DIFFENDERFER v. CENTRAL BAPTIST CHURCH

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Argument of Leo Pfeffer

Chief Justice Warren E. Burger: We will hear arguments next from number 47, Diffenderfer against Central Baptist Church.

Mr. Pfeffer.

Mr. Leo Pfeffer: Mr. Chief Justice may it please the Court.

This case presents a question whether the First and Fourteenth Amendment of the Constitution forbid Government of Tax Exemption to extent to Church owned commercial property.

The specifics of the case involve a Florida Statute --

Unknown Speaker: Excuse me, Mr. Pfeffer.

I wonder before you begin, the Attorney General of Florida has filed a suggestion which as I read it says that this exemption is no longer available under Florida Law and this is to which I wish, if you would, you particularly address this up.

It says that under Florida Law, this particular property even if there is a reversal cannot be subjected to tax.

Is that right?

Mr. Leo Pfeffer: Yes, not quite -- I have addressed myself to the question of mootness in my reply brief which I filed in this Court. Specifically to that exclusive issue but I will briefly state that why I believe this case is not moot.

The first case, the new amendatory law is not yet in effect.

It takes effect next year, December 31st of this year which means the next fiscal year.

And so that the tax for this year at very least is before the Court, so it is not moot at least --

Unknown Speaker: Let me see now, you mean even if the tax, it we were to reverse and the tax for the past years is not collectible, you say it is collectible?

Mr. Leo Pfeffer: For this year because the statute itself, the very less says it shall not take effect until next year.

So you will find that in the suggestion.

You will find that on the very last page 15 of the suggestion of the Attorney General, the State of Florida which has a text of the amendatory statute, actually will take effect December 31st, 1971 which means the next year and not for the current year.

So that -- it is a very minimum, it is applicable.

There is also a Florida statute which says, if any tax which is not collected for any reason, is there after determined to be payable, the taxpayer is liable for the three years past taxes.

So that on the very technical --

Unknown Speaker: That is the one that concerned me.

I thought the State was suggesting that there was no such provision.

Mr. Leo Pfeffer: Yes.

There is, right.

Yes, there is, it is contained in my reply brief.

Unknown Speaker: Well, perhaps I should ask your adversary, then I would be taking more of your time.

Mr. Leo Pfeffer: And the statute itself does so provide --

Unknown Speaker: I take it, you would concede if there were no tax collectible in the event you prevailed then this case would be moot, would it not?

Mr. Leo Pfeffer: Well, I do not think so for a different reason.

I think that under the decision of this Court in (Inaudible), a determination that the plaintiffs here, assume this taxpayer is planning to sue means that they have been individually harmed by the exemption and while the State of Florida can if it wishes to provide the future of the exemption.

At least as far as the tax was accrued, while this suit is pending at the very least, the very least, the plaintiff by his factor, he has standing, has the pressure to agree with him even though the tax is never collectible.

Well, the tax may be collectible, presumably within the power of this Court as a Court of equity.

Unknown Speaker: Let me put you a hypothesis Mr. Pfeffer, only one, would this case be moot if in fact, if you prevailed and the property were taxable, nevertheless the tax is not collectible under Florida law.

Mr. Leo Pfeffer: Well, I would say that under the First Amendment, the plaintiffs would have a suit in the Court, to compel them to pay the tax as a redress for wront that he committed, an equitable cause of the Court.

In any event the issue, it is collectible as I indicated that the issue is one of national importance or else the Court would not have noted it.

Unknown Speaker: You know, as you know Mr. Pfeffer, I am sure, Florida has a rule sometimes of which many others --

Mr. Leo Pfeffer: Yes

Unknown Speaker: Which permits us to submit the State law questions to the Florida Supreme Court before we decide a constitutional question, we have done that in many of the cases.

You do not think this might be an appropriate case?

Mr. Leo Pfeffer: I do not think it is necessary because the amendatory statute is unambiguous, it says, some will take effect until next year.

So then in that sense I do not think it was --.

Chief Justice Warren E. Burger: So, you do not think it is necessary, do you think it would be an appropriate case?

Mr. Leo Pfeffer: No, Mr. Chief Justice, I do not think so, because I think if the Florida Court, as I indicated in my brief, if the Florida Court would say that the tax is not collectible retroactively, I would say that is to raise a federal issue, a federal question whether that Florida, the State of Florida can deprive a taxpayer of that equitable remedy anymore than to deprive him a right to sue originally because it is a federal question and not the State question.

Now, the question -- the specifics of this case is a Florida statute is which as pointed out has been amended.

Now there is a difference between myself and the Attorney for the other plaintiff.

We do not challenge the constitutionality of the amendatory statute.

The amendatory statute says, when a piece of property owned by a Church is used partly for church purposes and partly for non commercial purposes, that part which is used, that should be prorate tax on that part which is used for non or to the extent that is used for commercial purposes.

Mr. Hollander representing the plaintiff, is of the opinion that end use of it destroys the entire exemption, we do not have to go that far.

We concede, at least for the purpose of this case that to the extent that the statute prorates the taxability to that extent, it is constitutional.

Now the question presented to this Court is whether this Court’s decision on Walz which upheld the exemptibility of property owned by a church and used exclusively for religious purposes extends to property which is used for in least , in part, purely in the secular field of commercial competition enterprise.

The sole relationship to the church being that all of the profits of it go to the church.

It was our contention that nothing in the Walz case requires its extension to this particular case and the issue was specifically not before the Court then.

In Walz the Court recognized and rejected the argument there presented that tax exemption represented the first step inevitable progression, the Court said, the history of tax exemption for 200 years shows there has not been an inevitable progression in breaking down the wall of separation between church and State.

If your Honor please, this case shows that perhaps the Court was a little too optimistic in Walz because this is a further step.

Unlike the Walz situation, this does not have the support of 200 years of uniform universal practice about which the Court both in the Court’s opinion and Congress' opinion relied large measure in Walz.

It showed that ever since our constitution was written, in every state, the union including the Federal Government, land used exclusively for religious purposes was exempt and the Court pointed out and this Congress' opinion pointed out, as the Holmes statement, that this history is worth volumes of logic and should be great width.

The history here is just the reverse.

The history here shows, and I pointed out in our brief, that even as far back as 1217, there was this device of turning all the property to a religiously owned property for non-religious use as a means of avoiding the obligations of feudalism and what today would be the functional equivalent of taxation.

Now, it is our contention that a statute which exempts a church from those burdens which every secular commercial institution bears in its operation, the commercial area is inevitably a statute whose purpose or certainly its effect, whatever its purpose, its primary effect is the advancement of religion.

To that extent it is subject to the restrictions of the First Amendment.

Now in Walz, the Court noted aside from the historical background of tax exemption that the distinctive state would be an alternative though, taxed the church in which case, there will have to be some entanglement of the state and church affairs or do not tax it in which case the entanglement if any will be considerably less.

And the rationale of the Court, as I see is, if you ask my opinions as I see is this, that prima facie at the very least, a statute by the State which advances religion or aids religion is prima facie subject to constitutional, at least scrutiny, strong scrutiny, and it is only if you can show as was, certain in Walz that there was a countervailing factor that to tax would impose another evil which the First Amendment was sought to avoid, the evil of entanglement, then we will allow the exemption rather than invoke the entanglement.

Now in the case that is decided since we wrote the brief in this case, the Lemon, and DiCenso, and Tilton cases, the Court molded that the Walz case did not intend and it did not expand the scope of governmental, of permissible governmental aids religion but restricted it.

And the Court noted, particularly in Tilton which involved the collegiate and the Court held that that part of the federal law which said that after 20 years, a college which receives support funds to build a facility may use it for any purpose.

That part of it the Court unanimously, there was no Court’s opinion in Tilton that was (Inaudible)

But all my Justices agreed that to that extent at least that statute was unconstitutional, there was some value which existed after 20 years and the State could not or the Federal Government could not aid or advance religion to that extent.

Even though it would mean continuing surveillance and entanglement after 20 years because the statute, the (Inaudible) forbids the use of those facilities and federal funds to be for sectarian teaching or religious worship.

So that the government agents after 20 years would still have to keep an eye on that facility to make sure it was not used for religion.

Thus quite clearly indicating although there seems to be an impression which I do not believe is valid that the Eversen rule has been buried that government may aid religion, I do not know if any case would so hold but it is quite clear that Tilton and Lemon, DiCenso do not allow a government aid to religion absent of some countervailing factor such as in Walz entanglement in Everson, the welfare of children were protected from the accidents -- of the hazards of the roads and that type of case.

Now, and our contention here is that the amount of entanglement involved in financing the commercial activities of a religious group is minimum and that it is far outweighed by the other factors which call for constitutional restriction upon that aid or benefit to religion.

One of the things which we believe should be considered by the Court which the Court noted both in Walz and in Lemon and DiCenso, that one of the things, one of the major evils, the First Amendment was aimed at -- of wordings, was that the Court “the potential for political divisiveness along religious or divisive political potential that the fathers of the First Amendment were afraid and they had a whole history of 2,000 years of political confidence and decisiveness, because of religion that a church is seeking certain benefits and the church in return is seeking to control the statement and trying to control the church.

We contend that this type of legislation which puts a competitive advantage in the business world in favor of churches necessarily bring to that type of divisive political potential which this Court wanted to get both in Walz and repeated it Lemon against DiCenso.

The acrimony, the bitterness, the feelings of a grudge locks on there and across the street from downtown, that owned by the church, that the church does not have to pay a tax and therefore can undercut it whereas he has to pay a tax.

That kind of political divisiveness, that kind of reaction towards a favoritism for the church is one of the dangers which I believe the First Amendment was intended to evoke.

Now --

Chief Justice Warren E. Burger: The municipality could easily control that competitive aspect, could it not by prescribing rates?

Is the competitive factor really very important?

Mr. Leo Pfeffer: Oh, yes it is, Mr. Chief Justice because the -- the municipality is not the state.

The State can afford it by simply taxing it.

The point is that it does not.

It is not that it has a power to, the point is, if it had the power to, it would simply -- nobody contends, Mr. Chief Justice that a State could not impose such a tax.

Chief Justice Warren E. Burger: I just thought you were resting too much on the competitive factor when the municipality could govern that by fixing all the rates for all the parking lots so that one could not undercut the other.

Mr. Leo Pfeffer: But -- as I have indicated Mr. Chief Justice if the State did not want to give a fair advantage to the church, and simply do it -- simply not making tax exempt.

By simply not -- by not making -- I do not believe the appellees here contend that there was a constitutional right to tax exemption --

Chief Justice Warren E. Burger: We will suspend for lunch.

Mr. Pfeffer you may proceed.

Mr. Leo Pfeffer: I believe I have used up my time, if possible my time will be used by Mr. Hollander, the attorney for the other appellant.

Chief Justice Warren E. Burger: Very well, Mr. Hollander.

Argument of Howard J. Hollander

Mr. Howard J. Hollander: Mr. Chief Justice, may it please the Court.

The case is of course one involving the separation of Church and State and is in fact a progression of the Walz decision decided last year by this Court.

I do not premise my thinking on this case on the Everson decision.

I believe that my position in this is case would be squarely met with the dictates of not only Walz but the three cases decided this year, DiCenso, Tilton and Lemon.

This Court has said in those three cases, as well as Walz that there are three main evils in which the establishment clause attempted to prevent and that was financial aid sponsorship and active involvement.

And we measured those three evils by three tests, we are told.

And the tests are whether or not there is a valid secular legislative purpose.

The second was a test decided in the DiCenso which is whether or not the primary effect either inhibits or advances the religion.

And the third test is whether or not there is excessive entanglement or active involvement.\

I think that the case before you, Honors is clearly was not involving a valid secular legislative purpose as seen in the Walz decision where there was discussion in the Court opinion concerning the pluralism of religions and the good works of religion.

Certainly that is not involved where we have a commercial parking lot and that incidentally is exactly what it is, were involved with a square block in the city of Miami which occupies a 127,500 sq. ft. of which 75,000 sq. ft. is this commercial parking lot, Monday through Saturdays, is all stipulation of fact but it is not contested facts.

We are up here on stipulation of that, Monday through Saturday, each and everyday other than Sunday, this religious institution rents out this lot other than to those particular lots within the 290 which are used for persons who might want to attend church that day for a choir meeting or a directors meeting of some kind.

Other than the portion which might be used for someone who might have some business, Monday through Saturday in a church, the entire rest of this lot, 75,000 sq. ft., 290 parking spaces is rented out commercially six days out of seven days a week.

This is stipulation of fact.

Unknown Speaker: So do you mean, they are rented out commercially over those, they have an operator on (Voice Overlap)

Mr. Howard J. Hollander: Oh, yes!

Drive your car and you pay your rent until you go out.

Unknown Speaker: You mean, this operation is regular?

Mr. Howard J. Hollander: Right, we do not know that it is necessarily owned even by a Church.

It is just the regular parking lot for anyone who does not have business in the Church.

Unknown Speaker: Are these Church employees or they attendants?

Mr. Howard J. Hollander: Are they Church employees?

I really do not know that sir.

I do not know.

Justice Potter Stewart: The Church has not -- at least the lot to a parking lot operator who -- is rented as a parking lot.

It is directly by the Church, is that it?

Mr. Howard J. Hollander: I really cannot tell you that sir.

I do not know whether or not that at least it that I know that the lots are used commercially, six days out of seven days a week.

I do not know if there is anyone else has intervened between the Church and perhaps --

Unknown Speaker: Stipulation of facts does not cover that all?

Mr. Howard J. Hollander: I do not think it covers that Your Honor.

But I do not really think that gets at the issue, the issue is whether or not in my judgment the primary effect of renting out Monday through Saturday, 290 spaces or almost all of that or the active involvement of the Government is such as to transgress the restrictions of the establishment clause.

I think that is really the issue involved and I do not think whether not the institution itself or a corporation which the institution has contracted with actually runs the lot.

Unknown Speaker: What would you say if the Church has made the lot available to the general public during the week at no cost?

Mr. Howard J. Hollander: I think it is constitutional.

I think it is constitutional.

Unknown Speaker: That would be non-religious purpose?

Mr. Howard J. Hollander: I think so but this lot is -- that is not case.

Stipulation of facts of course is --

Unknown Speaker: What -- where are the stipulations with respect to this aspect of the Lemon, are they here in the appendix somewhere?

Mr. Howard J. Hollander: They are, the appendix was dispensed, what they are as part of the record and they are quoted incidentally at length in the appellee’s brief.

Unknown Speaker: Well, I do not want it.

I do not want it, it will take more of your time, I could find if there in the appellee’s briefs.

Mr. Howard J. Hollander: They -- well it is certainly stipulations of facts which 12 parties entered in to.

Unknown Speaker: I understand that.

Mr. Howard J. Hollander: I do not think that those facts heard at all in issue.

I do think that we have some very important things to decide and that is certainly the valid leg -- secular legislative purpose is not there.

And we come to primary effect and I noted the language in Tilton, I think that is extremely important because Tilton was cited on the bases that the buildings were strictly secular.

There were no religious symbols, there was no permeation of religion on a higher institutions.

It was strictly secular use.

So the Court was concerned with the use of these facilities or what is the use of this facility?

Six days out of seven days each week they rent out this parking lot and they take in a profit out of competitive advantage because they do not pay taxes.

So if the use of the property is to be any kind of criteria as apparently it was not the Tilton decision where the building were strictly secular and the Court dwelled on that fact and certainly the use of this property commercially with cast within the terms of the establishment clause.

And certainly also within the terms of what this Court discussed in the Tilton decision.

I also think that the entanglement that we get involved in which this Court discussed in a three decision this year and the Walz decision last year is present in this case.

The kind of political divisiveness which this Court says if not inherent in our people is certainly involved in this case after all we have certain Court that attempted to tax.

We have a Supreme Court of Florida that got a raised at the Circuit Court in reversed.

We have legislation there so we do not like the Supreme Court decisions all through out the statutes and say but next year we will go into new statutes.

We have a raging controversy in Florida over this lot.

And a very political divisiveness which this Court seeks to prevent is exactly what we have with the commercial parking lot in Miami.

Now, is it a commercial parking lot or it is something else?

The District Court down there said it was commercial parking lot, they held as follows.

Does the holding in Walz versus Tax Commissioner supra that there is no establishment of religion and no inhibition of the free exercise religion in a State Taxation Scheme which exempts from taxation property use “exclusively for religious proposes”, i.e. religious property used solely for religious worship.

Encompass a tax exemption in the instant case as it applies to Church property used as a commercial parking lot, we answer affirmatively.

So they have concluded it is commercial parking lot.

But why have they decided it is okay a novel institution, another constitutional principle.

They said because the proceeds go to a worthwhile charitable recipient based on Walz and the Court based their decision on Walz.

And the recipient, we are going to hold that it is perfectly alright because there is a worthwhile recipient even though we hold it a commercial parking lot.

I think that is a novel, well because I have never seen any establishment case really that looked at whether or not that worthwhile recipient was such as to permit it within the establishment clause.

And incidentally the very kind of entanglement is inherent in that kind of decision.

After all, the sight of Government Auditors, Government Inspectors and daily surveillance running through Church records each day to determine where the funds were traced to.

Was it or not a worthwhile recipient?

That is the very kind as I understand it, surveillance which this Court says is not proper under the establishment clause.

So the very decision of the US District Court calls for the kind of surveillance which is traced the funds and with this worthwhile, fine, it is not worthwhile.

Then we do something about it.

Now, I think along these very same lines and counsel and I may have difference here.

I think we do.

The new statute which is going to go into effect next year is even worse than this one because the new statute says, well, whether we will break it off at 50% and if it is less than 50% we will prorate it.

So the Government auditors or inspectors for daily policing of going through the records of the Church of this 290 spaces and it was like, you use this space Monday, Wednesday and Friday for commercial purposes.

Use this space, Tuesday and Thursday for religious purposes and they will have to go, how many spaces were used for religious purposes?

How many for commercial purposes?

And the very surveillance, the very abhorrent kind of degrading situation not only for the Government but for the religious institution is inherent in the new formula.

It does not cure it.

It makes it worst, the new statute.

Justice Potter Stewart: On this issue I gather you and your fellow counsel, your fellow appellant are in odds, am I right?

Mr. Howard J. Hollander: We are at odds.

I think that the new statute is going to worst in the old statute because I think it calls for greater entanglement even in the old one does.

Justice Potter Stewart: As I understand his position, he explicitly told us that he does not think the new statute produces an unconstitutional revelation?

Mr. Howard J. Hollander: Yes, sir.

We are at odds on that point and I wanted to practice my remarks in that regard.

Unknown Speaker: Alright.

Mr. Howard J. Hollander: I want to direct my remainder of the marks, the mootness issue because I think it is vicious in all respect.

It is vicious for several reasons.

First of all let us get to the back taxing.

Back taxing is specifically permitted in the Florida.

It is specifically permitted by Florida statute 193.092 and the two cases cited by appellees which was a City of Naples case in the Blount case stand for the proposition that back taxing is permitted.

In fact, the two cases say so.

Justice Thurgood Marshall: Mr. Hollander, do you think this Court has the authority to tell the State of Florida that they must collect the back taxes?

Mr. Howard J. Hollander: Yes, sir.

I think it does.

Because I think it is a matter --

Justice Thurgood Marshall: (Voice Overlap) Under what authority?

Mr. Howard J. Hollander: Under the First and Fourteenth Amendment which tells us that -- the establishment of religion is prohibited.

And that the --

Justice Thurgood Marshall: Well, for how many years back?

Mr. Howard J. Hollander: It is permitted for three years under the statute.

Justice Thurgood Marshall: Well, why could not we, we are not bound by that, to your term, we could go back 20, could we not?

Mr. Howard J. Hollander: Well, perhaps so.

Justice Thurgood Marshall: Thus how far do you go?

Mr. Howard J. Hollander: Well, at least the statute permits three years.

In fact Your Honor, the case says, are these the very case cited appellees in this point, case says, although back assessments are specifically authorized by Florida statute.

Justice Thurgood Marshall: But specifically what they have or would that be mandamus in order or what?

Mr. Howard J. Hollander: Well, I do not -- I cannot tell the Court what procedure to use.

I simply think that --

Justice Thurgood Marshall: Well, tell me who has the authority to levy the taxes involved?

Mr. Howard J. Hollander: The County Authority, the Taxing authority in Dade County.

Justice Thurgood Marshall: Dade County it is?

Mr. Howard J. Hollander: Dade County is the defendant, party defendant Your Honor.

Justice Thurgood Marshall: And who collects those to your party?

Is it tax collected in Florida?

Mr. Howard J. Hollander: I am sorry Sir, I cannot hear.

Justice Thurgood Marshall: Is the tax collector a party?

Mr. Howard J. Hollander: Dade County, Florida is a party to this suit Your Honor.

Justice Thurgood Marshall: Yes.

I know they have done this.

Mr. Howard J. Hollander: And Mr. R.K. overspeed the tax collector Dade County, is it not?

Justice Thurgood Marshall: (Voice Overlap) And did you ask for the relieve that assessed the taxes?

Mr. Howard J. Hollander: This has been implicit, they attempted to assess the taxes.

The Florida Supreme Court said it cannot do it.

Justice Thurgood Marshall: So why did you consider to say that you wanted to levy the back taxes?

Mr. Howard J. Hollander: The -- well, my complaint calls for the taxation of it.

Perhaps I did not spell it out, I know only aobut taxation but I want back taxation as well but I think my complaint covers exactly what we are looking for.

Justice Thurgood Marshall: When you are done with the case as it now stands, we can order them to levy the taxes.

Mr. Howard J. Hollander: Oh, yes, sir.

I have no question about it because I think the case is in Florida specifically permitted.

I call Your Honor --

Justice Thurgood Marshall: I understand that you have (Inaudible).

Mr. Howard J. Hollander: Yes, sir.

The case is although back assessments as specifically authorized by Florida statute of 193.23, F.S.A, equitable estoppel present the city in this case where good faith is not disputed.

That case happens to involve where the city is -- certain reliance was placed upon what the city or county have done.

So they said, well, in this case you cannot do it.

But the general principal in the statute was upheld.

They did the same thing in Crockett versys Lynch (ph).

In Crockett versys Lynch, they specifically said, however, from defendant appellants brief and we took -- we determined the trial of trial judge concluded that the back assessments involved herein were specifically authorized by statute 193.23, Florida statutes.

We agree with this conclusion.

They then said well because of certain reasons in this case we feel that we have to stop taxing authorities because the more --

Unknown Speaker: Well, I -- I do not believe the State is saying anything indifferently what they say at Page 3 is that back assessment construed by the Florida Supreme Courts to be inapplicable because of a estoppel of service.

Mr. Howard J. Hollander: But not stopple against to plaintiffs in this case, it was a stopple against the taxing authorities.

Unknown Speaker: Well, I do not know about that.

Mr. Howard J. Hollander: Why would the plaintiffs who never mislead or never intended to rely on anyone -- never gave reliance upon this people possibly be stopped.

Unknown Speaker: Yes.

But who collect -- is the public authority that have to collect the tax?

Mr. Howard J. Hollander: I think so, and I think --

Unknown Speaker: So the back taxes would have to be collected, not by you but by the Florida public authorities, is it not?

Mr. Howard J. Hollander: That is right.

Unknown Speaker: Well let us say that this doctrine, the stopple may not be applied if they made that effort.

Mr. Howard J. Hollander: Well, the County never gave these people reliance that they would not tax --

Unknown Speaker: No, no, no.

Who makes that decision whether the estopple there applies or not?

Mr. Howard J. Hollander: Well, I think that this Court can take notice of the Florida State -- of the Florida cases on (Voice Overlap).

Unknown Speaker: All the Florida cases, according to the statement and that is that they cannot collect them if the taxing authorities were stopped from collecting.

Mr. Howard J. Hollander: That is a -- I think that if Your Honor really looks at this cases specially of points that that case makes to the end.

Both cases which say we approve the general principle but in specific cases we have to invoke a stopple.

I think that the Courts clearly say we approve to the general principle of back taxes because we approve of the statute.

In those cases the City and the County respectably gave.

Unknown Speaker: Well, tell me if the facts here -- were or that the taxing authorities are not stopped on that premise that they are stopple from collecting these back taxes.

On that premises would this case be moot?

Mr. Howard J. Hollander: Well, if there is a stop, there would be no other authority to collect the taxes.

Unknown Speaker: Therefore the case would be moot.

Mr. Howard J. Hollander: Well, it would certainly have to go back but I think in my judgment at any rate that whatever stops – stopple would not be present against these taxing authorities because of they took it to the Supreme Court of Florida.

They never gave these people reliance that they would asses.

And in addition is the plaintiffs who asked for the relief and I do not think a stopple would be proper.

Chief Justice Warren E. Burger: Thank you.

Mr. Whelan.

Argument of Charles M. Whelan

Mr. Charles M. Whelan: Mr. Chief Justice and may it please the Court?

The Tax exemption that is involved in this case is possibly singular in the history of American tax law but it is certainly extinct.

The statute has been changed.

This particular tax exemption will not be available after the end of this year and this year’s tax year is already closed.

Chief Justice Warren E. Burger: What are your tax years?

Mr. Charles M. Whelan: Well it begins in January and by the first Monday on October, if the roles are furnished and nothing more can be done.

Unknown Speaker: That is for the year 1971?

Mr. Charles M. Whelan: That is correct.

Unknown Speaker: I see thank you.

Chief Justice Warren E. Burger: Now that -- is that in the record, that October date?

Mr. Charles M. Whelan: No.

But it is in the statute that governs the assessments.

Chief Justice Warren E. Burger: Well, but is it clear that is – or property inavertably admitted or admitted for any reasons at all could not be placed on after the (Voice Overlap).

Mr. Charles M. Whelan: Oh, no.

Under Florida Law where there has been simple inadvertence or even positive neglect, back taxes can be assessed for a period of three years.

That is clear from the terms of the statute and from the construction of that statute in City of Naples against Convoy, however, where the taxing authority has positively and affirmatively treated the property as exempt as it has in this case since the decision of the Supreme Court of Florida then the taxing authority cannot change its position after the roles have been endorsed on the First embank October.

Chief Justice Warren E. Burger: Is that principle applicable to ay kind of exemption?

That is -- that you have many grounds I take it for exempting properly back taxing (Voice Overlap)?

Mr. Charles M. Whelan: Yes.

This is a general role.

Unknown Speaker: General (Voice Overlap) applicable to all exemptions.

Mr. Charles M. Whelan: (Voice Overlap) foreclosing the assessment.

For all tax --

Unknown Speaker: If it is solicited thing -- if it is solicited by the assessing authorities as exempt, you are telling us that under Florida law that does establish a stopple against the taxing authorities subsequently (Voice Overlap)?

Mr. Charles M. Whelan: That is correct Your Honor.

Unknown Speaker: I see.

Mr. Charles M. Whelan: Now it is true that in the City of Naples case that the Florida Supreme Court allowed the taxpayers who were the plaintiffs in that suit and who were trying to compel the City of Naples to disregard a contract that entered into for an exemption for a real estate development.

It is true that the Supreme Court of Florida said that while the City could not be compelled to collect taxes for the three years prior to the commencement of the litigation that they could collect taxes for the years during which the litigation proceeded.

So in so far as the plaintiffs make the contention that at least the current year’s tax is still at issue at least that much because a Court order could change the roles.

My answer to that is that the doctrine of equitable stopple as it has been applied in the Coppock case and the City of Naples case would clearly result in a decision by the Supreme Court of Florida that these -- the tax commissioner here cannot change their minds.

We are the ones who relied on the Supreme Court of Florida’s decision in the suit brought some years ago by the accounting.

So we have had the assurance of the Supreme Court of Florida that we meet.

Unknown Speaker: Well, does this not mean if that so that the relevance of a new statute is really irrelevant to the issue of mootness?

Mr. Charles M. Whelan: Yes it is.

Unknown Speaker: Because what you are telling us is we could never reach this question since and no -- and in no circumstances could these taxes ever be collected?

Mr. Charles M. Whelan: That is my contention Your Honor.

And it seems clear to me that the law of Florida is quite clear on this point.

Chief Justice Warren E. Burger: Even if the new statute had not be adopted as Justice Brennan suggest.

Mr. Charles M. Whelan: Yes Your Honor.

Chief Justice Warren E. Burger: So, we can write that out of the case in your view?

Mr. Charles M. Whelan: Yes, however if the statute, the old statute were still on the books then it would seem me the -- at least the question of the old statute would still be around but it is not a round.

And if the plaintiff, the appellants are correct which I do not concede but they are correct in saying that Florida is really out of the line of America tax tradition, you know with this type of statute and then it goes in the teeth of the whole history as Anglo-American Tax Law then clearly this case becomes totally insignificant.

The statute no longer exists and if they correct Florida is the only or almost the only jurisdiction that has ever permitted this sort of thing.

So there is no significance to this case whatsoever.

However, the real issue in this case is not the issue that the appellants have presented and the reason it is not the issue that they have presented is that they have attempted to court the label of commercial business on an activity of the Church which while it has certain commercial dimensions is a little much more limited character and one recognized by all American jurisdictions as being something that is different from pure commercial activity.

And in this stipulation of facts which is contained which is reprinted as an appendix to the motion to dismiss or affirm, we have the following stipulated facts between the parties on page three of the appendix.

Stipulation --

Unknown Speaker: Where is the appendix?

Mr. Charles M. Whelan: It is in the motion to dismiss or affirm.

Unknown Speaker: Unless they take it, page three?

Mr. Charles M. Whelan: On page three we have stipulation that all of this Church property is being used for Church purposes.

On page four, a stipulation of the use of part of the parking area during the week by Church members.

On page five particularly, we have a key stipulation on the paragraph at the top of the page.

But the Church is located in the heart of a great metropolitan area and is required to maintain the parking area for the use of the congregation and so forth.

Then a part of this part of this parking space, which is in the middle, it is used every day of the week by people attending Church and Church functions but rather than permit that portion not for use to lie vacant the Church rents the parking area.

The Church does directly operate this parking area.

There is no intervening less so.

Unknown Speaker: Well, tell me under the new statute, you know that statute is not before us, notwithstanding all of this that the Church is going to have to pay some part of the tax that some it is --

Mr. Charles M. Whelan: That may be so, Your Honor.

It depends on the regulations that will be promulgated in interpreting that 50%.

Unknown Speaker: Well, of course it has to be 50% or something.

Mr. Charles M. Whelan: Yes.

Unknown Speaker: And of course the Court --

Mr. Charles M. Whelan: It is Depending what the Church itself does depending on the regulation say, what the Church does.

Unknown Speaker: I was just wondering if [Inaudible] it say so factly that this is an absolute essential to the Church services, whether the news -- new statute as applied to this may not run to the total.

Mr. Charles M. Whelan: Well, yes.

There are questions that is still has to be answered about the new statute.

That is clear.

Chief Justice Warren E. Burger: I take it you have conceived that Florida could eliminate exemption all together.

Mr. Charles M. Whelan: Yes it could Your Honor.

Chief Justice Warren E. Burger: And now if you suggest that this new statute just gives a partial exemption to--

Mr. Charles M. Whelan: That is certainly its intention.

Its intention is to say that from now on we are not going to follow the 75% rule.

Florida has the statute as a set up in the brief where in any charitable non-profit organization could rent out up to 75% of its home facility.

The basic facilities necessary for the operation, the exempt on -- on operations of that organization and they could take the rental and use t he rental income for exempt purposes.

Florida has now said, we are not going to do that anymore.

If you do not use at least 50% of the facility for exempt purposes then you have to pay a hundred percent of the tax.

If you use it 50 -- more than 50% then we will apportion the tax according to the amount of the property that is used for non-exempt purposes.

So in this particular case the application that will actually be made of new statute to the parking lot will depend on how that 50% is figured and on what use the Church makes next year.

January 1st is the status date in Florida so the used that is made of that Church parking area on January 1st will determine the -- the one of the principal determinants of the application of the new statute.

Chief Justice Warren E. Burger: Well, under that statute would it be possible for the Church to just layout the square footage and carve off to be safe 49% of it and rent the 49% out?

Mr. Charles M. Whelan: Then it would have to pay tax in 49%.

Chief Justice Warren E. Burger: And it would reserve the others for Church purposes during the week as well as on Sunday.

Mr. Charles M. Whelan: But the State may take in the position that if the area to be measured is strictly the parking area and not all the property owned.

And that if more than 51% of the parking area is rented than the taxes have to be paid on the entire parking area and we just do not know what position the County Commissioner of the State will take on that question.

Justice Thurgood Marshall: Well, if they took the parking area and the Church reserved 51% for all kinds during the week for its Church under the new statute would have --

Mr. Charles M. Whelan: They would have to pay tax on the 49% that they rent out.

Justice Thurgood Marshall: Is it licensed, the parking lot?

Mr. Charles M. Whelan: It does not require a license according to my information, Your Honor.

Now finally there is a stipulation on page 12 of the appendix that this parking lot is as necessary to the Church as the roof.

So there can be no question but that in this case we are talking about an income that incidentally, income producing use of a facility that is absolutely indispensible for the conduct of the exempt operations and functions of this Church.

And that is why the issue in this case simply cannot be the issue that the appellants have attempted to raise.

The broad issue of how far the First and Fourteenth Amendments would prevent the States of the Federal Government from granting an exemption like the exemption that used to exist in the Internal Revenue Code before the Tax Reform Act of 1969.

That exemption, the exemption of Churches and certain other types of exempt to organizations from the tax on unrelated business income is the exemption that appellants seem to be attacking but that exemption does not exist either except to the extent that there is a type of five year flaws in which the organizations that used to enjoy that exemption before 1969 or given a grace period in which to dispose of the property or start paying the full tax.

Justice Thurgood Marshall: Mr. Whelan, how long is the parking lot been there?

Mr. Charles M. Whelan: Well, the parking lot was originally not a part of the Church it was purchased at -- mostly after the Second World War to make it possible for the people to get to Church as that area developed commercially and you know, became quite congested with automobiles when they became available again after the war and gasoline was more available.

Then it was necessary to secure this property otherwise --

Justice Thurgood Marshall: I think you say that it is indispensable to rule a fund, that was in churches without parking lots, I do not know what would have lost.

Mr. Charles M. Whelan: Well, in this particular days --

Justice Thurgood Marshall: I have wondered you would push it a little far.

Mr. Charles M. Whelan: Well, I have not pushed it beyond what appellants have stipulated and what the Supreme Court of Florida found and what the District Court in this case also presume.

So as a State of question here is simply not the question of the constitutionality of an exemption that would be granted to some totally commercial operation of a Church.

The real issues in this case as we see them are rather the permissibility of parity of treatment by the States of the Federal Government of churches with charitable non-profit organizations.

That is the only question that is before this Court because Florida did not give any special treatment to churches in this case.

Florida treated churches the same way that it treated charitable non-profit organizations in general.

But there is nothing specific.

There is no preference here in favor of a church.

Florida treated the church in the same method just as New York in the Walz case treated Churches the same way it treated other types of exempt organizations.

What appellants are really asking in this Court to say is that Churches has to be singled out.

They have to be singled out in tax.

They cannot be included in this general class of charitable non-profit organization.

Unknown Speaker: Tell me, suppose this -- the Church for ten miles in this parking lot.

What parking lot was because the church needed supplement -- to supplement its income.

Actually released as a commercial parking lot of seven days a week and the evidence were that that income was absolutely essential that the church itself would have to close down.

Are there any -- under Florida law would the -- this parking lot would be exempt?

Mr. Charles M. Whelan: No, it would not.

Unknown Speaker: Suppose it were owned by a charitable corporation --

Mr. Charles M. Whelan: It would not be exempted.

It has got to be used at least 25% or had to be used at least 25% of the time.

Its park, one of the home facility.

Unknown Speaker: I do not think I --

Mr. Charles M. Whelan: So it is completely separate and it is not used for the exempt purposes.

It simply is not exempt.

Then I would draw the attention of the Court to -- with typical structure of an American charitable non profit organizations, then think of any college or university of any hospital of any orphanage of good size.

Most of these organizations have in addition to the basic facilities that they are using, other facilities which are also important and necessary but which are open to the public in many cases and for which a charge is made.

The hospital cafeteria, the hospital parking lot, the auditorium in a college, it has never been a rule of American taw law that the only way of charitable non-profit organization or a Church can support itself is by free will offerings that are sufficient every year for its budget.

Every Church there and every State in the union and here in the District of Columbia, churches and non-profit charitable organizations have been allowed to engage in fund raising activities of various types of a more or less commercial character without losing the property tax exemption.

Now Florida, it is true has adopted a rule that is somewhat different in most States so far as I have been able to discover, if the property is rented that is the end of the matter.

But Florida permitted for a time, 75% rental without loss of the property tax exemptions.

But there is not any constitutional difference between this kind of permission for use, income producing use of the basic home facility and the permission that has been granted for such matters as dances and dinners and picnics and bazaars of all kind.

The rule has been in every American jurisdiction that non -- that exempt organizations have to be non-profit.

It has never been if they have to be non-productive but they have to be completely dependent upon the free will offerings of the public as a method of financing themselves.

Now, there have been in our history certain efforts now and then to change this rule and to require particularly the churches to be dependent on free will offerings may each year and only on those offering.

But no jurisdiction has ever adopted that particular rule of Law.

In this morning’s paper we read of the Johnson Foundation where a billion dollars has been donated for the charitable purposes of that foundation.

And of this initial gift will be administered by the foundation in conformity with Walz and the income from that capital gift will finance many of the activities of the foundation.

Our Law permits the creation of such activities and entities and has always done so.

I think that there is still another matter which is of extreme importance in this case and that is the attack by the appellants on the doctrine of legislative discretion in the tax area.

This doctrine as been expressed by this Court on many occasions, notably in the Bell's Gap Railroad against Pennsylvania case and in -- it was also in the Gibbons against District of Columbia case, it was also mentioned in the Walz case that the legislature is in frozen into every particle of the tax orders.

There is an ample opportunity for the exercise of a choice.

A constitution extrudes that is some moments there are specific limitations in the constitution of the United States and the taxing power most of Congress and of the States.

But in the absence of a specific prohibition, clear prohibition, this Court has been correctly totally reluctant to imply limitations on the exercise on the taxing power.

Unknown Speaker: Florida does not impose that (Inaudible) taxes and stocks and bonds, is that it?

Mr. Charles M. Whelan: I -- (Inaudible) in personal property.

Unknown Speaker: Yes.

Mr. Charles M. Whelan: I do not know Your Honor.

I do simply do not know the answer to that.

Unknown Speaker: Mr. Whelan it did and the -- if you have the problem here whether churches with endowments, aided of the stocks and bonds --

Mr. Charles M. Whelan: Oh, there would not be a problem in that area.

I -- my only information is that it generally speaking in American tax laws such securities have not been subject to the personal property tax.

Unknown Speaker: There have to be in New Jersey?

Mr. Charles M. Whelan: Yes, and in the Pennsylvania case, the Bell's Gap case in which this Court asserted the authority of the States to exercise a sample of discretion.

That was a security’s facts case too.

Unknown Speaker: Mr. Whelan, I am just curious I think I know the answer.

Does the Church have any Federal income tax complication with respect to this parking lot? Is the income taxable, federal income tax?

Mr. Charles M. Whelan: No it is not Your Honor because the definition of an unrelated business excludes rentals, not churches anymore.

Unknown Speaker: Exclude to rentals?

Mr. Charles M. Whelan: Rentals.

That is correct.

Unknown Speaker: At anytime has it ever paid federal income tax?

Mr. Charles M. Whelan: No, Your Honor.

Chief Justice Warren E. Burger: And there is no State, no Florida State income tax or at least has not been for a while?

Mr. Charles M. Whelan: Not that I know.

So the parental problem and say the unrelated business income problem here is that the debt or the answer to it simply that the federal statute excludes from the definitions of an unrelated business income derived from interests from dividends, from rentals and from royalties.

But let us consider for moment the choice that the State faces in this area of Taxation and exemption.

It has only two choices, one, to tax or other not to tax.

Appellants assert that not taxing helps.

If they are correct in that contention despite of the language of the Walz case which rejects that concept that an exemption involved sponsorship for active assistance, but if they are correct in saying that an exemption helps than extends the reason that taxation purpose and the doctrine of the Everson case and of the subsequent explanations and elaborations of that case is not that the Government cannot aid the Churches.

It is that the Government cannot neither help nor hurt certainly not on purpose and neither help nor hurt.

And in the phase of this mandate of the First Amendment, what is the Government to do when it cannot avoid one or the other?

No I think this is a false dilemma.

I think that the Walz opinion quite correctly rejected the concept that the exemption amounted to positive sponsorship of a church or direct active assistance to the church.

What the Government has faced with the legislatures faced with here is four types of organizations, Governmental Organizations, private for profit organizations, charitable non profit organizations and churches and religious organizations.

Now in the choice between taxing and not taxing when it comes to the Governmental Organization, the Government is certainly not going to tax unless it engages in some budget bookkeeping, a shifting of the burden – of -- of long different elements of the Government.

With the private for a profit organizations, the Federal Government, the Federal Government and the States have elected to tax and when the charitable non-profit organizations, the Federal Government and the State Governments have elected not to tax.

Now when the come to the churches and the religious Organizations which of this three categories are Churches and to religious organizations which of these three categories are churches most like, well, they are certainly not governmental organizations and there is certainly not drive organizations under the legal concept of a private for profit Organizations because of they were, they would not qualify under the legal concept of a Church.

So they are much more similar to a charitable non-profit organizations than to anything else.

And in view of the facts that many of Churches do engage in charitable activities in addition to the basic worship and preaching that they do it is eminently sensible for a legislature to treat Churches and religious organizations in the same way that it treats charitable non-profit organizations.

But there is more to this than just reasonable mess because our historical tradition shows that this is the choice that all of the States and the Federal Government have in fact made.

And if we have any reverence for the choices of our ancestors, it seems to me we ought particularly to reverence those that they not only practice but they profess as being the right solution.

As far as the entanglement question is concerned.

It seems to me that that is entirely spurious in this particular case.

There has been no evidence whatsoever of that entanglement and there is no meaning for it under this kind of -- it is the only statute involved in this case which permits the organization to do, to engage in this type of renting.

As far as policing, the income is concerned.

Again that is a spurious claim because in order for you qualify initially as a church the State has to be entitled, you know, and to review that, has to be entitled to make at least simple external tests of the uses to which the property and income of that organization is put.

So we cannot have tax exemptions of any kind and we could not have taxation of any kind either if the entanglement doctrine were pushed to the point where the State could not engage in simple external auditing at definite periods of time.

The last reason that would really justify and increases the justification for this choice, of the all the States is that if they were to single out churches as of special class of churches would as a practical matter simply restructure their legal entities for a holdings their charitable non-profit activities.

In other words if the doctrine were that the Church could not be exempted with respects to this traditional income producing activities of home facility.

Then the churches would spin off all their other activities into other types of corporations.

And this seems to be an absolutely useless time of gesture to force the churches to make.

Now if the church, pull itself down to where it is simply conducting a house of worship then Walz is absolute authority for the exemptability from the property tax of the house of worship.

Unknown Speaker: And you are assuming a for example that in this case the church could sell its parking lot to a corporation and then retain the shares in the corporation?

Mr. Charles M. Whelan: Well, (Inaudible) could do that of course of corporation that it sold it to would have to pay the property tax and the income tax.

Justice Potter Stewart: Yes.

But the Church would receive as the sole shareholder, the net, net income?

Mr. Charles M. Whelan: If the taxes --

Justice Potter Stewart: That is your hypothesis, is what -- is to what the church could constitutionally do.

Mr. Charles M. Whelan: Sure.

They have every right to do that.

Well, I think in conclusion I can sum it up this way.

The appellants are asking this Court to decide a question that is not presented by this case.

They are asking the Court to decide a question to the extent that they are asking this Court to decide the question that is presented, the case is moot.

But if any reason, the Court should decide that the questions presented by this case is not moot then the only answer that the Court can give to the question which is simply the constitutional permissibility of parity of treatment with respect to the home facilities is that that parity of treatment is permissible because that is the only answer that is consistent with the State and the Federal Tax history with religious neutrality and with the preservation of legislative discretion.

Chief Justice Warren E. Burger: Thank you Mr. Whelan.

Thank you gentlemen.

The case is submitted.