Another Tax Day has come and gone, but a big taxation question in Wisconsin remains unresolved, in the wake of a recent ruling that Catholic Charities in the Diocese of Superior isn’t religious enough in the eyes of the state’s Supreme Court to qualify for a religious tax exemption.
The nonprofit organization, called Catholic Charities Bureau (CCB), provides a host of social services, including job training and housing support for people with mental and physical disabilities.
As Bishop James Powers explains in a 2023 press release, “As our diocese’s social-ministry arm, Catholic Charities Bureau and their subsidiary ministries provide essential resources to the most vulnerable members of our community. These ministries carry out the redeeming work of Our Lord by reflecting Gospel values; everything they do is steeped in the mission of the Church.”
Yet according to the Wisconsin Supreme Court, the work CCB and its affiliates do is secular, not religious. For that reason, the court on March 14 ruled that CCB and four other affiliated charities aren’t exempt from paying state unemployment taxes to cover their employees.
How the justices arrived at this conclusion makes the most arcane questions on the IRS 1040 tax form seem self-evident by comparison.
Since 1972, the Wisconsin Unemployment Compensation Act has exempted qualified religious organizations from having to pay the tax, if they provide unemployment coverage through their own funds, as the Diocese of Superior does.
Specifically, the law states that the exemption applies to organizations “operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches.”
One would think, from a commonsense reading of the law, that a nonprofit group like Catholic Charities Bureau — or any charitable arm of a Catholic diocese — would fill the bill.
But in Wisconsin it has never been that simple.
In 1972, the state’s Department of Industry, Labor and Human Relations ruled that CCB didn’t qualify for the exemption. The department cited a form CCB submitted that described the nature of its operations as “charitable,” “educational” and “rehabilitative,” rather than “religious.” The state evidently sees this 52-year-old form as some kind of smoking gun. CCB has been forced to pay the unemployment tax ever since.
In 2015, a county circuit court determined that another CCB affiliate did qualify for the exemption. Naturally, that prompted CCB and four other affiliated charities to petition the state to change their status. The state turned them down, which led to the litigation that eventually made its way to the state Supreme Court.
Several pages of the court’s decision are devoted to parsing the words “organization,” “operate,” “primarily” and “purposes.” You can read the hair-splitting details here.
In the end, the court affirmed the state’s position that the law restricts the exemption to charities whose motives and activities are religious in nature. The majority ruled that CCB and its affiliates fail to meet the latter criterion, because the services they provide are comparable to those offered by nonreligious charities.
As its decision tries to explain:
“The record demonstrates that CCB and the sub-entities … 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.”
Fortunately, Becket, the religious-liberty-focused law firm, is representing CCB and the other charities and plans to appeal the ruling to the U.S. Supreme Court. One hopes that the federal justices will demonstrate greater common sense.
Wisconsin’s position is puzzling, to say the least. A big part of the problem is that state lawmakers did such a ham-handed job of writing the tax act in the first place. Why even offer a religious exemption if the criteria are so narrow that even St. Mother Teresa wouldn’t have qualified? Isn’t the point of such tax exemptions to encourage charities to render the kind of social services the state would otherwise have to provide (and pay for) itself?
If charities are privately providing their employees with unemployment benefits, it’s hard to see who would be harmed if religious and nonreligious charities were both exempt — unless the state’s hard line is really about something else.
But there’s a larger issue at stake here. Slowly but surely, hard-core secularists are trying to narrow religious-liberty protections to cover only explicit expressions of religious faith, such as worship, religious instruction and evangelization. This wrong reading of the First Amendment is blind to the notion of putting one’s faith in action.
As followers of Jesus Christ, we have an obligation to help the poor, the sick, the homeless and others in need. As we read in James 2:15-17:
“If a brother or sister has nothing to wear and has no food for the day, and one of you says to them, ‘Go in peace, keep warm, and eat well,’ but you do not give them the necessities of the body, what good is it? So also faith of itself, if it does not have works, is dead.”
The Catechism of the Catholic Church reminds us of this sacred duty:
“Respect for the human person proceeds by way of respect for the principle that ‘everyone should look upon his neighbor (without any exception) as ‘another self,’ above all bearing in mind his life and the means necessary for living it with dignity” (1931).
The Catechism also makes the point that the state alone, for all its powers, can’t achieve true social justice.
“No legislation could by itself do away with the fears, prejudices, and attitudes of pride and selfishness which obstruct the establishment of truly fraternal societies,” it explains. “Such behavior will cease only through the charity that finds in every man a ‘neighbor.’”
In the end, it’s not tax breaks but Jesus himself who motivates our charitable work as Catholics. There is, after all, a higher law than the Wisconsin Unemployment Compensation Act to consider in this case.
May God bless you!