Walz v. Tax Commission

In the Walz decision, the Supreme Court used the excessive entanglement test for the first time to regulate the relationship between church and state. For over a decade, this test remained the Court's most prominent method of interpreting cases involving the religion clauses.

The First Amendment to the U.S. Constitution contains the two religion clauses, which prohibit government from either establishing a state religion or restricting the free exercise of religion. Together, the Establishment Clause and the Free Exercise Clause work to ensure the separation of church and state and religious freedom. For the courts, however, steering between the two clauses has proved challenging. As Reka Potgieter Hoff explained in a 1991 article in the Virginia Tax Review, "an interpretation of the Free Exercise Clause to give religious groups space freely to exercise their different conceptions of religious belief and worship, exempt from otherwise legitimate governmental requirements, may in effect, amount to an establishment of religion." One area in which interpretation of the religion clauses has sparked controversy is that of taxation.

In 1968, a lawyer named Frederick Walz challenged Section 420(1) of the New York Real Property Tax Law in a New York court as a violation of the Establishment Clause of the First Amendment. The section in question provided a property tax exemption for religious organizations using property for religious purposes, as part of a wider exemption for public welfare organizations. Walz claimed that this exemption forced him, as a taxpayer and property owner, to make an indirect contribution to religious organizations. The New York courts ruled against Walz, as did the court of appeals in 1969. In 1970, the Supreme Court upheld the lower courts' decisions.

The Court emphasized several points in rendering its decision. First, it determined whether either the purpose of the exemption or its end result amounted to a state establishment of religion. In both cases, it found no violation of the Establishment Clause. It found instead that New York's tax exemption neither promoted nor inhibited religion; rather, it retained a healthy level of neutrality. In so ruling, the majority opinion insisted that a difference existed between a tax exemption--which gave indirect economic benefits to a religious organization--and the more direct support of a governmental subsidy.

The Walz decision also introduced the excessive entanglement test for the first time. This test determined whether a statute would bring the government into excessive involvement with religion through regular official surveillance. In applying the test, the justices had to consider not only the current state of affairs, but also whether entangling tensions might arise in the future. The Court decided that in this case, exempting religious organizations from the New York property tax actually created less entanglement than taxation would inevitably bring; therefore the tax exemption fostered a healthy separation of church and state.

The Walz Court took other factors into consideration as well. It argued that religious organizations provide services which contribute to the well-being of the community beyond a strictly religious context. These benefits, and the way in which the Court saw religious institutions as contributing to a pluralistic environment, encouraged it to support the tax exemption. The Court also felt that such exemptions helped to prevent discrimination against religion. Finally, the majority opinion found that New York and many other states had offered similar exemptions for many years without causing conflict between religion and the state; thus history sanctioned the practice.

Following the Walz decision, subsequent Supreme Court rulings used and expanded upon the ruling. First in Lemon v. Kurtzman (1971), and then in other cases throughout the 1970s and early 1980s, justices relied on the excessive entanglement test to monitor church-state relationships, particularly regarding the status of religious schools. Many of these decisions moved beyond the Establishment Clause issue raised by Walz to apply entanglement analysis to the Free Exercise Clause as well. Though the majority opinion in Walz did not explicitly discuss the Free Exercise Clause, it did imply a relationship to it. The Court justified the state accommodation of religious organizations embodied in a tax exemption--what Frederick Walz objected to as establishment of religion--by arguing that avoiding the oppressive entanglement of government tax regulation and surveillance allowed more room for the free operation of religion. In this way, the decision clearly marked an attempt by the Supreme Court to maneuver between the two religion clauses.

Walz v. Tax Commission sparked controversy among legal scholars interested in the balance between church and state. Several commentators objected to the Court's use of historical precedent to justify tax exemptions for religious organizations, insisting that the rapidly changing nature of the modern state-church relationship differed markedly from the context in which such exemptions first arose. In Kenneth Ripple's 1980 article in the UCLA Law Review, he decried the level of judicial subjectivity inherent in the excessive entanglement test's "prophylactic" function, which forced justices to predict possible future conflicts and move to prevent them.

One of the most comprehensive critiques of the Walz decision came from Douglas Rovens in a 1982 article for the Southwestern University Law Review. Rovens dismissed the Court's attempt to distinguish between a tax exemption and a direct subsidy, and condemned both as an unconstitutional establishment of religion. He also argued--in direct opposition to Walz--that tax exemptions for religious purposes actually created more excessive entanglement between church and state than taxation would, as they put the government in the dangerous position of defining what constituted religion and what did not. Finally, Rovens expressed concern with the possibility of growing numbers of "fraudulent" religious organizations and their leaders abusing tax exempt status to accumulate property wealth. As such responses show, at the controversial crossroads of church, state, religious freedom and taxation, no decision as influential as Walz could remain unchallenged.