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The Secretary of Defense closed the Valley Forge General Hospital in an effort to reduce the number of military installations in the country. In accordance with a congressional statute regulating the dispersal of surplus government property, part of the hospital's land was given, free-of-charge, to the Valley Forge Christian College.

Did the transfer of property violate the Establishment Clause of the First Amendment?

The Court held that Americans United for Separation of Church and State did not have standing to sue. Justice Rehnquist argued that the group did not pass the first prong of the Court's test for taxpayer standing. Since the source of the group's complaint was not a congressional statute but the decision of a government agency to dispose of a parcel of property, and because the transaction did not involve the taxing and spending power, the group had no standing to sue.