It has always been the contention of Reformed Protestants that the good works of the individual serve as evidence of faith rather than the substance of it, as if faith meant something closer to faithfulness. While Catholics do not deny that such works provide evidence of faith, they also see them as the basis for maintaining justification—or, if you prefer, the result of the justifying process of sanctification.
At the Council of Trent, the Roman Catholic Church drew a hard and fast line between their view and that of the Reformed Protestants. We’ve already explored the Council’s view; now we will see more clearly what they were opposing.
In considering the Reformed view of soteriology, it is important to make two things immediately clear:
First, while I have contrasted infusion and imputation, it is not a matter of comparing exact like to like. Catholics teach infused grace and virtue, while the Reformed teach imputed righteousness. It is not a matter of the same kind of righteousness infused or imputed, or the same kind of grace imputed or infused. I choose these two verbs beginning in ‘I’ as the point of contrast because it is a good way to summarize the differing processes by which the two groups believe justification takes place.
Second, there is a difference in how Roman Catholics and Reformed Protestants define the terms justification and grace in line with their differing interpretations of the equivalents in the original biblical languages. To put it in what may be an overly simplified manner, Catholics believe that justification is about becoming personally just, whereas Protestants believe it is about being declared just on the basis of Christ’s work. This is why the former group hardly differentiates between justification and sanctification while the other perceives a firm divide between the two.
This leads us into the concept of imputed righteousness. While Reformed soteriology is more often associated with the doctrine of justification by faith alone, the doctrine of imputed righteousness (also referred to as alien righteousness) is, in the opinion of this author, its most important distinctive. If the view of “faith alone” was alone, it would move us only halfway from the Catholic Church to the Reformed Church. Imputed righteousness teaches not only a difference in how a person becomes righteous, but also a difference in whose righteousness is in question.
An early statement of the concept of imputation can be found in the Augsburg Confession (1530). Written chiefly by Philipp Melanchthon, it states that
“…men cannot be justified before God by their own strength, merits, or works, but are freely justified for Christ’s sake, through faith, when they believe that they are received into favor, and that their sins are forgiven for Christ’s sake, who, by His death, has made satisfaction for our sins. This faith God imputes for righteousness in His sight.”
In that quote, we see a clear mention of imputation, but I would submit that the wording is slightly different from what would eventually become the Reformed doctrine of imputed righteousness. The linchpin in this system seems to be the faith of the individual, which is indeed imputed to them by God and counted as righteousness. Later descriptions by Reformed theologians have tended to emphasize that faith is merely the instrument by which Christ’s righteousness is grasped. What do we make of this? In his defense of the Augsburg Confession, Melanchthon wrote the following in regard to Romans 4:4-5.
“Here he clearly says that faith itself is imputed for righteousness. Faith, therefore, is that thing which God declares to be righteousness, and he adds that it is imputed freely, and says that it could not be imputed freely, if it were due on account of works. Wherefore he excludes also the merit of moral works [not only Jewish ceremonies, but all other good works]. For if justification before God were due to these, faith would not be imputed for righteousness without works… We have believed in Christ Jesus that we might be justified by the faith of Christ, and not by the works of the Law.” 
This quote includes two important assumptions of the Reformed view: 1) that justification involves a declaration of righteousness rather than a gradual accumulation of the same, and 2) that the “works” described in the Apostle Paul’s epistles, by which a person cannot be justified, are not only the works of the old Mosaic Law, but any works performed by the individual before or after regeneration.
Furthermore, the view put forward in the Augsburg Confession was not opposed to the later Reformed view, but simply represented an earlier method of speaking. As Carl Trueman has noted when commenting upon this aspect of the Augsburg Confession and its Apology,
“The important point to note…is the precise role of faith. Faith does not consist in the righteousness that is the basis for the divine declaration that we are justified. Justification is thus a declaration of God based on a righteousness that is, strictly speaking, extrinsic to us but made ours by the way in which faith unites us to Christ. Faith, in short, is the instrumental cause of our justification.”
Therefore, there is no great difference between the early Lutheran view and the later Reformed view in this area. The wording had simply not evolved to the point we see in the Reformed confessions of the second half of the 16th century and the 17th century. The Heidelberg Catechism, published three decades later, uses different language that is closer to the final Reformed view.