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Theonomy recognizes that the revealed word of God is the rule in every area of life, not merely the spiritual matters. Theonomists interpret the Bible to prescribe civil laws, especially from the Israelite theocracy that are supposed to govern all civil governments that are in line with God's will. They recognize both the civil magistrate and the Church as legitimate institutions who owe their allegiance to the word of God but they are not the same institution. In their view, it would be inappropriate for either institution to interfere with the matters that concern the other. Church courts are never to exercise civil penalties over their judgments nor are civil courts to usurp the ministry of the keys or the sacraments from the Church.
This view is not unique to James Thornwell, but it is clearly evident in his thinking.
[T]he separation of Church and State is a very different thing from the separation of religion and the State. Here is where our fathers erred. In their anxiety to guard against the evils of a religious establishment, and to preserve the provinces of Church and State separate and distinct, they virtually expelled Jehovah from the government of the country, and left the State an irresponsible corporation, or responsible only to the immediate corporators. They made it a moral person, and yet not accountable to the Source of all law. It is this anomaly which we desire to see removed; and the removal of it by no means implies a single element of what is involved in a national Church.