In the case of Chicago Theological Seminary v. Illinois, 1902, the U.S. Supreme Court ruled that a religious institution could not be exempted from property taxes if it was used for commercial purposes. The Chicago Theological Seminary owned a building which they rented out to students and faculty members as living quarters while also using part of it for educational purposes. However, under Illinois law at that time, only buildings used exclusively for school or religious purposes were tax-exempt. Therefore, the state argued that since part of the building was being used commercially (as rental properties), it should be subject to taxation. The seminary countered this argument by stating their primary purpose remained education and religion despite renting out some parts of their property; thus they should still qualify for tax exemption. However, in its decision favoring Illinois State's position on taxing such properties regardless of ownership status when utilized commercially - even partially - set an important precedent about how non-profit organizations' assets can potentially become taxable based on usage rather than just ownership alone.

In the dissenting opinion for Chicago Theological Seminary v. Illinois, it was argued that the majority's decision to uphold a tax exemption for religious institutions violated the principle of separation of church and state. It was contended that by granting such exemptions, the government effectively endorsed religion over non-religion, thereby breaching its duty to remain neutral in matters of faith. Furthermore, it was suggested that this ruling could lead to an unfair burden on taxpayers who do not subscribe to any particular belief system or whose beliefs are not recognized as 'religious' under law. This interpretation held that all property should be subject to taxation regardless of its use or ownership so as not to favor one group over another.