Federal judge: Tax-free bonds can't be used for religious university
By The Associated Press
10.26.00
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NASHVILLE, Tenn. — A church-affiliated university cannot benefit
from tax-exempt municipal bonds because the practice amounts to
government-sponsored support of religion, a federal judge has ruled.
In a ruling Oct. 24 that could affect church-supported schools across
the state, U.S. District Judge Aleta Trauger said governmental bond authorities
cannot issue tax-free bonds for Lipscomb University or any other "pervasively
sectarian" institution.
"There are a number of institutions that have been supported by
municipal non-taxed bonds," said Claude Pressnell, director of the Tennessee
Independent Colleges and Universities Association. The association represents
35 mostly church-affiliated schools. The
Tennessean reported today that 20 private colleges and
universities across the state have benefited from tax-free bonds.
Pressnell says he does not think the ruling will affect existing bond
issues, but could make it more difficult to use this funding mechanism in the
future.
Attorneys for Lipscomb said they intend to appeal to the 6th U.S.
Circuit Court of Appeals.
"The government has a strong interest in promoting education, and
because Lipscomb offers the highest quality educational programs, Lipscomb's
religious affiliation should be irrelevant," said Brad McLean, an attorney
representing the Church of Christ-affiliated university. "If a school's
educational programs meet the highest academic standards, then it would be an
unconstitutional form of discrimination to prevent a school from participating
in tax-exempt municipal bond financing merely because of its religious
orientation."
The $15 million in bonds in the Lipscomb case were issued through
Nashville's Industrial Development Board. The bonds are tax-free to the buyer.
Since the buyer has no tax obligation, he accepts a lower return and the school
benefits by paying the lower interest rate.
Trauger ruled the bond issue violated the establishment clause of the
First Amendment.
"If the religious mission of Lipscomb is so intertwined with the
academic goals that they cannot be separated, no matter what worthwhile
projects the tax-free bonds financed, they were state support for Lipscomb's
religious message," Trauger wrote in her 77-page opinion. "Metropolitan
government cannot support or promote religion — any religion — and
be in conformity with the First Amendment."
Joe Johnston, a Nashville attorney for the five men who sued Lipscomb,
Nashville, the Industrial Development Board and Sovran Bank nine years ago,
said his clients were satisfied.
Trauger awarded $1 each to the five men.
"That was all they really wanted," he said. "There was no motive to
make any money on this case."
The bonds were used to build and equip a new library, renovate and
convert the old library to office space, and to build intramural athletic
facilities, four tennis courts, a baseball stadium and an addition to the
university's business center.
Update
Religious school can use tax-exempt bonds
Federal appeals judges overturn lower court ruling, saying issuing bonds to Nashville, Tenn., college didn't violate First Amendment.
08.16.02
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