Are there any Protestant denominations or churches that reject penal substitution?

Early unitarians such as Joseph Priestly and later William Ellery Channing rejected the idea that God punished Jesus in the place of sinners. They thought rather that God rewarded Jesus with resurrection and ascension and did not punish him. They reasoned that if Jesus were the only one to die and go to hell, he might have been punished by God for all the sins of everyone else, but that if he rose from death and went to heaven instead, Jesus was not a substitute to go in our places, but rather one we should follow, both his words and his deeds. They saw Jesus more as an example to follow than a substitute to give them a free ticket to heaven, regardless of what they do.

I do not believe there are any (in my experience or knowledge, anyway) Protestant churches that reject penal substitution. Protestant churches, for the most part with the exception of the newer liberal denominations, adhere to the traditional Reformation fundamentals of Sola Scriptura, Sola Christus, etc. If a denomination/church/believer believes in the supremacy of Scripture, it's nearly impossible to reject Christ's penal substitution.

Maybe I'm misunderstanding what you're asking about, and I know you're looking for a factual answer rather than a discussion, but I think the Scriptures are rather clear on this topic, though I'd like to see where you substantiate you beliefs. I could come up with more examples, but I don't think I need to after reading Romans 5, which states pretty clearly that we are reconciled "through the death of his Son."

Romans 5

6 You see, at just the right time, when we were still powerless, Christ died for the ungodly. 7 Very rarely will anyone die for a righteous person, though for a good person someone might possibly dare to die. 8 But God demonstrates his own love for us in this: While we were still sinners, Christ died for us.

9 Since we have now been justified by his blood, how much more shall we be saved from God’s wrath through him! 10 For if, while we were God’s enemies, we were reconciled to him through the death of his Son, how much more, having been reconciled, shall we be saved through his life! 11 Not only is this so, but we also boast in God through our Lord Jesus Christ, through whom we have now received reconciliation.

So to answer your question, I don't think you'll find any traditional Protestant churches that reject penal substitution, since most traditional churches believe in the supremacy/infallibility of Scripture. I think it's hard to conclude anything other than Christ's penal substitution unless you reject the idea that Scripture is inerrant.

You will find rejection of the Penal Substitution Atonement theory among the Progressive churches and theologians. They reject the theory because it makes God out to be no different than the pagan gods. JKlemm responding to this question says "If a denomination/church/believer believes in the supremacy of Scripture, it's nearly impossible to reject Christ's penal substitution." This belies a fundamental misunderstanding of the issue. It has nothing to do with the authority of scripture and everything to do with how one interprets those scriptures, specifically how one views the sacrifice of Christ and the atonement. Progressive churches have gained much insight into pre-Augustine thinking with the help of your Eastern Orthodox churches that escaped the influence that Augustine had on the Western Roman Empire.

Not all Anglicans have held to Penal Substitution Theory. For example, the nineteenth to early 20th century Anglican bishop Charles Ellicott did not. See his commentary on Galatians 3, for example. The Thirty-Nine Articles of Religion does not express Penal Substitutionary Atonement. So, if you look at some of the continuing Anglican denominations you may find a church that is Protestant but does not hold to Penal Substitution Theory. Some of those continuing denominations are "Anglo-Catholic", so I'm not sure they are actually Protestant.

I am in a denomination called the Federation of Reformed Churches. I do not hold to Penal Substitution Theory. I've expressed this in a paper sent to my fellow Presbyters. None of them attempted to bring any charge against me. So, there are Reformed Presbyters who can tell the difference between theory and scriptural data and have some appreciation of the history of the doctrine of Christ as our propitiatory sacrifice.

It is interesting to note that Calvin did not write his view on penal substitution theory into either the Geneva Confession of 1536 or the later French Confession. (There is some question as to whether Calvin wrote those documents or just influenced them.) Calvin seems to have been more careful of such things than the Lutherans and many of the other Reformed, such as Ursinus.

There have been Reformed believers and are at least some now who do not hold to Penal Substitution Theory. Furthermore, it is not hard to find Arminian teachers who do hold to it. So I do not think that holding to or not holding to the theory has any direct relationship to one's doctrine of free will.