Church Law and Tax 1989-11-01 Recent Developments

Taxation – Sales

The United States Supreme Court ruled that a Texas law exempting religious periodicals from state sales tax violated the first amendment’s “nonestablishment of religion” clause. From 1984 until 1987, Texas law imposed a sales tax upon all periodicals except those “published or distributed by a religious faith and that consist wholly of writings sacred to a religious faith.” This law was challenged by a secular publisher, and the United States Supreme Court agreed that the Texas law violated the first amendment. The Court’s ruling is significant, since it probed the meaning of the first amendment’s language prohibiting the establishment of a religion. The Court noted that the first amendment nonestablishment of religion clause “prohibits, at the very least, legislation that constitutes an endorsement of one or another set of religious beliefs or of religion generally.” It observed that the “core notion” underlying the first amendment is that the government “may not place its prestige, coercive authority, or resources behind a single religious faith or behind religious faith n general, compelling nonadherents to support the practices or proselytizing of favored religious organizations and conveying the message that those who do not contribute gladly are less than full members of the community.” The Court was quick to add that government policies that are designed to implement a broad secular purpose are not invalid merely because they incidentally benefit religion. For example, the Court noted that it had previously upheld a New York property tax exemption law because it exempted a wide variety of charitable organizations including churches. The Court concluded: “Every tax exemption constitutes a subsidy that affects nonqualifying taxpayers, forcing them to become indirect and vicarious donors. Insofar as that subsidy is conferred upon a wide array of nonsectarian groups as well as religious organizations in pursuit of some legitimate secular end, the fact that religious groups benefit incidentally” does not [violate the first amendment]. However, when government directs a subsidy exclusively to religious organizations … and that either burdens nonbeneficiaries markedly or cannot reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion, as Texas has done, it provides unjustifiable awards of assistance to religious organizations and cannot but convey a message of endorsement to slighted members of the community. This is particularly true where, as here, the subsidy is targeted at writings that promulgate the teachings of religious faith. It is difficult to view Texas’ narrow exemption as anything but state sponsorship of religious belief ….” The Court emphasized that if Texas chose to grant a tax exemption to “all groups that contributed to the community’s cultural, intellectual, and moral betterment, then the exemption for religious publications could be retained.” The Court specifically ruled that a statute exempting organizations created for “religious, educational, or charitable purposes” from the payment of state sales tax would be a “model” exemption statute. Texas Monthly, Inc. v. Bullock, 109 S. Ct. 890 (1989).

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