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First Liberty’s Win Before Christmas: City “Holy Water” Tax Scheme Comes to an End

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December 31, 2021
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by Lauren Moses &  Jorge Gomez • 4 min read

2021 has been an incredible year of victories, and First Liberty’s winning streak isn’t coming to an end any time soon.

Thanks to your unwavering support, our legal team recently secured another win on behalf of three houses of worship in our Church Water-Tax case—a very important triumph that will help ring in the New Year on a positive note, ensuring that religious organizations don’t have to face unfair treatment by government officials.

Recall that several years ago, city officials in Magnolia, Texas—to satisfy their unquenchable thirst for more tax revenue—created an expensive “institutional” fee that only applied to churches, faith-based schools and other nonprofit organizations. The water rate structure essentially levied a “water tax” on these houses of worship and organizations.

How much more did churches have to pay than commercial businesses? In one case, a church’s water bill increased by 178%!

This blatant water fee scheme was devised even though state law expressly prohibits local governments from taxing churches and nonprofits. From the very beginning, it became crystal clear that this was unconstitutional religious discrimination, as one official even publicly stated the water fee scheme “would allow the city to collect funds from these entities in place of taxes or other fees.”

In 2019, First Liberty filed a lawsuit against the City of Magnolia, Texas on behalf of three churches who’d been subjected to the excessive fees.

Now, after years of litigation and an arduous legal battle, these churches can breathe a sigh of relief and get back to what they do best: living out their faith and supporting their local community.

Just a few days before Christmas, First Liberty and our volunteer attorneys at the Baker Botts law firm, reached a settlement in the case, restoring religious liberty for our clients. The City agreed to reclassify its water rate structure and treat “all religious organizations, religious non-profits, churches, or houses of worship” equally with commercial businesses.

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While winning for our clients is certainly cause for celebration, it is a victory for all houses of worship in the Magnolia community who were being treated more harshly just because they were religious.

Aaron Streett, a partner at Baker Botts who donated his time in defense of our clients, summarized the significance of bringing the case to a close:

“Churches and non-profits provide a multitude of services to their communities, particularly for the most vulnerable. This joint agreement will allow both the city and all the religious organizations of Magnolia to build a stronger community.”

With 2021 coming to an end on an incredibly positive note, First Liberty is thankful for YOU.

Because of your generous support, we’re delivering religious freedom for America’s houses of worship and ministries like never before. And together, in the coming year, we can continue winning and empowering religious Americans to live in liberty.

There are still many challenges ahead and opportunities in 2022 that we can—and must—seize if we are to protect and restore our First Freedom.

Will you give to First Liberty today? Because of our generous $450,000 Year End Challenge Grant, your gift has a multiplied impact, helping our legal team deliver more freedom per dollar and restore the rights of churches in Magnolia and across the country.

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