Could most churches survive without their tax-exempt status? Many large urban churches probably would fail or be forced to move out to the suburbs if they had to pay property tax on their downtown sites, says David Thompson, spokesman for the Washington, D.C.-based National Council of Nonprofits. That would especially hold true in Portland, where many of the mainstream denominations maintain churches on prime Park Blocks real estate despite dwindling congregations and budgets.

But church charity isn't the only justification for the tax-exempt status, according to Thompson. The main reason, he says, is that nonprofit status limits government ability to intrude into people's practice of religion.

"Tax exemption for houses of worship is there to prevent governments from taxing the religious entities out of existence," Thompson says.