In the case of Walz v. Tax Commission of the City of New York, 1969, Fredrick Walz, a taxpayer in New York City challenged the constitutionality of tax exemptions given to religious organizations for their properties used solely for religious worship under Section 420, Real Property Tax Law. He argued that this violated the Establishment Clause and Equal Protection Clause of First Amendment as it indirectly required him to contribute to religions he did not support. However, The Supreme Court ruled against Walz with a vote count 8-1 stating that such exemptions created only minimal and remote involvement between church and state and far less than taxation would entail; thus they do not violate Constitution's prohibition on laws respecting an establishment or free exercise religion. Furthermore, these exemptions contributed towards maintaining separation between Church & State by avoiding potential conflicts over property ownerships which could arise from imposition taxes on churches.

In the dissenting opinion for Walz v. Tax Commission of the City of New York, Justice William O. Douglas argued that tax exemptions to religious organizations violated the Establishment Clause of the First Amendment, which prohibits government from making any law "respecting an establishment of religion." He contended that by granting these exemptions, government was indirectly supporting and endorsing religious institutions. Furthermore, he believed this practice could potentially lead to a dangerous entanglement between church and state as it might encourage political lobbying by religious groups seeking favorable treatment in tax laws. In essence, his view was that complete separation between church and state is necessary to maintain true freedom of religion; thus any form of financial support or benefit given directly or indirectly should be deemed unconstitutional.