tax foreclosure

Frederick Walz, owner of real estate in Richmond County, New York, filed suit in New York state courts seeking an injunction to prevent the New York City Tax Commission from granting property tax exemptions to religious organizations for properties used solely for religious worship. The exemptions were authorized by Article 16, Section 1 of the New York Constitution, which permits exemptions for real or personal property used exclusively for religious, educational, or charitable purposes and owned by nonprofit corporations or associations organized exclusively for such purposes. Walz contended that the exemptions indirectly required him to contribute to religious bodies by increasing the tax burden on non-exempt property. The New York City Tax Commission moved for summary judgment. The trial court granted the motion. The Appellate Division of the New York Supreme Court affirmed, and the New York Court of Appeals also affirmed. The United States Supreme Court noted probable jurisdiction and heard oral argument on November 19, 1969. All fifty states provide tax exemptions for places of worship, most through constitutional provisions. New York has granted such exemptions since before the adoption of the First Amendment, and Congress has provided similar exemptions for church property in the District of Columbia since the early nineteenth century. The exemptions apply to a broad class of nonprofit organizations, including hospitals, libraries, scientific groups, and patriotic societies, not solely to religious organizations.

In 1982 Texas enacted a sales and use tax exemption for periodicals published or distributed by a religious faith and consisting wholly of writings promulgating the teaching of the faith, along with books consisting solely of writings sacred to a religious faith, under Tex. Tax Code Ann. § 151.312. Prior to October 2, 1984, Texas also exempted magazine subscriptions running half a year or longer and entered as second class mail. That general exemption was repealed effective October 2, 1984, and remained repealed until October 1, 1987. During the three-year interval, Texas Monthly, Inc., which publishes a monthly general interest magazine not limited to religious teachings, was required to collect and remit sales taxes on its qualifying subscription sales. Texas Monthly paid $149,107.74 in sales taxes under protest in 1985 and filed suit in the District Court of Travis County, Texas, seeking a refund of those payments. The district court ruled that the religious periodicals exemption had no basis other than the promotion of religion itself. The court also found that the exemption discriminated on the basis of publication content. It declared the tax unconstitutional as applied to nonreligious periodicals and ordered the State to refund the amount paid plus interest. The Court of Appeals, Third Supreme Judicial District of Texas, reversed the district court's judgment by a 2-to-1 vote. The Court of Appeals applied the tripartite test from Lemon v. Kurtzman. It concluded that the exemption served a secular purpose of preserving separation between church and state, did not have the primary effect of advancing or inhibiting religion, and did not produce impermissible government entanglement with religion. Therefore the Court of Appeals upheld the exemption. The United States Supreme Court noted probable jurisdiction to consider the constitutionality of the exemption.

In 1994, the Internal Revenue Service seized real property in Michigan belonging to Grable & Sons Metal Products, Inc., to satisfy the company's federal tax delinquency. The IRS provided notice of the seizure to Grable by certified mail, which Grable received before selling the property to Darue Engineering & Manufacturing. Grable did not redeem the property within the 180-day statutory period following the sale. After that period had passed, the Government gave Darue a quitclaim deed. Five years later, Grable brought a quiet title action in Michigan state court against Darue. Grable claimed that Darue’s record title was invalid because the IRS had failed to notify Grable of its seizure of the property in the exact manner required by federal statute. Grable asserted that the statute required personal service rather than service by certified mail. Darue removed the case to the United States District Court for the Western District of Michigan. The district court declined to remand after finding that the claim posed a significant question of federal law and granted summary judgment to Darue. The Court of Appeals for the Sixth Circuit affirmed. The Supreme Court granted certiorari on the jurisdictional question alone.

In November 1978, H. Everett Pope, Jr., was admitted to St. John Medical Center, a hospital in Tulsa, Oklahoma. On April 2, 1979, while still at the hospital, he died testate. His wife, appellee JoAnne Pope, initiated probate proceedings in the District Court of Tulsa County. The court entered an order setting a hearing, admitted the will to probate, and named appellee as executrix, issuing letters testamentary to her. Following her appointment, the court ordered appellee to immediately give notice to creditors. Appellee published notice in the Tulsa Daily Legal News for two consecutive weeks beginning July 17, 1979. The notice advised creditors that they must file any claim against the estate within two months of the first publication. Appellant Tulsa Professional Collection Services, Inc., a subsidiary of St. John Medical Center and the assignee of a claim for expenses connected with the decedent's hospital stay, did not file a claim with appellee within the two-month period. In October 1983, appellant filed an Application for Order Compelling Payment of Expenses of Last Illness in the District Court of Tulsa County. The district court denied the application. The Oklahoma Court of Appeals affirmed the district court's judgment. Appellant then sought rehearing, raising a due process challenge to the nonclaim statute's notice provisions for the first time. The Court of Appeals rejected the due process claim on the merits in a supplemental opinion. Appellant sought review in the Supreme Court of Oklahoma, which granted certiorari and affirmed the Court of Appeals' judgment. The United States Supreme Court noted probable jurisdiction and heard the case.