Can Maine's state business-loan agency insure or extend a loan to build a church?

Plain-English summary

Christopher Roney at the Finance Authority of Maine (FAME) asked the AG two questions. First, could FAME provide loan insurance under its Small Business and Veteran's Insurance Programs on a loan to a Maine LLC formed to purchase land and build a church? Second, could FAME make a direct loan under the Economic Recovery Loan Program to a church for the same purpose?

AG Steven Rowe answered no to both, on two independent grounds.

First, as a matter of state statutory construction, FAME has no authority to insure or make these loans. Title 10 M.R.S.A. § 962 empowers FAME to encourage mortgage loans to "industrial, manufacturing, recreational, fishing, agricultural and other business and natural resource enterprises." Section 962(4) targets "small businesses and veteran-owned small businesses." For mortgage insurance under §§ 1026-B through 1026-E, the borrower must be an "eligible enterprise" as defined in § 963-A, namely "an agricultural enterprise, fishing enterprise, industrial enterprise, manufacturing enterprise or recreational enterprise." Section 1026-J's Economic Recovery Program is similarly limited to manufacturing, industrial, recreational, or natural resource enterprises. Both statutes contemplate commercial borrowers. A church is not commonly thought of as a commercial enterprise. State v. Vaino directs that statutory words be given their common meaning. Absent clear legislative language including churches, they are not covered.

Second, as a constitutional matter, direct state credit support or loans for church construction would likely violate the Establishment Clause of the First Amendment. The Establishment Clause prevents government from enacting laws that have the "purpose" or "effect" of advancing or inhibiting religion (Agostini v. Felton; reaffirmed in Zelman v. Simmons-Harris). While there is room to argue that FAME's predominant legislative purpose is not to advance religion, the AG found no support for the argument that making or guaranteeing loans for construction of a church facility used principally for religious worship does not have the effect of advancing religion. Such an undertaking, the AG wrote, is not an incidental advancement of a religious mission (Zelman v. Simmons-Harris, 536 U.S. at 652).

The Legislature is presumed to be aware of First Amendment requirements and would not have enacted FAME's authorizing statutes in contravention of those requirements. Both prongs of the AG's analysis point the same way: no.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What if the church set up an LLC?
A: The opinion's first ground is statutory, not formal. The LLC's purpose was to build a church. The statutory "eligible enterprise" categories do not include religious or worship enterprises.

Q: Could FAME insure a loan for a building used partly for commercial and partly for worship?
A: The opinion did not address mixed-use facilities. Its Establishment Clause concern was specifically a facility "used principally for religious worship," so how a mixed-use case would come out is outside what this opinion decided.

Q: Could the Maine Legislature amend FAME's authorizing statutes to allow it?
A: A statute could be amended, but the Establishment Clause overlay remains. A statute expressly funding church construction would face a strong First Amendment challenge.

Q: Is this 2003 Establishment Clause analysis still current?
A: Treat it as historical. The opinion itself called the Establishment Clause case law "in transition," and the doctrine has continued to evolve in the years since. Anyone applying this opinion today should check current First Amendment law before relying on its constitutional conclusion.

Background and statutory framework

FAME is Maine's quasi-state-agency providing financing assistance to Maine businesses. Title 10 M.R.S.A. § 962 sets its mission to encourage business and natural-resource lending. The mortgage insurance scheme in §§ 1026-A through 1026-E grew out of 1985 legislation (P.L. 1985, ch. 344). The Economic Recovery Loan Program in § 1026-J was added in 1991 (P.L. 1991, ch. 849).

The First Amendment Establishment Clause precedents the opinion cited (Zelman and Agostini) reflect the doctrinal landscape at the time of the 2003 opinion, which the AG himself described as "in transition." Establishment Clause doctrine has evolved substantially since.

Citations

• 10 M.R.S.A. § 962 (FAME mission)
• 10 M.R.S.A. § 963-A (eligible enterprise defined)
• 10 M.R.S.A. § 1026-B (mortgage insurance)
• 10 M.R.S.A. § 1026-J (Economic Recovery Loan Program)
• U.S. Const. amend. I (Establishment Clause)
• State v. Vaino, 466 A.2d 471 (Me. 1983) (common-meaning canon)
• Agostini v. Felton, 521 U.S. 203 (1997)
• Zelman v. Simmons-Harris, 536 U.S. 639 (2002)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/2003/ag_20030822.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

03-6

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
6 STATE HOUSE STATION
AUGUSTA, MAINE 04333-0006

G. STEVEN ROWE
ATTORNEY GENERAL

August 22, 2003

Mr. Christopher H. Roney
Finance Authority of Maine
5 Community Drive
P.O. Box 949
Augusta, Maine 04332-0949

Dear Mr. Roney:

This will respond to your letter of June 4, 2003, in which you request an Opinion of this Department concerning the following questions:

1. May the Finance Authority of Maine (FAME) provide loan insurance under the Small Business and Veteran's Insurance Programs on a loan made to a Maine Limited Liability Corporation formed for the purpose of purchasing land and constructing a church thereon?

2. May FAME make a direct loan under the Economic Recovery Loan Program, or similar direct funding source, to a church for the purpose of purchasing land and constructing a church thereon?

For the reasons discussed below, it is the opinion of this Department that under the relevant statutes, FAME has not been authorized by the Legislature either to insure loans made to a church or to make direct loans to a church for the purposes set forth in the statement of the issues. Further, a direct subsidization of the construction costs of a church with State tax revenues through either loan insurance or direct loans would likely violate the Establishment Clause of the First Amendment of the United States Constitution. The Legislature is presumed to be aware of the requirements of the Establishment Clause and would not, therefore, have enacted the relevant statutes in contravention of such requirements.

In 1985, the 112th Legislature amended 10 M.R.S.A. § 962, to empower FAME to encourage mortgage loans to "finance the planning, developments, acquisition, construction, improvement, expansion and placing in operation of industrial, manufacturing, recreational, fishing, agricultural and other business and natural resource enterprises." (P.L. 1985, ch. 344, § 4). Section 962(4) specifically authorizes FAME to "[e]ncourage the making of mortgage loans to small businesses and veteran-owned small businesses." (P.L. 1985, ch. 344, § 4). In furtherance of FAME's statutory obligation to encourage mortgage loans to eligible businesses, the legislature enacted 10 M.R.S.A. §§ 1026-A through 1026-E. (P.L. 1985, ch. 344, § 49). In your first question, the mortgage insurance sought would be provided under section 1026-B.

With respect to any mortgage insurance program covered by sections 1026-B through 1026-E, section 1026-A(2)(A) provides that, in order for a mortgage to be eligible for insurance, there must be a lien on, or security interest in, eligible collateral owned, leased, used or held by an "eligible enterprise." An "eligible enterprise" is defined under section 963-A to be "an agricultural enterprise, fishing enterprise, industrial enterprise, manufacturing enterprise or recreational enterprise."

The Economic Recovery Program, enacted in 1991 as 10 M.R.S.A. § 1026-J (P.L. 1991, ch. 849, § 1), referred to in your second question, was created to assist businesses to gain access to credit through direct extension of loans by FAME. Similar to the program contemplated under section 1026-B, eligible projects under 1026-J must pertain to manufacturing, industrial, recreational or natural resource enterprises. 10 M.R.S.A. § 1026-J(A) and (B). Unmistakably, both sections 1026-B and 1026-J contemplate borrowers that are commercial enterprises.

A fundamental principle of statutory interpretation is that the words of a statute are to be given their common meaning. See State v. Vaino, 466 A.2d 471 (Me. 1983), cert. denied, 104 S. Ct. 2385 (1983). Churches are not commonly thought of as commercial enterprises, and, accordingly, would not, absent clear legislative language, be deemed to be included with the purview of these statutes. Accordingly, it is the opinion of this Department that FAME is not authorized under applicable State law to insure or make direct loans to a church under the provisions of 10 M.R.S.A. §§ 1026-B and 1026-J.

Further, providing direct credit enhancements or loans through programs supported by state taxes for the purpose of church construction would, we believe, constitute a violation of the Establishment Clause of the First Amendment to the Constitution of the United States. While the body of decisional law surrounding the Establishment Clause may fairly be characterized as in transition, see Zelman v. Simmons-Harris, 536 U.S. 639, 649 (2002) and Agostini v. Felton, 521 U.S. 203, 236 (1997), there has never been any question that this constitutional provision prevents the federal government or a state from enacting laws that have the "purpose" or "effect" of advancing or inhibiting religion. Agostini v. Felton, 521 U.S. 203, 222-223. While there may be some argument that the predominant legislative purpose of the statutes involved in this case is not to advance religion, we have found no support for the argument that the making or guaranteeing loans for construction of a church facility used principally for religious worship does not have the effect of advancing religion. Such an undertaking is not an incidental advancement of a religious mission. See Zelman v. Simmons-Harris, 536 U.S. 639, 652.

In view of the foregoing, it is the Opinion of this Department that FAME is not authorized by its statute to insure under the Small Business and Veteran's Insurance Programs or to extend loans under the Economic Recovery Loan Program for church construction.

I hope this information is helpful to you. Please feel free to contact this office if we can be of further assistance.

G. Steven Rowe
Attorney General