The Basic Law (constitution) provides for freedom of religion, and the Government generally respected this right in practice; however, discrimination against and unequal treatment of some minority religious groups remained an issue, in part because of the legal/constitutional structure of church-state relations. The structure for managing church-state relations, established in 1949, was gradually adapting to the country's increasingly diverse religious composition.

Religious organizations are not required to register with the state, and groups may organize themselves for private religious purposes without constraint. However, most religious organizations are registered and treated as nonprofit associations, which enjoy a degree of tax-exempt status.

Religion and state are separate, although a special partnership exists between the state and those religious communities that have the status of a "corporation under public law." Any religious organization may request that it be granted "public law corporation" status, which, among other things, entitles it to name prison, hospital and military chaplains, and to levy a tithe (averaging 9 percent of income tax) on its members that the state collects.  An estimated 180 religious groups have been granted public law corporation status, including the Evangelical and Catholic churches, the Jewish community, Mormons, Seventh-day Adventists, Mennonites, Baptists, Methodists, Christian Scientists, and the Salvation Army.

The state provides subsidies to some religious organizations for historical and cultural reasons. In view of German culpability for the Holocaust, the states have accepted as a permanent duty the obligation to provide financial support to the Jewish community, including support for reconstruction of old and construction of new synagogues. Repairs to and restoration of some Christian churches and monasteries expropriated by the state in 1803 are financed by the Government. Newer church buildings and mosques do not generally receive subsidies for maintenance or construction. State governments also subsidize various institutions affiliated with public law corporations, such as religious schools and hospitals, which provide public services.

The 2003 "State Agreement on Cooperation" between the federal Government and the Central Council of Jews agrees to supplement the funding received by the Jewish community from the states. Approximately 3 million euros is provided annually to the Central Council to maintain Jewish cultural heritage, to build up the Jewish community, and to support integration and social work. The Central Council reports annually to the Government on the use of the funds. The agreement emphasizes that the Central Council of Jews is meant to support all branches of Judaism with the funds provided.

Most public schools offer Protestant and Catholic religious instruction in cooperation with those churches, as well as instruction in Judaism if enough students express interest. Depending on the state, a nonreligious ethics course or study hall may be available for students not wishing to participate in religious instruction.