Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission

Facts of the Case

Provided by Oyez

Catholic Charities Bureau (CCB) is the social ministry arm of the Diocese of Superior in Wisconsin, operating since 1917 to provide services to the poor and disadvantaged as an expression of the Catholic Church's social ministry. The organization is controlled by the bishop of the Diocese, who serves as CCB’s president and appoints its membership. CCB’s mission is to provide service to people in need and advocate for justice, with a philosophy rooted in being “an effective sign of the charity of Christ.” The organization makes no distinctions based on race, sex, or religion in its services, employment, or board appointments.

Under CCB’s umbrella are four sub-entities involved in this case: Barron County Developmental Services, Black River Industries, Diversified Services, and Headwaters. These entities provide various social services, including job placement and coaching for people with disabilities, community-based training, daily living services, and support programs. While CCB oversees these sub-entities and provides management services, the sub-entities themselves are primarily funded through government contracts and do not receive direct funding from the Diocese. Neither employees nor service recipients are required to be of any particular religious faith, and the programs do not provide religious training or attempt to promote the Catholic faith.

CCB and its sub-entities sought an exemption from state unemployment insurance contributions in 2016, but the Department of Workforce Development denied the exemption. An administrative law judge reversed that decision, but then the Labor and Industry Review Commission (LIRC) reversed again, finding the organizations were not operated primarily for religious purposes. Then, the circuit court sided with CCB, and then the Wisconsin Court of Appeals reversed and reinstated LIRC’s decision. Ultimately, the Wisconsin Supreme Court affirmed, holding that the organizations did not qualify for the religious purposes exemption under state law.

Questions

Does a state violate the First Amendment’s religion clauses by denying a religious organization an otherwise-available tax exemption because the organization does not meet the state’s criteria for religious behavior?

Conclusions

A state law that exempts nonprofit organizations from unemployment taxes for being “operated primarily for religious purposes” may not condition that exemption on particular theological practices such as proselytizing or serving only fellow believers. Justice Sonia Sotomayor authored the opinion for the unanimous Court.

The First Amendment prohibits government favoritism or discrimination between religions, particularly when based on theological differences. Wisconsin’s interpretation of the exemption statute at issue favored religious groups that proselytize or limit services to members of their own faith and penalized groups that do not adopt these religious practices. This amounted to an unconstitutional denominational preference because it relied on inherently religious criteria. The Court rejected the State’s argument that the exemption could be conditioned on religious motivation or on activities that “express and inculcate” doctrine, emphasizing that all such standards require impermissible theological line-drawing and thus fail strict scrutiny.

The exemption in Wisconsin law as enforced against Catholic Charities Bureau and its affiliates cannot survive strict scrutiny; it was not narrowly tailored to serve a compelling government interest. The State’s stated goals—ensuring unemployment coverage and avoiding religious entanglement—could not justify its selective exemption based on religious practice. For example, petitioners already offered equivalent unemployment benefits through their own system, and Wisconsin’s regime was both underinclusive and overinclusive: it exempted some similarly situated religious providers while denying the exemption to petitioners. The law thus failed to achieve its aims without intruding on religious neutrality.

Justice Clarence Thomas authored a concurring opinion emphasizing that the organizational structure of Catholic Charities should be viewed as integrated with the Diocese for First Amendment purposes, not as separate legal corporations.

Justice Ketanji Brown Jackson authored a concurring opinion focusing on how the statute should be interpreted as a matter of textual and legislative meaning, arguing that “religious purposes” refers to the religious function an organization performs, not to its motivations or doctrinal methods.