U.S. Supreme Court to Decide If Catholic Charities Agency is Eligible for Tax Exemption
Justices will review a Wisconsin Supreme Court decision denying the exemption on grounds that the nonprofit's work is not primarily religious.
By Gary Gately
The U.S. Supreme Court will decide whether Wisconsin can deny the charitable arm of a Catholic diocese an unemployment tax exemption on grounds that its work is not primarily religious.
Justices will review a divided Wisconsin Supreme Court decision denying the exemption to the Catholic Charities Bureau (CCB) of the Diocese of Superior.
In its 4-3 March ruling, the state court ruled that the work of the CCB and four affiliated organizations is “primarily charitable and secular” and that the CCB is therefore ineligible for the tax exemption. Under Wisconsin law, nonprofit employers must pay an unemployment tax that’s used to compensate jobless workers unless exempted because they’re “operated primarily for religious purposes.”
The state court also said that the CCB and its affiliated organizations serve and employ Catholics and non-Catholics alike and “neither attempt to imbue program participants with the Catholic faith nor supply any religious materials to program participants or employees.”
The CCB, which has paid the state unemployment tax since 1972, appealed to the U.S. Supreme Court, arguing that the state court decision violated its First Amendment right to religious freedom.
“Wisconsin is trying to make sure no good deed goes unpunished,” said Eric Rassbach, vice president and senior counsel at Becket Fund for Religious Liberty, which is representing the CCB. “Penalizing Catholic Charities for serving Catholics and non-Catholics alike is ridiculous and wrong. We are confident the Supreme Court will reject the Wisconsin Supreme Court’s absurd ruling.”
In their petition to the U.S. Supreme Court, Becket lawyers also said the court should take the case to resolve several conflicting state supreme court rulings on similar issues.
The closely watched Wisconsin case could have far-reaching implications: Forty-seven states and the federal government grant unemployment tax exemptions to organizations operated for religious purposes.
And in recent years, the U.S. Supreme Court has consistently ruled in favor of churches and other religious plaintiffs in disputes with states.
Catholic, Jewish, Lutheran, Mormon and Islamic organizations across the country have filed state U.S. Supreme Court briefs in support of the CCB.
The Wisconsin Supreme Court said in its ruling that the work of CCB and its affiliates helping low-income, disabled and elderly people represents an “expression of the social ministry of the Catholic Church” but is “not religious per se.”
“In other words, they offer services that would be the same regardless of the motivation of the provider, a strong indication that the subentities do not ‘operate primarily for religious purposes,’” Justice Ann Walsh Bradley wrote for the majority.
“If we looked to the church's purpose in operating the organization only, then any religiously affiliated organization would always be exempt,” Bradley added.
State officials urged the U.S. Supreme Court to decline to hear the case, writing in a brief: “Courts routinely deny religious tax exemptions to entities that assert religious motivations without overly entangling themselves in religious matters.”
In a brief filed with the U.S. Supreme Court in support of the CCB, however, the Wisconsin Catholic Conference disputed the state court’s conclusion that the organization’s work is not primarily religious. Rather, the brief said, the CCB’s work goes to the heart of Catholic teachings — “looking at others through the very eyes of Jesus” and “seeing Jesus in the face of the poor.”
Bishop James Powers of the Diocese of Superior said in a statement: “Catholic Charities Bureau is on the front lines bringing love, healing and hope to the most vulnerable members of our community. We pray the Court recognizes that this work of improving the human condition is our answer to Christ’s call to serve those in need.”
But the Freedom From Religion Foundation (FFRF), which supports separation of church and state, warned that granting the CCB the exemption could extend to organizations such as Catholic hospitals and universities.
That, in turn, could result in thousands of healthcare and educational workers in Wisconsin “losing their unemployment overnight,” the FFRF said in a statement.
“Granting an exemption to the employers and other religiously-affiliated organizations would limit the state’s ability to control for the economic risk of widespread unemployment,” the statement said. “This could have disastrous effects not just on the workers who lose their unemployment benefits, but also on the rest of the economy.”
Religious organizations in the U.S. have long received exemptions from taxes — most often property taxes — but the Wisconsin case appears to be the highest-profile case involving unemployment taxes.