Wisconsin Supreme Court Denies Religious Exemption to Catholic Charities Bureau
Last Thursday, the Wisconsin Supreme Court issued its much anticipated opinion in Catholic Charities Bureau, Inc., Barron County Developmental Services, Inc., Diversified Services, Inc., Black River Industries, Inc. and Headwaters, Inc. There is some weeping and gnashing of teeth going on because the Court ruled in a 4-3 opinion that neither the Catholic Charities Bureau (CCB) nor its various subcontractors qualified for a religious exemption from the state’s unemployment tax. The opinion relies heavily on federal tax cases such as Waltz and Living Faith. We have previously blogged about the case here and here. Wisconsin law exempts from the definition of “employment,” three things, the second of which was at issue in the case. Thus the unemployment tax does not apply to services:
2. In the employ of an organization operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches; or
There are two parts to that exemption. The second is that the organization must be controlled or principally supported by a church. The Court found that CCB and the subagents met the second part. CCB is entirely controlled by the Diocese and the subagents must comply with CCB rules. But none of CCB rules require profession or teaching of Catholic doctrine.
The first requirement is that the organizations must be “operated primarily for religious purposes.” The Court found that although the Catholic Diocese controlled both the separately incorporated Bureau and all the subagents in pursuit of the Diocese’ religious purposes, neither the CCB nor the subagents operated primarily for religious purposes. I have noted before that the argument, never mind the conclusion, is counter intuitive. It seems crazy to think that a CATHOLIC charity is not operated for religious purposes but that is what the court said.
Instead, the Court interpreted the phrase “religious purposes” the way federal tax law interprets the exemption for churches – which ought to be called “organized worship,” instead, so as not to bias the law towards western conceptions. Anyway, the Court said that “religious purposes” for exemption from the unemployment tax requires proselytizing activities:
It further charted “[t]ypical activities of an organization operated for religious purposes” as including: (a) corporate worship services, including due administration of sacraments and observance of liturgical rituals, as well as a preaching ministry and evangelical outreach to the unchurched and missionary activity in partibus infidelium; (b) pastoral counseling and comfort to members facing grief, illness, adversity, or spiritual problems; (c) performance by the clergy of customary church ceremonies affecting the lives of individuals, such as baptism, marriage, burial, and the like; (d) a system of nurture of the young and education in the doctrine and discipline of the church, as well as (in the case of mature and well developed churches) theological seminaries for the advanced study and the training of ministers.
. . .
The record demonstrates that CCB and the sub-entities, which are organized as separate corporations apart from the church itself, neither attempt to imbue program participants with the Catholic faith nor supply any religious materials to program participants or employees. Although not required, these would be strong indications that the activities are primarily religious in nature.
. . .
Our own precedent, albeit in another First Amendment context, further bolsters this conclusion. In Coulee Catholic Schools, 320 Wis. 2d 275, ¶48, we distinguished “one religiously-affiliated organization committed to feeding the homeless [that] has only a nominal tie to religion” from “another religiously-affiliated organization committed to feeding the homeless [that] has a religiously infused mission involving teaching, evangelism, and worship” for purposes of the ministerial exception. CCB and the sub-entities fit into the former category. Both employment with the organizations and services offered by the organizations are open to all participants regardless of religion.
To require proselytizing is to be content neutral with regard to religion and may just save the case from constitutional challenge raised by the dissent. The dissent argues that it is a violation of the First Amendment for any court to decide what constitutes “religion” and then to make distinctions between those that are and those that ain’t. But I am not sure the Wisconsin Supreme Court decided that the CCB and its subagents were not religious as much as it decided that CCB and the subagents were insufficiently churchy because they don’t proselytize. The other two exceptions in the statute strongly suggest that the Wisconsin law intends to exempt churches qua churches, not just religiously motivated organizations. The statute supports the notion that any organization affiliated with a religious purpose – as were the CCB and all its subagents – could be exempted. The Court thought that way too broad a loophole and would deprive all sorts of employees from unemployment compensation protection. Instead, the Court inquired whether CCB and its subagents were proselytizers – like all organized worship groups, presumably – and having determined that they weren’t proselytizers, concluded that they were not eligible for the exemption. In effect, the Court held that only churches acting as such are exempt, not just religious organizations.
Nobody argued, by the way, that CCB (as opposed to the subagents) ought to be considered churchy via the integral part doctrine. By that, I mean that if the CCB were not a separate organization but instead operated under the Diocese’ legal existence, it would surely qualify because the Diocese undoubtedly proselytizes. The interposition of the corporate legal form should not defeat the exemption. The Court held that its only CCB’s activities that count, never mind that it is wholly controlled by the Bishop. There is no integral part boost, as would apply under federal law.
The dissent’s argument challenges the constitutionality of any distinction between churchy activities and a broader definition of religious activities. Media reports indicate that CCB and the subagents intend to file a petition for cert and if that is successful, the only thing the U.S. Supreme Court could do would be to declare the distinction unconstitutional. Now that would upset a whole apple cart of religious and church tax exemption.
darryll k. jones