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The practice and doctrine of indulgences is specific to Roman Catholicism. In Roman Catholic theology, an indulgence is the remission of temporal punishment due to a sin granted by the Roman Catholic Church. Disagreement over the doctrine of indulgences was one of the main reasons for the Reformation and formation of Protestant churches.
The word indulgence (Latin indulgentia, from indulgeo, to be kind or tender) originally meant kindness or favor; in post-classic Latin it came to mean the remission of a tax or debt. In Roman law and in the Vulgate of the Old Testament (Isaiah 61:1) it was used to express release from captivity or punishment. In theological language also the word is sometimes employed in its primary sense to signify the kindness and mercy of God. But in the special sense in which we are speaking here, an indulgence is a remission of the temporal punishment due to sin, the guilt of which has been forgiven. Some of the terms used in the past were pax, remissio, donatio, condonatio.
Roman Catholic teaching regarding indulgences
Jesus taught us that nothing unclean goes before the Father. Therefore, it is the teaching of the Roman Catholic Church that those who die in a state of venial sin are cleansed in purgatory. Those in purgatory are assured a place in heaven once their time in purgatory is completed.
An indulgence is an extra-sacramental remission of punishment (less or no time in purgatory) for sins already confessed and forgiven. In other words, to be eligible to receive an indulgence for a specific transgression one must have already made a sincere confession. The most common indulgence is penance, where a priest gives a person an assignment after he confesses (for example, say 10 Hail Mary's, or say the Rosary twice). Another indulgence may be offered by a Pope or Bishop for those who make a pilgrimage to a holy site or shrine on a specific day.
Protestant teaching regarding indulgences
Protestant churches reject the notions of the existence of venial sins, purgatory and therefore indulgences. In general, hey teach that once a person has repented of sins and trusted in Jesus, all sins have been forgiven and all punishment taken already by Jesus on the cross. Because of this, there is no such place or thing as purgatory; only Heaven or Hell.
Throughout history there has widespread confusion about the nature of this practice and its limits; and as such there have been abuses of this practice.