Directors of the Crystal Cathedral church said this week they paid the state $473,000 in back taxes, but only "under protest."
The 16 directors of the Garden Grove Community Church voted to pay the taxes but will appeal the government's decision that the church is not a tax-exempt organization, said spokesman Michael Nason.
The tax bill was paid on Wednesday, the deadline set by Orange County, an attorney for the church said.
"Better to pay it than to pay penalties," he said, explaining why the payment would be made even though the church believes it is unjust.
The state Board of Equalization, citing use of church property by profit-making groups and concerts with tickets costing up to $150, lifted the church's tax-exempt status in May. Lawrence Welk, Victor Borge and Fred Waring were among the performers at the 12-story glass cathedral during the 1981 and 1982 tax investigation.
"We feel the preliminary findings by the Board of Equalization staff are not substantiated by the law and we are looking forward to the appeal process that will vindicate our position," said the Rev. Robert Schuller, the television evangelist who is pastor of the church.
Schuller, whose "Hour of Power" television ministry attracts an estimated 2.7 million viewers, vowed from the pulpit earlier this year to fight the tax ruling.
An appeal before the board is set for Oct. 31. If that is unsuccessful, the church will take the matter to court, Nason said.
Church officials say they are being singled out and harassed because of the size and visibility of the church.
"We think this is the beginning of a new kind of harassment religious institutions will have to deal with," Herman Ridder, a minister with the church, said at a news conference at the cathedral.
"The underlying issue is who determines what we can do here," Ridder said. "And who decides what is religion. We think it is the church and not the state."
Nason described as "up in the air" the status of the cathedral's annual Christmas extravaganza, a three-week pageant called "The Glory of Christmas."
The church has asked the state board for a ruling on whether the event, with nightly performances by actors, musicians and choirs, would affect the tax-exempt status.