A Young Woman In A Wheelchair Reaching Toward A Book On A Library Shelf While A Young Woman Standing Behind The Wheelchair Reaches To Help Her

March 22, 2024 – Four sub-entities of the charitable arm of the Roman Catholic Church don’t qualify for an unemployment tax exemption because their activities are secular, the Wisconsin Supreme Court has ruled (4-3) in Catholic Charities Bureau, Inc. v. State of Wisconsin Labor and Industry Review Commission, 2024 WI 13 (March 14, 2024).

Justice Ann Walsh Bradley wrote the 50-page majority opinion, joined by Justice Rebecca Dallet, Justice Jill Karofsky, and Justice Janet Protasiewicz.

Justice Rebecca Bradley dissented, joined by Chief Justice Annette Ziegler and Justice Brian Hagedorn, who wrote a separate dissent.

Like every other Roman Catholic diocese in Wisconsin, the Diocese of Superior maintains a social ministry arm called Catholic Charities Bureau (CCB), Inc.

Various CCB sub-entities operate 63 programs that serve the elderly, the disabled, children with special needs, poor families, and people facing disaster.

CCB’s executive director oversees the sub-entities. Neither the employees of the CCB sub-entities nor those they serve are required to be members of any religion.

Subject to Unemployment Scheme

In 2015, the Douglas County Circuit Court ruled that one of the CCB sub-entities was operated primarily for religious purposes and therefore exempt from the unemployment compensation law.

Jeff M. Brown
Jeff M. Brown , Willamette Univ. School of Law 1997, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by
email or by phone at (608) 250-6126.

In 2016, CCB and four of its sub-entities filed a claim with the state Department of Workforce Development (DWD), seeking to get out of the unemployment compensation system.

DWD denied the request. When CCB appealed, an administrative law judge (ALJ) reversed DWD.

DWD appealed to the state Labor and Industry Review Commission (LIRC) and LIRC reversed the ALJ.

CCB appealed to the Douglas County Circuit Court and the court reversed LIRC.

After the Wisconsin Court of Appeals reversed the circuit court, CCB appealed.

Motivations and Activities

CCB argued that it was “an organization operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches” under Wis. Stat. section 108.02(15)(h)(2), and as such was exempt from the state unemployment scheme.

In her majority opinion, Justice A. Bradley concluded that it was the purpose of CCB and the sub-entities that mattered when analyzing whether the sub-entities qualified for the exemption under section 108.02(15)(h)(2), not the purpose of the religious affiliation.

“If the tax-exempt status of a nonprofit organization operating under the umbrella of a church is predicated on the religious purposes of the church, an organization operated or controlled by a church always will automatically satisfy the first condition,” A. Bradley wrote.

“In other words, the second condition of Wis. Stat. section 108.02(15)(h)2. would subsume the first.”

CCB argued that in applying section 108.02(15)(h)2., courts should look primarily at its motivations in operating the sub-entities. LIRC argued that the court should look instead at the nature of the sub-entities’ activities.

Justice A. Bradley noted that the relevant statutory phrase contained the words “operated” and “purposes.” She concluded that the statute, when read as a whole, required an examination of both CCB’s motivations and the activities of the sub-entities.

Liberal Construction

Justice A. Bradley pointed out that under Wisconsin Supreme Court caselaw, the unemployment compensation statute was a remedial statute that should be liberally construed, with its exceptions being narrowly construed.

She concluded that CCB and the sub-entities were not “operated primarily for religious purposes” based on the following:

  • CCB and the sub-entities are organized as corporations separate from the Roman Catholic Church;

  • CCB and the sub-entities did not proselytize program participants or employees; and

  • the services provided by the sub-entities were charitable and secular.

“Such services can be provided by organizations of either religious or secular motivations, and the services provided not differ in any sense,” A. Bradley wrote.

First Amendment Issues

CCB argued that by denying it the exemption provided by section 108.02(15)(h)2., the state had violated the Establishment Clause and the Free Exercise Clause of the First Amendment.

The Establishment Clause prohibits excessive government entanglement in religion. The Free Exercise Clause prohibits the government from burdening the exercise of religion.

The majority concluded that CCB’s motivations and the activities of the sub-entities did not entangle the government in religion because it required only “a minimal judicial inquiry into religion, as there is no examination of whether CCB’s or the sub-entities’ activities are consistent or inconsistent with Catholic doctrine.”

Section 108.02(15)(h)2., A. Bradley wrote, “does not concern matters that are ‘strictly’ or even remotely ‘ecclesiastical,’ which belong to the church alone.”

Regarding CCB’s free exercise argument, Justice A. Bradley noted that the U.S. Supreme Court has held that the imposition of a generally applicable tax, while it reduces the amount of money that a church has to spend on religious activities, does not impermissibly burden its rights under the Free Exercise Clause.

“Such is the nature of the unemployment tax at issue here,” A. Bradey wrote.

R.G. Bradley Dissent: Majority Misinterprets Statute

Justice R. Bradley argued in a 73-page dissent that the majority had misinterpreted section 108.2(15)(h)2. and done so in a way that squarely violated the First Amendment’s Establishment Clause.

R. Bradley argued that the majority erred by looking to the activities of the sub-entities to determine whether they and CCB were “operated for a religious purpose” under the statute.

To know whether the sub-entities were operated for a religious purpose, R. Bradley argued, it was necessary to look at the motive of CCB.

“Apparently, the majority would ask a car why it is being operated rather than asking the driver,” Justice R. Bradley wrote. “If the majority’s analysis seems ridiculous, that’s because it is.”

CCB’s activities were part of the charity’s religious exercise, R. Bradley argued, meaning they were religious.

“This court belittles Catholic Charities’ faith – and many other faith traditions – by mis-characterizing their religiously motivated charitable activities as ‘secular in nature,’” Justice R. Bradley wrote.

R. Bradley also noted that canon holding that remedial statutes should be liberally construed has faced criticism by both scholars and jurists over the last 20 years.

Justice R. Bradley also argued that by concluding that because the sub-entities don’t attempt to spread religious doctrine, they are not operated for a religious purpose, the majority violated the Free Exercise Clause’s prohibition against discriminating against religious conduct.

“The majority’s test prefers some types of worship (e.g., proselytizing) over others (e.g., religiously motivated charity).”

Hagedorn Dissent: Narrow Construction an Error

In a short dissent, Judge Hagedorn wrote that he agreed with Judge R. Bradley’s dissent – especially her statutory construction – although he said he would not have reached the constitutional issues.

“There is no particular reason to assume a statutory exemption in an area like religious freedom – a constitutionally protected category to which the law regularly gives wide latitude – should be construed narrowly,” Hagedorn wrote.