Idaho's Hitching Post wedding chapel won't have to host same-sex marriage after all following a U-turn by the city authorities.

The chapel in Coeur d'Alene was under threat after the city said that as a for-profit organisation it came under the local anti-discrimination laws. The Hitching Post's owners, Donald and Evelyn Knapp, said they were afraid that they would face imprisonment or fines if they refused to offer marriage services to a same-sex couple.

It became a rallying point for conservatives eager to defend religious liberty, with the Knapps' cause taken up by the Alliance Defending Freedom (ADF), which is also involved in the case of Houston pastors whose writings and speeches have been subpoenaed.

The city originally said that the anti-discrimination law applied because the Hitching Post is a commercial enterprise. However, Coeur d'Alene city attorney Mike Gridley said that after further consideration he had determined that the ordinance did not specify whether an organisation had to be for profit or not.

"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," he said.

Leo Morales of the American Civil Liberties Union of Idaho said the exemption made sense as long as the chapel's purpose was to perform religious weddings. He added: "However, if they do non-religious ceremonies as well, they would be violating the anti-discrimination ordinance. It's the religious activity that's being protected."

The Knapps were represented by the ADF, whose senior legal counsel Jeremy Tedesco had said in a statement: "The government should not force ordained ministers to act contrary to their faith under threat of jail time and criminal fines" and accused the city of being on "seriously flawed legal ground". The lawsuit said that the city was "unconstitutionally forcing" them to perform same-sex ceremonies "in violation of their religious beliefs, their ordination vows, and their consciences".

Marriage licences for same-sex couples were issued in Idaho for the first time on October 15.