United States Library of Congress, The Constitution of the United States of America: Analysis and Interpretation
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 comment 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.1
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 one or more of these purposes and did not operate for profit.2
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.3
For the second prong, the Court created a new test, the entanglement test,4 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.5
Although 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.6 For example, the Court determined that a sales tax exemption applicable only to religious publications constituted a violation of the Establishment Clause,7 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.8
1. 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).
2. Walz v. Tax Comm’n, 397 U.S. 664 (1970). Justice Douglas dissented.
3. 397 U.S. at 672–74.
4. See discussion under Court Tests Applied to Legislation Affecting Religion, supra.
5. 397 U.S. at 674–76.
6. 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. Diffenderfer v. Central Baptist Church, 404 U.S. 412 (1972).
8. 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. § 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).