
Freedom Writer - March 1996

Colorado debates abolishingtax exemption for churches

By Barbara A. Simon, Esq.

John Patrick Michael Murphy, a personal injury attorney 
and host of a weekly talk show is leading an effort 
to eliminate almost all property tax exemptions for 
churches and nonprofit organizations in Colorado. Tax-exemption 
would be retained for nonprofit schools and universities, 
groups that provide housing for prisoners, orphans, 
the elderly, the disabled, and the homeless.

The effort is taking the form of a ballot initiative 
to be voted on by Colorado voters this November. 

Some of the initiative's supporters view the initiative 
as an effort to halt the influx and growth of evangelical 
Christian organizations. Colorado Springs is host to 
more than 70 religious organizations, among them the 
Navigators, Focus on the Family, and the International 
Bible Society. State officials estimate that the amendment 
would put nearly $3 billion worth of land and buildings 
on the state tax rolls, providing nearly $70 million 
in new property tax revenue. The amendment would require 
that the money be used to reduce taxes for state residents.

Some of the initiative's opponents believe that the 
initiative represents an "attack" that "undermines 
the entire nonprofit sector and may produce permanent 
damage." In a January 14, 1996 _The_New_York_Times_ 
article, the Reverend Lucia Guzman, executive director 
of the Colorado Council of Churches, stated that the 
initiative, if successful, may force many small churches 
to close.

Assuming that the ballot initiative is successful, 
will it pass constitutional scrutiny? In the 1970 case 
of _Walz_v._Tax_Commissioner_of_New_York_, the Court 
upheld the exemption authorized by state law for "real 
or personal property used exclusively for religious, 
educational, or charitable purposes as defined by law 
and owned by any corporation or association organized 
and conducted exclusively  for one or more such purposes 
and not operated for profit." Walz, a property owner 
and taxpayer, contended that the exemption indirectly 
compelled him to support religious organizations owning 
exempt property. 

The Court, finding for the Tax Commission, held that 
the First Amendment "will not tolerate either governmentally 
subsidized religion or governmental interference with 
religion." Chief Justice Burger found that the legislative 
purpose served was legitimate, that historically exemptions 
recognize the "beneficial and stabilizing influences" 
of nonprofit groups. The Chief Justice argued that 
governmental involvement with religion existed with 
or without the exemption and that "elimination of the 
exemption would tend to expand the involvement of the 
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." The Court found that upholding 
the tax exemption provided less opportunity for excessive 
entanglement of church and state. The Court also rejected 
any "nexus between tax exemption and establishment 
of religion."

Another case which addressed the constitutionality 
of tax exemptions for religion was the 1989 case of 
_Texas_Monthly_v._Bullock_. In that case the Court 
struck down a state sales and use tax exemption for 
periodicals published or distributed by a "religious 
faith" which consisted entirely of writings either 
"promulgating the teachings of the faith," or "sacred 
to a religious faith."  

During the years between _Walz_ (1970), and _Texas_
Monthly_ (1989), the Court formalized a standard of 
review for Establishment Clause cases. Taken from _Lemon_
v._Kurtzman_ (1971), the Court established a three-prong 
test to determine if a governmental action is neutral 
toward religion, and therefore passes constitutional 
muster. First, the governmental legislation must have 
a secular purpose; second, the primary effect must 
be one that neither advances, nor inhibits religion; 
and third there must not be excessive governmental 
entanglement with religion.

In _Texas_Monthly_v._Bullock_, the Court held that 
when exemptions are granted, they must fall to a "wide 
array of nonsectarian groups as well as religious organizations." 
The Court also found that the exemption was confined 
exclusively to religious publications which gave it 
insufficient "breadth" to serve a secular objective. 
 The governmental exemption failed the first prong 
of the Lemon Test, that it have a legitimate secular 
purpose. The governmental exemption also failed the 
third prong of the Lemon Test, that of excessive entanglement 
between government and religion. The Court found that 
under the exemption, public officials were asked to 
determine whether a message or activity is "consistent 
with the teachings of faith."

In light of _Texas_Monthly_and_Walz_, will Colorado's 
proposed repeal of exemptions for some nonprofits pass 
constitutional muster?  The initiative seeks to eliminate 
almost all property tax exemptions for churches and 
nonprofit organizations. Tax exemption would be retained 
for nonprofit schools and universities, and  groups 
that provide housing for prisoners, orphans, the elderly, 
the disabled, and the homeless. 

The initiative appears to be discriminatory on its 
face. Nonprofits that provide education through schools 
and universities and nonprofits that provide housing 
to certain segments of society will  receive the benefit 
of tax exemption, while nonprofits that provide food, 
clothing, and medicine for perhaps the very same segment 
of society will not receive the benefit of tax exemption.

What is the rational basis behind this discriminatory 
initiative? There appears to be none. For a governmental 
action to be found constitutional, it must have, at 
minimum, a rational basis. There seems to be no rational 
basis behind this proposed state action. 

Could Colorado decide to do away with all tax exemptions? 
Theoretically, it could. If it did, there would be 
challenges, especially from religious organizations, 
who realize the strength of Chief Justice Burger's 
argument in _Walz_  that governmental involvement 
with religion existed with or without the exemption 
and that "elimination of the exemption would tend to 
expand the involvement of the government," and that 
by upholding the tax exemption there would be less 
opportunity for excessive entanglement between church 
and state. 

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