February 19, 2016

Religious-Themed Tourist Attraction Cannot Be Denied Kentucky Tax Incentives

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By Erica Horn and Maddie Schueler

In a high profile case, the U.S. District Court for the Eastern District of Kentucky held a religious-themed tourist attraction, even one advancing religion, meeting the neutral criteria for tax incentives offered by the Commonwealth of Kentucky cannot be denied those incentives based upon the Establishment Clause of the U.S. and Kentucky Constitutions.[1] The case was filed against the Kentucky Tourism, Arts and Heritage Cabinet (the “Cabinet”) by Ark Encounter, LLC, and its related entities (collectively, “Ark Encounter”).  Ark Encounter is engaged in building a theme park in Northern Kentucky centered on a full-scale replica of Noah’s Ark.  Ark Encounter sought a preliminary injunction challenging the Cabinet’s denial of sales tax incentives under the Kentucky Tourism Development Act (the “KTDA”).  The Cabinet moved to dismiss the complaint on the basis that allowing Ark Encounter to participate in the state’s incentive program would violate the prohibition against establishing a religion under both the federal and state constitutions. 

The Court rejected the Cabinet’s argument, holding Ark Encounter’s participation in the incentive program would not violate the Establishment Clause.  As an initial matter, the Court noted that some interaction between church and state is “inevitable”.  The question, however, is whether such interaction creates an impermissible establishment of religion.  The Court focused on the KTDA’s secular legislative purpose of relieving unemployment by preserving and creating jobs through tourism projects and also creating sources of tax revenue through the projects and their attraction of out-of-state tourists.  Specifically, the Court noted, nothing in the KTDA indicates its purpose is to aid or give preference to a particular religion.  Instead, the language of the KTDA is neutral. 

The Court also concluded Ark Encounter’s participation in Kentucky’s incentive program would not result in the government’s endorsement of religion, nor would it create an excessive government entanglement with religion.  By contrast, excluding Ark Encounter from the program because of its religious nature would result in excessive government entanglement with religion because it would require state officials to scrutinize applicants’ beliefs to ensure the proposed projects were either secular or at least not “too religious”.  The government could avoid such entanglement, the Court stated, by approving all programs meeting the neutral requirements of the incentive program.

Furthermore, the Court held the Cabinet’s exclusion of Ark Encounter from participating in the program violated Ark Encounter’s free exercise and free speech rights under the First Amendment.  The Court noted the Cabinet’s actions forced Ark Encounter to choose between expressing its religious views on its own property and receiving tax incentives under the KTDA.  Therefore, the Court denied the Cabinet’s motion to dismiss and entered a preliminary injunction prohibiting the Cabinet from excluding Ark Encounter from Kentucky’s tax incentive program based upon its religious purpose and message.



[1] Ark Encounter, LLC v. Parkinson, Civ. Action No. 15-13-GFVT (E.D. Ky. Jan. 25, 2016).