WI Supreme Court: Catholic-aligned charities don't get an automatic religious tax break

A shocking 4-3 ruling means faith-adjacent groups will have to do more to earn a tax exemption

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Wisconsin’s Supreme Court issued a shocking (and thoughtful) ruling on Thursday saying that a non-profit organization cannot get out of paying unemployment taxes just because it happens to be overseen by a religious ministry.

The 4-3 decision (elections matter!) is a remarkable defense of church/state separation—and it infuriated the Christian Nationalists who have come to rely on the courts to do their bidding.

Catholic Charities (screenshot via YouTube)

The case involved the Wisconsin Unemployment Compensation Act. In short, employers in the state are required to give money to the government to help pay eligible citizens temporary benefits when they’re out of work. But in 1972, religious non-profits were declared exempt from the law. Specifically, the law said that non-profits that are run by a church/ministry and that operate “primarily for religious purposes” do not have to pay into the system.

Last year, an appellate court ruled that Catholic Charities Bureau (along with four of its sub-entities) were not eligible for that exemption. While no one doubted they were run by the Catholic Diocese of Superior, there was disagreement over whether their work was religious in nature.

For example, the CCB-aligned groups assist with job placement, food services, and helping people with developmental disabilities. All of those are undoubtedly important, and the CCB says that the desire to help the “poor and disadvantaged” is an extension of their faith.

But helping the poor and disadvantaged is not inherently religious.

In fact, all those services they provide are secular in nature. Just because those groups happen to be overseen by the Catholic Church doesn’t mean they’re working to advance Catholicism. And if they’re not actively and directly promoting their faith, then why do they deserve a tax exemption meant to benefit religious organizations?

For decades, the CCB paid the unemployment taxes because they themselves said their work was “charitable,” “educational,” and “rehabilitative.” Not “religious.”

But in 2015, they decided to apply for the religious exemption… and got rejected. Over the next several years, that decision was reversed, then reversed again. The same thing happened in the courts.

The court of appeals concluded that "for an employee's services to be exempt from unemployment tax the organization must not only have a religious motivation, but the services provided—its activities—must also be primarily religious in nature."

When the Wisconsin Supreme Court considered the case, they arrived at the same conclusion. They couldn’t just look at the Catholic Church for being at the top of the organizational pyramid, or else anything under them would qualify as religious even when it clearly was not. Therefore they had to look at the sub-groups themselves; they had to look at the “activities,” not the stated “motivations.”

To put that another way, it didn’t matter if a group claimed to be Catholic... because literally any organization could say they were religious in nature and get out of paying the tax. What mattered was what the organization did.

When the justices considered that, it was obvious that the tax exemptions were never intended for these particular groups.

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.

…

CCB's and the sub-entities' activities are primarily charitable and secular. The sub-entities provide services to individuals with developmental and mental health disabilities. These activities include job training, placement, and coaching, as well as services related to activities of daily living. CCB provides background support and management services for these activities—a wholly secular endeavor…

Such services can be provided by organizations of either religious or secular motivations, and the services provided would not differ in any sense…

…

Although CCB and the sub-entities assert a religious motivation behind their work, the statutory language indicates that this is not enough to receive the exemption. An objective examination of the actual activities of CCB and the sub-entities reveals that their activities are secular in nature. We therefore conclude that CCB and the sub-entities are not operated primarily for religious purposes…

There could have been a different outcome if the Catholic Church was literally running these organizations, but that wasn’t the case. The Church just oversees these groups at arm’s length. From here on out, at least in Wisconsin, charities will have to do a lot more than point to a nearby cross to prove they deserve a faith-based exemption under the law.

It’s an astonishing ruling in large part because it feels courageous for a powerful court to state the obvious. Just because an organization cites a religious link doesn’t make it religious. (It’s a far cry from the U.S. Supreme Court treating Hobby Lobby as a Christian company based on its owners whims.)

Just consider what could have happened if the decision went the other way:

If the charity groups had prevailed, the next step would be arguments to exempt religious hospitals and colleges, such as Marquette University, from paying the unemployment tax, [Patrick Elliott, an attorney for the Freedom From Religion Foundation,] said.

“It’s really a win for employees who work for religious organizations,” Elliott said. “They get coverage under the Wisconsin unemployment system.”

If you need even more proof that the majority’s decision was correct, just consider that the dissenting opinion began with a Bible verse… as if that should matter.

It is deeply ironic that, one paragraph after citing the Bible, Justice Rebecca Grassl Bradley went on to say that the liberal majority was “impermissibly entangling the government in church doctrine.”

The other side is wrongly merging church and state, said the justice who cited a Bible verse in her legal opinion.

The religious groups defending CCB are predictably furious and are vowing to take this up with their even more powerful allies:

“The Wisconsin Supreme Court got this case dead wrong,” said Eric Rassbach, vice president and senior counsel at the Becket Fund for Religious Liberty, a law firm that is representing Catholic Charities and its subentities. “CCB is religious, whether Wisconsin recognizes that fact or not.”

The firm will appeal to the U.S. Supreme Court, said Sarah Buckley, a Becket spokesperson.

It’s telling that the response doesn’t bother mentioning the facts of the case. CCB is religious in name, yes, but the work its sub-entities are doing is not, and that’s what this case was all about.

A ruling like this was long overdue.

After all, we know there are megachurch pastors who don’t pay taxes on their mansions because they can claim those homes are owned by their ministries. Should religious ministries be allowed to claim property tax exemptions on everything they own, even when that land isn’t being used for religious reasons? Of course not—and that’s usually how courts have seen it, too.

Serving the poor and helping the needy aren’t inherently religious just because some people want to pretend they are.

At the end of the day, none of this prevents the Catholic Church from doing a damn thing. They can still help people if they believe their faith calls for. No one is stopping them.

If anything, by paying into the system, they will actually be doing even more good by helping people going through unemployment. It’s a win-win!

By appealing this decision to the U.S. Supreme Court, the Catholic Church and the Becket Fund folks are basically saying that screwing over the unemployed is also a part of their faith, negating whatever goodwill they may have preserved by focusing on helping the less fortunate.

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