The city has been embroiled in controversy ever since the owners of the Hitching Post sued the city. They say a city anti-discrimination law threatened to force them to marry same-sex couples now that gay marriage is legal in Idaho.

The story lit up conservative and gay-rights blogs. Wedding chapel owners Donald and Evelyn Knapp said they feared jail time or fines if they declined marriage services to a same-sex couple.

Initially, the city said its anti-discrimination law did apply to the Hitching Post, since it is a commercial business. Earlier this week, Coeur d'Alene city attorney Mike Gridley sent a letter to the Knapps’ attorneys at the Alliance Defending Freedom saying the Hitching Post would have to become a not-for-profit to be exempt.

But Gridley said after further review, he determined the ordinance doesn’t specify non-profit or for-profit.

“After we've looked at this some more, we have come to the conclusion they would be exempt from our ordinance because they are a religious corporation,” Gridley explained.

Court filings show the Hitching Post reorganized earlier this month as a “religious corporation.” In the paperwork, the owners describe their deeply held beliefs that marriage should be between one man and one woman.

The Knapps' attorney said the city is about to be tested on its approach. He said the Knapps have been contacted by the police about a complaint filed on Thursday by a same-sex couple who were turned away at the Old West themed chapel.

Leo Morales of the ACLU of Idaho said the exemption makes sense as long as the Hitching Post primarily performs religious ceremonies.

“However, if they do non-religious ceremonies as well, they would be violating the anti-discrimination ordinance,” Morales said. “It's the religious activity that's being protected."