only to
religious publication was unconstitutional.84 Texas claimed that this tax exemption helped the
state to avoid violating the Establishment Clause because they believed eliminating the tax
exemption would “entangle church and state to a greater degree than the exemption itself.”85 The
Court did not agree with this argument and thus struck down the statute holding it was in
violation of the Establishment Clause amongst other constitutional provisions. However, the
Justices could not reach an agreement on all major points; thus, they wrote three separate
opinions.86
Justice Brennan, writing for the plurality, applied the Lemon test and found that the Texas
statute did not pass.87 Brennan held that the statute did not have a secular purpose because it
only benefited religious periodicals.88 Also, the statute did not pass the second prong of the
Lemon test, statute’s primary effect cannot advance nor inhibit religion, since the statute was
limited to religious publications only its primary effect was an endorsement of religion.89 Such
an endorsement of religions offends the Establishment Clause as explained by the Endorsement
Analysis. Thirdly, the statute appears to actually create greater state entanglement with religion
84
Texas Monthly v. Bullock, 489 U.S. 1, 5-6 (1989).
Id. at 17.
86
Id. at 5 (Brennan, J., plurality opinion)(joined by Marshall and Stevens); id. at 25-26 (White, J., concurring in
judgment); id. at 26-29 (Blackmun, J., concurring in judgment) (joined by O’Connor).
87
Id. at 9.
88
Id.
89
Id. at 20.
85
18
than would be created by denying the tax exempt status, because it required state officials to
decide if a message conveyed by the publication was consistent with “the teaching of faith.”90
The characterization of tax exemption as a subsidy reared its semantic head once again in
Brennan’s opinion. However, this time Brennan took the exact opposite position than he had in
Walz; he declared that all tax exemptions constituted “a subsidy that affects non-qualifying
taxpayers, forcing them to become indirect and vicarious ‘donors.’”91 This departure from the
original characterization is not only troubling because it is directly in opposition with the bright
line rule espoused in Walz, that exemptions are not subsidies because the “government does not
transfer part of its revenue to churches,” but is also quite a surprise given Brennan’s hand in the
Walz rule.92 Brennan, concurring with the majority in Walz, stated “tax exemptions and general
subsidies... are qualitatively different” and expressed his agreement that a subsidy requires a
transfer of public money to a church and since there is no transference of money involved in an
exemption it is not a subsidy.93
Given this tangled mess of Supreme Court rationales used in regards to religious
organizations tax exemptions, it is difficult to see what the future will look like. However
confusing and flawed the Court’s analysis may be, there are three basic conclusions that can be
drawn. First, any tax exemption granted to a religious organization is not a constitutional right
but rather a privilege. Also, the Justices on the Court have not been able to agree amongst
themselves and even with themselves at times whether tax exemptions are subsidies or not.
90
Id.
Id. at 14 (citing Bob Jones Univ. v. United States, 461 U.S. 574, 591(1983)).
92
Walz, 397 U.S. at 675.
93
Id. at 690.
91
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Third, tax exemptions that rest safely under the protection of the Establishment Clause will only
enjoy such protection so long as they do not conflict with national public policy or other rights.94
IV. DIFFICULTIES IN DETERMINING THE ACTUAL BURDEN CAUSED BY CHURCH PROPERTY
TAX EXEMPTIONS ON STATES AND INDIVIDUAL TAXPAYERS
The current property tax varies from state to state and from personal residential property
to commercial property. Since church property is not taxed it is difficult to know the value of
church property and the overall dollar amount of church property in any given state. Because
these amounts are not known it is quite difficult to know the true amount of the burden caused by
church property tax exemptions on individual states and accordingly to individual taxpayers.
Although these amounts and figures are not readily available, President Ulysses S. Grant made
this prediction in his message to Congress in 1875:
In 1850, I believe, the church property of the United States which paid no tax,
municipal or State amounted to about $83,000,000. In 1860 the amount had doubled; in
1875 it is about $1,000,000,000. By 1900, without check, it is safe to say this property
will reach a sum exceeding $3,000,000,000. So vast a sum, receiving all the protection
and benefits of Government without bearing its proportion of the burdens and expenses of
the same, will not be looked upon acquiescently by those who have to pay taxes. In a
growing country, where real estate enhances so rapidly with time as in the United States,
there is scarcely a limit to the wealth that may be acquired by corporations, religious or
otherwise, if allowed to retain real estate without taxation. The contemplation of so vast
a property as here alluded to, without taxation, may lead to sequestrations without
constitutional authority and through blood.95
MODERN DEVELOPMENTS IN THE RELIGIOUS REALM
With a firm understanding of the history and Court rationale supporting property tax
exemption for churches, it is important to note the major development that have been made in the
religious sector over the past years. While there are so many specific examples that this paper
94
Whitehead, 566.
President Ulysses S. Grant, Seventh Annual Message to Congress (December 7, 1875). Available at The
American Presidency Project, http://www.presidency.ucsb.edu/ws/?pid=29516.
95
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would not end, the focus will be on somewhat general, broad and sweeping looks at the way
churches and the property churches use have evolved over the years. This bears doing because it
emphasizes the need to correct the current way of thoughtlessly handing out church property tax
exemptions. It also helps to highlight another reason to change the way these tax exemptions are
handled, because for those who rely heavily on the history of always granting church property tax
exemptions it is more difficult to argue that position when the look at history as compared to
modern times is so vastly different.
A. NEWLY EMERGING RELIGIOUS GROUPS
This issue has been brought up over and over again anytime a “new” religious group has
surfaced and asked to be treated the same as the Christian religions that tax laws originally
benefited in the early Colonial days. The main issue here is will almost always fall back to the
excessive entanglement problem. Anytime a new religious group, be it Buddhists, Scientologists
or followers of the Flying Spaghetti Monster, seeks tax exemption the government must take it
upon itself to make the decision whether they are a legitimate religious group and thus eligible to
receive such an exemption. This is a direct entanglement of church and state and is absolutely
excessive. The government’s determinations of whether a person’s beliefs are qualified to
receive recognition as a religion can be considered nothing but government endorsement. The
Court has thus far used the reasoning that while granting church property tax exemptions does
create some involvement between church and state it is much less of an involvement than taxing
the church. I think the Court has failed to consider all aspects of granting tax exemptions. If the
Court considers the fact that before it may grant the exemption the government must decide if a
religion is the kind of religion they want the grant the exemption for, it would be extremely
21
difficult to say that this is less of an entanglement. Taxing all church properties requires no
inquiry or determination of the state regarding the validity of religious beliefs. In fact the
government does not even have to know, much less make a determination, anything about a
church’s religious beliefs or practices. Rather a valuation of church property will be made and
will be taxed just as other non-church properties in the community are taxed.
B. NEWLY ENLARGED CONGREGATIONS
In colonial times the picture of a church was generally a modest building supporting the
needs of the believers in that community. Today, however, that picture is much different. Most
communities have several and sometimes hundreds of churches. The buildings used by churches
are often times extremely large buildings and many churches are no longer housed in just one
building, but rather a series of buildings all in the same compound like area. In addition, the
church buildings are no longer mainly used for the people of the surrounding community, instead
as the churches grow larger they reach out to neighbouring communities and cities to bring in
members from all over. This is a common practice with the mega churches, some people are
reported to drive hours to attend a service.
With the rise of mega churches in America, their ability to avoid paying property taxes
threatens the citizens of the community where these large churches are located. Generally, a
church with more than 2,000 weekly attendants can be considered a mega church. In Texas
alone, there are around 190 mega churches. One can imagine the size of building it would take
to hold even a fraction of a congregation with over 40,000 members. If imagining that kind of a
building is difficult, think refurbished basketball stadium, the building that is home to Lakewood
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Church in Houston, Texas. Lakewood is the largest congregation in America and has
approximately 47,000 members.96
C. EXPANDING USES AND EXPANDING TAX BREAKS FOR RELIGIOUS
ORGANIZATIONS
Not only are the buildings larger than ever, but many churches own more than just one
building on one city plot. Many churches hold multiple buildings on multiple acres. Beyond that
there is a new and interesting trend regarding religious property being used in a rather
untraditional manner. While this next example is not considered church property it is important
to see the trend in the religious industry to see what is next on the horizon for church and
religious property tax exemptions.
In Orlando, Florida there is a theme park with a religious theme that charges
approximately a $30 admission fee.97 In June 2006 after nearly five years of an intense battle,
Jeb Bush signed a bill into law that exempts the Holy Land from paying property taxes.98 The
law provides a property tax exemption for property owned by 501(c)(3) tax exempt
organizations to “exhibit, illustrate, and interpret Biblical manuscripts, codices, stone tablets, and
other Biblical archives, provide live and recorded demonstrations, explanations, re-enactments,
and illustrations of Biblical history and worship; and exhibit times, places, and events of Biblical
history and significance.”99 If this is not an endorsement of religions that follow the Bible then
who can say what is.
96
Hartford Seminary, Hartford Institute for Religion Research (2000-2006), http://hirr.hartsem.edu/cgibin/mega/db.pl?db=default&uid=default&view_records=1&ID=*&sb=5.
97
Sarah A. Lindquist, Property Tax Exemptions for the Nontraditional Church: How Do We Grant Tax Exemptions
to Places of Worship and Not Amusement Parks?, 33 FLA. ST. U. L. REV. 1149, 1150 (2006).
98
West’s F.S.A. § 196.1987
99
Fla. Stat. L. 2006, H 1783 (c. 164)
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V. NECESSARY CHANGE
This is a call to change in light of the flawed jurisprudence supporting church property
tax exemptions, drastic changes in the way churches use their property and the value of such
property and economic hard times that await the country. There are many alternatives that would
be better than the current system of essentially granting any religious organization deemed
worthy as being considered a religion and thus eligible an exemption from paying all property
taxes. There is one alternative that I believe is the best and most correct, but as it would require a
swallowing of pride, admittance of getting it wrong and abandonment of the way it has always
been done, I have offered other solutions that might be easier to digest and would still
accomplish the goal and solve the problem.
A. TAX EXEMPTIONS FOR CHURCH PROPERTY ARE NOT REQUIRED BY THE
CONSTITUTION
It is my belief that the correct answer to this problem is also the most difficult one to
swallow. Church property tax exemptions are not required by the Constitution. The Court has
already said that the Free Exercise Clause does not require a tax exemption be granted to church
property. And it is quite clear that the Establishment Clause certainly does not require such an
exemption rather church property tax exemptions are likely the exact type of thing the
Establishment Clause was written to protect against. The separation of church and state desired
by the Establishment Clause really requires that church property tax exemptions be found
unconstitutional. However, I think it is enough to say that such exemptions are not required by
either the Free Exercise Clause, as directed by the Supreme Court, nor the Establishment Clause,
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as dictated by common sense and reasoning. To explain this further it is useful to look back the
Walz Court and highlight the areas where I believe the Court erred.
The Court in Walz found a place for church property tax exemptions claiming that
history should be respected and basically claiming that since such exemptions have always been
granted they should probably continue to be granted. However, the Court completely missed the
mark by relying so much on history without really examining the history of why such exemptions
existed and how they were applied. Simply because something has been done a certain way in
the past does not mean that it should be carried forward into the future, for not only does the
future often require different options but sometimes the historical way of doing things was wrong
from the beginning.
In addition, to the Court’s misapplication of history regarding the exemptions I also
believe that the argument used in regards to excessive entanglement was flawed. The Court
assumed that any interaction between the church and the state would be an entanglement, and it
found granting the exemptions to be less of an entanglement than collecting the taxes. I believe
it did not consider the fact that entanglement may not mean any contact between the church and
the government. I think that entanglement is not any basic connection such as assessing property
values, determining tax owed or collecting said taxes. Rather, entanglement should be more
focused on the beliefs of a religion and the governments thought and attitudes towards those
beliefs.
Under this view, determining whether to grant a church a property tax exemption requires
the state to determine first if a certain religion qualifies as the type of religion eligible to receive
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an exemption would be an entanglement. The government would look at the beliefs espoused by
the religion and make a subjective decision if those beliefs are the kinds of beliefs that should get
a property tax exemption. On the other hand, taxing church properties across the board
regardless of their beliefs requires no subjective decision regarding a churches religious belief.
In fact, it requires absolutely no inquiry into the religious aspects of the church and does not
require the government to endorse some religions while denying others. The only contact
required would be for the government to assess the property value, determine amount of tax
owed based on the same percentages used to determine property taxes for other non-church
properties in the community, and collect the tax. Based on my configuration of the definition of
entanglement, this would mean that the government could achieve no entanglement with
churches and thus the Establishment Clause can be satisfied.
B. STATE REPEAL OF CHURCH PROPERTY TAX EXEMPTION STATUTES
In the alternative to the above conclusion, I suggest that the States recognize the problem
of church property tax exemptions and repeal the statutes that grant tax exemptions to church
property. Because the Court has consistently rejected the claim that an exemption is required
because taxing a church would violate the Free Exercise Clause the States have no Constitutional
obligation to grant such exemptions.100 I suggest that if the Court is unwilling to find these
exemptions unconstitutional because they want to honor the historical tradition, then the States
should take a hard look at the historical beginnings of these tax exemptions in a way that the
Court did not.
100
Texas Monthly, 489 at 19-20.
26
From the common law courts the States should recognize the importance that the three
restrictions had: (1) only incorporated established churches devoted to acceptable religious uses
were eligible for the exemption, (2) limited the exemption to taxes that would be collected for the
upkeep and use of the church itself, and (3) tax exemptions could be temporarily suspended in
times of emergency or even relinquished completely if the tax burden on the other properties in
the community became too much to bear.
The second restriction only exempted certain types of property taxes, the taxes that would
be gathered to maintain the church; thus, in modern times no taxes should be exempt because the
state no longer pays to maintain the church property. The third restriction will recall the
exemption in hard times, such as war, poverty, disaster and the exemption could even be
abandoned indefinitely if the tax burden on the rest of the community grew to large. Therefore,
the States today could easily revoke such exemptions in accordance with this historical tradition
as this country has been in a perpetual state of “war” for quite some time. In addition the
economic hard times that the country is seeing would definitely be cause to revoke the church
property tax exemptions as well.
VI. CONCLUSION
Although the Supreme Court’s decisions regarding the Establishment Clause are a
jumbled mess this paper attempts to see through the mess and uphold the idea espoused by both
Madison and Jefferson that no man should be compelled to financially support any religion,
regardless of his belief or disbelief in that religion. This principal is directly violated by church
property tax exemptions that have been upheld by the Court. To make matters worse the Court’s
decision to uphold such exemptions has not been based on any sound argument.
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The Supreme Court’s decisions upholding church property tax exemptions are claimed to
be respecting a history of such exemptions, yet the actual historical treatment was overlooked.
The Court has also run around in circles attempting to justify such exemptions by claiming they
are less of an entanglement than taxing churches, thus, the Establishment Clause is respected. In
contrast to these weak arguments, this paper takes the ideas and thoughts that formed the
Religious Clauses of the First Amendment and proposes a solution that is in line with the
Constitution. Stated plainly, property tax exemptions should not be granted to any church. This
could be accomplished through the Supreme Court realizing the error of its ways, deciding to
give the Constitution fair and deserved consideration, and striking down the church property tax
exemptions. Alternatively, the States could realize that there is no Constitutional need for such
church property tax exemptions and repeal them.
Although this conclusion might be a difficult one to swallow in light of the admirable
intentions and long history of granting such exemptions, historical practices and good intentions
cannot be placed above respect and preservation of the Constitution’s First Amendment
Religious Clauses that were intended to protect our individual liberties at any cost.
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