Can Government Define Religion for Tax Exemption Purposes?

Last Friday, the Supreme Court granted cert in Catholic Charities Bureau, a case we’ve talked about a few times on this blog.  The WSC said the Catholic Charities Bureau was not exempt from unemployment taxes because it did not meet the statute’s definition of “religious activity.” You can read the petition, Wisconsin’s opposition and all the amicus briefs here.  Here is the question presented from Petitioner’s brief:

Does a state violate the First Amendment’s Religion Clauses by denying a religious organization an otherwise-available tax exemption because the organization does not meet the state’s criteria for religious behavior?

Man. The question presented is so skillfully written that it almost answers itself.  But don’t be fooled.

Government is  not required to grant tax benefits to religious activity; tax exemption for churches and religion is but a compromise between prohibiting and establishing.  But Catholic Charities Bureau argues that once a government decides to offer religious tax benefits, it may not thereafter define what is and is not “religious activity.” If the Court agrees, the Tax Code would be precluded from making distinctions between “churches” and “religious organizations” in IRC 501(c)(3) and in the Church Audit Procedures. Taken to its logical extreme, Catholic Charities Bureau’s argument would mean that government would never be able to question the bona fides of any organization claiming church or religious status.

The Wisconsin Supreme Court defined “religious activity” to mean “proselytizing.”  It didn’t dictate the content, it just said that to be tax exempt, religious actors must be about freeing, convincing, indoctrinating, saving, capturing, enslaving, or harvesting souls. I used all those action verbs to illustrate that the WSC doesn’t care what you call it, or its effect or intentions. Content neutrality is what tax law attempts — but does not quite achieve — with its malleable “church factors.”   WSC’s  proselytizing requirement might be debatably narrow, but it is even more content neutral than the IRS church factors.  It neither favors nor disfavors religious content. As long as it is content neutral, it’s for the legislature to decide whether the definition should be broad or narrow.  Otherwise religious tax exemption is unworkable and should be repealed altogether. 

Catholic Charities forces an all or nothing choice on the government.  It should lose on the question presented.  I will tell why tax law proves it should win on other grounds in a post on Friday.

darryll k. jones