The NYTimes series on religious insitutions and government regulation continues:

The conflict in South Bend echoes disputes from Alaska to Florida that raise the following issue: As religious organizations of all faiths stretch their concept of mission far beyond traditional worship, should their traditional tax exemptions expand as well? Increasingly, government at all levels is answering yes.

The property tax exemption is one of the oldest tax breaks granted to religious organizations, but it is not the only one. Lawmakers and judges have also approved what amounts to special tax treatment for religious organizations and some of their employees, including exemptions on personal-income and payroll taxes, and have made it easier for them to get tax-exempt construction loans for purely religious projects.

Like the exemptions from federal and state regulations that have proliferated for religious groups in recent years, these tax breaks are widely defended both as an acknowledgment of religion’s contributions to society and as a barrier to unjustified government limitations on the liberty that religious organizations enjoy under the First Amendment.

But in some communities like South Bend, tolerance of religious tax breaks is fraying as local governments struggle to provide basic services with limited resources.

It’s hard not to see the government case here – the central example in the story concerns a retirement village in South Bend, owned by the Holy Cross Brothers, that is indistinguishable from secular operations of the same type, with an average net worth of residents of $1 million.

When the Brothers of Holy Cross appealed the county’s ruling to the Indiana Board of Tax Review last year, it lost. “A charitable purpose involves something beyond merely successfully marketing one’s services to seniors,” the review board said. “It implies some level of sacrifice on the part of the entity providing those services. It is this sacrifice that separates an ‘obviously charitable act’ from the everyday purposes and activities of man in general.”

The fight has now moved to the courts, where the project’s management hopes to fare better. “We thought we were within the orbit of what was considered to merit that exemption,” Mr. Wychocki said. “Now we just stand and shake our heads.”

The rest of the examples are what you would expect – Holy Land USA in Orlando and various megachurches with their expanded, diverse services and facilities, as well as a long section, which is mostly above my head on issuance of tax-exempt bonds.