Christian leaders took the rare step of closing the Church of the Holy Sepulchre on Sunday at noon in a bid to pressure Israeli authorities into abandoning the measures.
They said the church, a major pilgrimage site, would be closed until further notice.
Church officials said Monday it was not clear when it would reopen, depending on discussions with Christian leaders and Israeli authorities.
"We closed the church for specific reasons and for an unlimited period of time," one church official said on condition of anonymity.
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The church is built where Christians believe Jesus was crucified, buried and resurrected.
Disappointed tourists gathered Monday in front of its large wooden doors hoping they would have the chance to visit the site.
"We were told it's political. It is disheartening -- it is such a holy place," said Aleana Doughty, a 35-year-old dental hygienist visiting with a group from the United States.
She said they were only scheduled to stay for one more day, so they were not hopeful they would be able to see the church.
Christian leaders are angry over attempts by Israeli authorities in Jerusalem to enforce tax collection on church property they consider commercial, saying exemptions only apply to places of worship or religious teaching.
Jerusalem Mayor Nir Barkat says the city is due 650 million shekels (USD 186 million, 152 million euros) in uncollected taxes on church properties.
He stresses the Church of the Holy Sepulchre and all other churches are exempt from the taxes, with the changes only affecting establishments like "hotels, halls and businesses" owned by the churches.
Christian leaders say the measure jeopardises their ability to conduct their work, which includes not only religious but also social services to those in need.
A separate bill seeks to allay the fears of Israelis who live in homes on lands previously held by the Greek Orthodox Church and which were sold to private developers, according to the lawmaker proposing the legislation.
Palestinians fear the sales will favour Israeli settlement construction in east Jerusalem, while Israelis are concerned over private developers' intentions for the land.
The bill would allow certain lands sold by the Greek Orthodox Church to be handed over to the state, which would then compensate those who bought it from the church.
"This reminds us all of laws of a similar nature which were enacted against the Jews during a dark period in Europe," Christian leaders said in a statement on Sunday.
The Greek Orthodox, Armenian and Roman Catholic denominations share custody of the Holy Sepulchre.