In the 1980 case of St. Martin Evangelical Lutheran Church et al. v. South Dakota, the U.S Supreme Court upheld a ruling by the South Dakota Supreme Court that denied tax-exempt status to church-owned property used for commercial purposes. The church owned a tract of land which was leased out as farmland and argued that it should be exempt from taxation because they were using income generated from this lease for religious and educational purposes within their institution. However, both courts held that while churches themselves are tax-exempt under state law, this exemption does not extend to properties used for profit-making activities unrelated to any religious or educational functions even if profits are funneled back into these institutions.

In the dissenting opinion for St. Martin Evangelical Lutheran Church et al. v. South Dakota, Justice Brennan argued that the majority's decision was inconsistent with previous rulings regarding religious freedom and tax exemptions. He contended that by denying a property tax exemption to a church-run camp used primarily for religious purposes, the state of South Dakota had violated the Free Exercise Clause of the First Amendment. According to Brennan, this clause protects not only beliefs but also actions stemming from those beliefs; thus, he believed it should extend to cover activities at a church-owned camp as well as worship in a traditional church building itself. Furthermore, he asserted that there was no compelling state interest justifying such an infringement on religious practice and warned against potential discrimination between different types of religious exercise based on their perceived social utility or lack thereof.