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The state of Texas offered a tax exemption to religious publications during a 3-year period. Texas Monthly, Inc, a nonreligious publisher, claimed that this promoted religion in violation of the First Amendment's Establishment Clause. Texas Monthly filed suit in a state court seeking to recover the taxes it had paid in 1985. The court ruled that the exemption violated the Establishment Clause by advancing religion and the Free Press Clause by discriminating based on the content of publications. Since the court did not have the authority to rewrite tax statutes, it instead invalidated taxes levied on nonreligious publications and ordered the state to refund Texas Monthly's tax payments. A state appeals court reversed the decision.

Does a state violate the Establishment Clause and the Free Press Clause by exempting religious publications from paying taxes that all nonreligious publications must pay?

Yes. Justice William J. Brennan Jr. delivered the judgment for 6-3 court a wrote a plurality opinion joined by Justices John Paul Stevens and Thurgood Marshall. In the Brennan's view, the Texas government "directs a subsidy exclusively to religious organizations" by providing the exemption. The Court referred to its decision in Lemon v. Kurtzman, which required legislation affecting religion to have a secular purpose. In this case, the exemption did not have a secular purpose since it could not "reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion." Since taxing religious publications did not inhibit the exercise of religion, a state could not singularly remove taxes for religious publications while still taxing nonreligious publications. This would use state mechanisms to give religious publishers an advantage over nonreligious publishers in violation of the Establishment Clause.