In the 1906 case of Board of Education of the Kentucky Annual Conference of the Methodist Episcopal Church v. Illinois, the U.S Supreme Court ruled that a state could tax property owned by religious organizations if it was not used for religious purposes. The case arose when Illinois imposed taxes on land owned by a church but leased to others for non-religious uses. The church argued this violated their constitutional rights under both federal and state law, claiming an exemption from taxation due to its status as a religious organization. However, in upholding Illinois' right to levy such taxes, the court established that while churches were indeed exempt from certain types of taxation, this did not extend to properties they held which were being used for commercial or secular activities rather than directly furthering their religious mission.

In the dissenting opinion for the Board of Education of the Kentucky Annual Conference of The Methodist Episcopal Church v. Illinois case in 1906, it was argued that religious institutions should not be exempt from taxation under state law. The dissenting justices believed that all property within a state's jurisdiction should be subject to equal taxation, regardless if they are owned by religious organizations or not. They contended that granting tax exemptions to such entities would essentially mean favoritism and could potentially lead to abuse as more properties might claim affiliation with religion just to avoid taxes. Furthermore, they pointed out that these institutions still benefit from public services funded by taxpayers' money like fire protection and police security among others; hence, it is only fair for them also contribute their share in maintaining these services through paying taxes.