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Separation of church and state in the United States
The phrase separation of church and state does not appear in any founding American document. It is, however, a common interpretation of the first clause of the First Amendment, which reads, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof...."
"[A] wall of separation between church and state" was first used by Roger Williams and popularized by Thomas Jefferson in a 1802 letter to the Danbury Baptists (a religious minority concerned about the dominant position of the Episcopal church in Virginia). His intention was to assure this religious minority that their rights would be protected from undue external interference. The phrase was first quoted by the United States Supreme Court in Reynolds v. United States, 98 U.S. 145 (1879), but it was not until Everson v. Board of Education, 330 U.S. 1 (1947) that the phrase became a definitive part of Establishment Clause jurisprudence. (Everson also was the first case to interpret the Clause as imposing a restraint on the states as well as the federal government – based upon the due process clause of the Fourteenth Amendment.)
In the 17th and 18th centuries, many Europeans immigrated to the United States. The primary reason for many was the desire to worship freely in their own fashion. These included a large number of nonconformists such as the Puritans and the Pilgrims, as well as Catholics. However, with some exceptions such as Roger Williams of Rhode Island and William Penn, most of these groups did not believe in religious toleration and in some cases came to America with the explicit aim of setting up a theocratic state compatible with their faith.
At the time of the passage of the Bill of Rights, several states had established churches, and the prohibition against the Federal interference with religion (like most of the other rights in the Bill of Rights) was understood to be a limitation on the Federal government, but not the power of state governments.
For example, in 1854 the State supreme court of Maine declared that the local school board had the right to expel a 15 year old girl for refusing to read aloud a portion of the King James translation of the Bible to her class; her family's religion required her to read only the Douay Catholic translation of the Bible. 
In 1875, Representative James Blaine of Maine proposed a constitutional amendment which would specifically prohibit the use of public funds for any religious purpose. The amendment did not pass, but many states adopted similar laws which are commonly known as Blaine Amendments.
In 1902, the Nebraska Supreme Court, ruled in a case brought by Daniel Freeman (who was, coincidently, the first person to file a claim for a homestead under the Homestead Act) that under the Nebraska Constitution, the local public school teacher could not lead religious exercises.
In 1962, the Supreme Court banned from public schools all public prayers and religious readings done for religious purposes. The Supreme Court continued to allow private prayer. As such, any teacher, faculty, or student can pray in school, in accordance with their own religion. However, they may not lead such prayers in class, or in other "official" school settings such as assemblies or programs. Even "non-sectarian" teacher-led prayers are not allowed, e.g. "Almighty God, we acknowledge our dependence upon Thee, and we beg Thy blessings upon us, our parents, our teachers, and our country," which was part of the prayer required by the New York State Board of Regents prior to the decision of the Warren Court in Engel v. Vitale.
The court noted that it "is a matter of history that this very practice of establishing governmentally composed prayers for religious services was one of the reasons which caused many of our early colonists to leave England and seek religious freedom in America." 
As authorized by state law, the "Almighty God" prayer had followed the teacher-led pledge of allegiance to the flag, which consisted of the following: "I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation, under God, indivisible, with liberty and justice for all." The pledge did not contain the words "Under God" until 1954, when Congress added them to the pledge. While the Court banned the "Almighty God" prayer, whose purported purpose was to "acknowledge the dependence of our people and our Government upon the moral directions of the Creator," it did not deliberate upon the "Under God" pledge.
Currently, the Supreme Court applies a three-part test in determining whether the government has violated the Establishment Clause: "The Establishment Clause forbids the enactment of any law 'respecting an establishment of religion.' The Court has applied a three-pronged test to determine whether legislation comports with the Establishment Clause. First, the legislature must have adopted the law with a secular purpose. Second, the statute's principal or primary effect must be one that neither advances nor inhibits religion. Third, the statute must not result in an excessive entanglement of government with religion. Lemon v. Kurtzman, 403 U.S. 602, 612-613, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745 (1971).
In 2002, a Court of Appeals held that a California law requiring students to recite the Pledge of Allegiance was unconstitutional. Reaction from the Senate was to unanimously pass a bill which reaffirmed their support for the words "under God", and the House also condemned the ruling by a 416-3 vote.   The case was appealed to the Supreme Court, where hearings began in March 2004. Elk Grove Unified School District v. Newdow was overturned by the Supreme Court on Flag Day, June 14, 2004. The Justices, however, did not reach the merits of the case (whether or not the phrase "under God" in a public school setting is unconstitutional). Rather, a five-justice majority held that Newdow, a non-custodial parent suing on behalf of his daughter, had no standing to bring the lawsuit in the first place, thus vacating the lower court ruling without resolving the constitutional question presented.
Some—especially certain devout Christians—believe that the United States Supreme Court has made a logical mistake in using the Establishment Clause to separate church and state by force of law.
The Founding Fathers did not prohibit religious references in official contexts. The Declaration of Independence, the founding document of the United States, contains four references to God (althought the word only appears once, in the phrase "Nature and Nature's God"). While the Declaration is a rebuke to the notion of a Divine Right of Kings, and while it can be argued that references to God were unavoidable because it is responding to a religious concept, its particular wording seemingly goes further than the minimum required for this, expressing implicit faith in God and reliance on God for the founding of the United States. The Declaration, however, is not a legal document; the Constitution—which is the legal framework of the United States—does not refer to God (other than referring to its passage by the Constitutional Convention as occurring in the "Year of our Lord 1787"). In fact, prior to the addition of the First Amendment or the balance of the Bill of Rights to the Constitution, it contained a clause forbidding any "religious test" for government employees. This has been called the "no religious test" clause, and is found at the end of Article VI, Section 3 (the final clause of the original Constitution save only for the Ratification Clause stating under what conditions the new Constitution would be deemed to be valid and in effect), which reads in part "but no religious test shall ever be required as a qualfication to any office or trust under the United States." This clause has been interpreted to cover both elected officials and appointed ones, career civil servants as well as political appointees. Religious beliefs or the lack of them have therefore not been permissible tests or qualifications with regard to federal employees since the ratification of the Constitution. Many state constitutions have lacked such protection; some have had opposite provisions, requiring state employees and officials follow such specific doctrines as the acceptance of the Christian verison of the afterlife. (Tennessee constitution Article IX, Section 2 is one such example.) At one time, such restrictions were allowed under the doctrine of states' rights; today they are deemed to be in violation of the federal First Amendment, as applied to the states via the 14th amendment, and hence unconstitutional and unenforceable.
While sometimes questioned as possible violations of separation, the appointment of official chaplains for government functions, voluntary prayer meetings at the Department of Justice outside of duty hours, voluntary prayer at meals in U.S. armed forces, inclusion of the (optional) phrase "so help me God" in the oaths for many elected offices, FBI agents, etc., have been held not to violate the First Amendment, since they fall within the realm of free exercise of religion.
Relaxed zoning rules and special parking privileges for churches, the tax-free status of church property, the fact that Christmas is a federal holiday, etc., have also been questioned, but have been considered examples of the governmental prerogative in deciding practical and beneficial arrangements for the society. The annual holiday of Thanksgiving, and the national motto "In God We Trust", are clearly violations if strict separation is implied; but they are not inconsistent with the religiosity expressed in the Declaration of Independence. Once again, however, although the Declaration carries no legal weight, these phrases and actions have been allowed as part of a civil religion, which some interpret to mean that they occur in a context which allows the observer to give them whatever meaning he or she wishes to ascribe to them, or to ascribe to them no meaning whatever.
Most of the relevant decisions (school prayer, pledge, etc.) have been based on the use of coercion by the State to promote religious dogma. Many decisions note that even if the State has no intention to promote one particular religion, in practice the predominant religious make-up of a school's population often makes those of a minority religion feel unwelcome or hated. This means that just because an act with religious connotations is deemed "voluntary" it is not specifically exempted from this doctrine; this is especially true with regard to public schools where the students are by definition young and immature and the expression of dissent can subject a child to ridicule, abuse, and negative peer pressure.
Regarding the display of religious symbols on public property during holiday seasons, one exception has been cases in which competing religions and non-religion have equal opportunity, although the non-religious displays are often not guarded from vandalism, etc.
Generally, a majority of voters in America favors prayer in schools, depending upon how the poll is phrased. But the Supreme Court has interpreted the Establishment Clause as giving minority religions protection against having the majority religion forced on them by the state. 
Religious test for office
The U.S. Constitution prohibits any religious test for federal office. Seven states, however, have language included in their Bill of Rights, Declaration of Rights, or in the body of their constitutions that require state office-holders to have particular religious beliefs. These states are Texas, Massachusetts, Maryland, North Carolina, Pennsylvania, South Carolina, and Tennessee. The required beliefs include belief in a Supreme Being, and belief in a future state of rewards and punishments. Some of these same states specify that the oath of office include the words "so help me God". In some cases these beliefs (or oaths) were historically required of jurors and witnesses in court. While these laws are often regarded as relics, if it became known that a non-believer was elected to office, there is the possibility of a court challenge over eligibilty.
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