Sales Tax on Church Upheld by High Court

The Supreme Court, in a decision viewed by some experts as providing at least a narrow opening for imposing property taxes on religious groups, ruled Wednesday that the Constitution does not shield churches from broadly based state sales taxes.

In a unanimous opinion, the court said that California could apply its sales tax to the sale by Louisiana evangelist Jimmy Swaggart of Bibles and religiously oriented pamphlets and tapes.

Because the tax applies to all sellers and does not endanger Swaggart’s ability to practice his religion, it is not unconstitutional, Justice Sandra Day O’Connor said for the court.

Although O’Connor addressed her opinion to “generally applicable sales taxes,” some legal experts said her language would apply to all manner of taxes, including property taxes on non-commercial religious facilities.

“Now we have the real threat of intrusion of government into the religious ministry of churches and synagogues,” Swaggart said in Baton Rouge, reading a statement a few hours after the ruling.

“The immediate impact of this decision on Jimmy Swaggart Ministries will not be disastrous because we have been in this battle for 10 years and have prepared for the consequences,” Swaggart said.

“I think it’s clear now there is no constitutional right to (tax) exemptions” for churches, said UC Berkeley law dean Jesse Choper, an expert on the Constitution’s religious clauses.

However, the court drew a distinction of a different kind. Taxes would unconstitutionally infringe on the free exercise of religion, the court held, if they jeopardized the very existence of the religious organization. A more “onerous” tax, which “might effectively choke off an adherent’s religious practices,” might well be unconstitutional, O’Connor said.

In addition to that constitutional barrier, state legislatures have traditionally opposed taxes on religious organizations.

Most states specifically exempt churches from broadly based taxes. No state has sought to tax church property, and California has been the only one that taxes the sale of religious literature such as that sold by Swaggart.

Benna Ruth Solomon, counsel for the National Conference of State Legislatures and the National League of Cities, said she did not expect legislators to try to assess new taxes on churches or religious groups as a result of Wednesday’s ruling.

The decision means that California properly imposed $183,338 in sales taxes on Swaggart between 1974 and 1981, at its then 6% rate. An unspecified amount is due for subsequent years.

Swaggart’s attorneys focused on what they said would be the broad ramifications of the ruling.

“This is a very sweeping opinion,” said University of Chicago law professor Michael McConnell, who represented Swaggart. “It removes the constitutional underpinnings of tax exemptions across the board. I don’t see how you’d draw a line at income taxes or property taxes. As of today, this puts churches entirely at the mercy of the state legislature.”

As a matter of tradition, churches and other nonprofit organizations have been exempted from taxes on their property and income.

In 1970, the Supreme Court upheld the tax exemptions against a challenge that they violated the First Amendment’s ban on laws “respecting an establishment of religion.” The court found that the exemptions did not improperly subsidize religion because they covered all nonprofit groups.

That decision meant only that governments are permitted to exempt churches from general taxes. It did not mean that they must--the issue presented by the Swaggart case and a series of earlier cases as well.

In the 1940s, the Supreme Court on two occasions struck down municipal licensing fees and taxes on Jehovah’s Witnesses who solicited from door to door. The court said that the fees and taxes violated the “great liberties” of religious freedom guaranteed by the First Amendment.

However, more recent decisions undercut that doctrine. A ruling last February seemed to strike at its heart.

In that decision, the high court said that the Texas Legislature may not exempt religious magazines from a general sales tax. The exemption, the court said, amounted to an unconstitutional government subsidy of religion.

Justice William J. Brennan Jr., writing in the Texas case, conceded that many legal scholars thought the Jehovah’s Witnesses decisions had required such a tax exemption for religious activity.

“To the extent our language in those (1940s) opinions is inconsistent with our decision here, based on the evolution in our thinking about the religion clauses over the last 45 years, we disavow it,” Brennan said.

In a fiery dissent, Justice Antonin Scalia called the Brennan opinion a “judicial demolition project” that knocked down the long-understood principle that religion was off limits to taxing authorities.

Scalia warned that the principle spelled out in the Texas case could lead to overturning laws in at least 45 states giving churches specific exemptions from “other types of taxes such as property, income, amusement and motor vehicle taxes.”

The very next week, the court agreed to hear Swaggart’s appeal. Lawyers for Swaggart, relying on the Jehovah’s Witnesses cases, said that the Constitution’s guarantee of the “free exercise” of religion prohibits the government from taxing “the distribution of religious materials by religious bodies for the purpose of spreading their ideas.”

The appeal was supported by numerous religious groups, from the Hare Krishnas to the mainline National Council of Churches, which argued that such taxes are a “serious threat” to religious liberty.

This time, all nine justices, including Scalia, rejected the church’s appeal.

O’Connor pointed out that even the Jehovah’s Witnesses decisions made clear that neither a religious group nor a minister is “free from all financial burdens of government, including taxes on income or property.” Moreover, churches and ministers, “like other citizens, may be subject to general taxation,” she said.

Deputy Atty. Gen. Richard E. Nielsen, who represented California, said he was pleased by the ruling and said it would aid the state in other pending cases. The Hare Krishnas have contested a state-imposed sales tax on religious items sold in airports, but the Supreme Court ruling appears to undercut their case, Nielsen said.

But Los Angeles lawyer Charles R. Ajalat, who appealed Swaggart’s case to the high court, said: “This opens the gates for the state, local or the federal government to tax the church. It’s a sad day for religious liberty.”

The Swaggart case involved the sale of $240,000 worth of religiously oriented publications and tapes during 23 “crusades” in California, plus the sale of an additional $1.7 million worth of similar items to Californians through the mail.

When state officials sought to tax Swaggart, his lawyers contested the tax in the state courts and finally paid it under protest before appealing to the high court. (Swaggart Ministries vs. California Board of Equalization, 88-1374.)

The court opinion pointed out that Swaggart did not contest the sales tax charged on a variety of other products sold by Jimmy Swaggart Ministries, such as T-shirts with a JSM logo, mugs, bowls, plates, Roman coins, candlesticks, pen and pencil sets, prints of religious scenes, bud vases and communion cups.