The form of religious accommodation most clearly permitted by the Establishment Clause is one that exempts both religious organizations and their secular counterparts from a particular legal requirement. Throughout American history, all levels of government have enacted these religion-neutral accommodations, most notably tax exemptions for both secular and religious nonprofit organizations.
The Supreme Court addressed the constitutionality of such tax exemptions in Walz v. Tax Commission (1970). This case involved New York state’s tax exemption for property owned by nonprofit organizations, including churches and other houses of worship. In an 8-1 decision, the court held that this exemption did not violate the Establishment Clause because the state extended the exemption to all charitable organizations, not just religious ones. The court found that, in this respect, New York’s property tax resembled the federal income tax code, which similarly exempts all qualified nonprofit entities, including religious groups. The court also noted that the religious-property exemption was quite narrow in that it applied only to property used exclusively for religious purposes.
Walz v. Tax Commission (1970)
Justice William O. Douglas was the lone dissenter in Walz. He argued that because a tax exemption is essentially a subsidy, a tax exemption for houses of worship is akin to the government funding religion. Since he would have found such funding unconstitutional, Douglas claimed that a tax exemption for religious organizations should also be unconstitutional, even if the exemption applied to secular organizations.
But the Supreme Court has largely ignored Justice Douglas’ concerns and, so far, has imposed only one constitutional limitation on accommodations that apply to both secular and religious organizations. In Larkin v. Grendel’s Den (1982), the court struck down a Massachusetts law giving both churches and schools the authority to stop nearby restaurants from obtaining liquor licenses. In striking down this law, the court acknowledged that Massachusetts passed the law to achieve the permissible goal of protecting churches and schools from the ruckus associated with liquor outlets and stated that the state could have achieved this goal in permissible ways. For example, the court noted, Massachusetts could have simply banned the sale of liquor within a certain distance of a church or school. But Massachusetts chose an impermissible means of achieving this goal because it gave religious organizations a power typically reserved for government. So even though the law was religion-neutral in that it treated churches just like secular schools, it was still unconstitutional because it threatened to entangle religious and governmental authorities.
From Larkin flows the general rule that accommodations, whether religion-neutral or not, may never authorize religious entities to wield a government power. To date, this is the only Establishment Clause limitation on religion-neutral accommodations.
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