Catholic Charities Bureau, Inc. v. State of Wisconsin Labor and Industry Review Commission

2023 WI App 12

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2020AP2007

†Petition for Review Filed

Complete Title of Case:

CATHOLIC CHARITIES BUREAU, INC., BARRON COUNTY
DEVELOPMENTAL SERVICES, INC., DIVERSIFIED SERVICES, INC.,
BLACK RIVER INDUSTRIES, INC. AND HEADWATERS, INC.,

PETITIONERS-RESPONDENTS,†

V.

STATE OF WISCONSIN LABOR AND INDUSTRY REVIEW COMMISSION,

RESPONDENT-CO-APPELLANT,

STATE OF WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT,

RESPONDENT-APPELLANT.

Opinion Filed: February 14, 2023
Submitted on Briefs:
Oral Argument: August 3, 2022

JUDGES: Stark, P.J., Hruz and Gill, JJ.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the respondent-appellant, the cause was submitted on the
briefs of Christine L. Galinat of Department of Workforce
Development. There was oral argument by Jeffrey J. Shampo of
Department of Labor and Industry Review Commission.
Respondent
ATTORNEYS: On behalf of the petitioners-respondents, the cause was submitted on
the brief of and oral argument by Kyle Torvinen of Torvinen, Jones,
Routh & Saunders, S.C., Superior.

2
2023 WI App 12

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
February 14, 2023
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2020AP2007 Cir. Ct. No. 2019CV324

STATE OF WISCONSIN IN COURT OF APPEALS

CATHOLIC CHARITIES BUREAU, INC., BARRON COUNTY
DEVELOPMENTAL SERVICES, INC., DIVERSIFIED SERVICES, INC.,
BLACK RIVER INDUSTRIES, INC. AND HEADWATERS, INC.,

PETITIONERS-RESPONDENTS,

V.

STATE OF WISCONSIN LABOR AND INDUSTRY REVIEW COMMISSION,

RESPONDENT-CO-APPELLANT,

STATE OF WISCONSIN DEPARTMENT OF WORKFORCE DEVELOPMENT,

RESPONDENT-APPELLANT.

APPEAL from an order of the circuit court for Douglas County:
KELLY J. THIMM, Judge. Reversed.

Before Stark, P.J., Hruz and Gill, JJ.
No. 2020AP2007

¶1 STARK, P.J. This unemployment insurance case requires us to
determine the proper interpretation of the religious purposes exemption under WIS.
STAT. § 108.02(15)(h)2. (2019-20).1 The petitioner-respondents are the Catholic
Charities Bureau, Inc. (CCB) as well as four of its sub-entities: Barron County
Developmental Services, Inc.; Diversified Services, Inc.; Black River Industries,
Inc.; and Headwaters, Inc.2 CCB asserts that it is exempt from Wisconsin’s
Unemployment Compensation Act under § 108.02(15)(h)2. because it is “operated
primarily for religious purposes.” In considering whether it is exempt under the
statute, CCB argues that the proper consideration is whether it is operated primarily
for a religious motive or reason.

¶2 Conversely, the Department of Workforce Development (DWD) and
the Labor and Industry Review Commission (LIRC)3 contend that whether CCB is
operated primarily for religious purposes depends on whether its activities are
primarily religious in character. The parties also dispute whether the religious
purposes exemption is ambiguous and, if so, how that ambiguity should be resolved.
Finally, both CCB and DWD argue, albeit for different reasons, that adopting the
opposing party’s interpretation of the religious purposes exemption will violate the
First Amendment to the United States Constitution.

1
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.
2
For ease of reading, we will refer to CCB and its sub-entities collectively as CCB when
referring to their arguments made on appeal, unless referring to the sub-entities individually.
Otherwise, we refer to them as CCB and its sub-entities.
3
DWD filed a brief in this appeal, and LIRC filed a letter indicating that it concurred with
the arguments raised in DWD’s brief and would not be submitting a separate brief. For ease of
reading, we will therefore refer to the appellants as DWD throughout, unless referring to LIRC’s
decision.

2
No. 2020AP2007

¶3 For the reasons that follow, we conclude that the reviewing body must
consider the nonprofit organization’s motives and activities to determine whether
that organization is “operated primarily for religious purposes” under WIS. STAT.
§ 108.02(15)(h)2., such that the religious purposes exemption to unemployment
taxation applies. We further determine that the First Amendment is not implicated
in this case. Given the facts here, we conclude that LIRC correctly determined that
CCB and its sub-entities are not organizations operated primarily for religious
purposes; thus, employees of the organizations do not perform their services under
excluded employment as that is defined under § 108.02(15)(h)2. We therefore
reverse the circuit court’s order and reinstate LIRC’s decision.4

BACKGROUND

¶4 The facts of this case are undisputed. Every Roman Catholic diocese
in Wisconsin has a Catholic Charities entity that functions as the diocese’s social
ministry arm. Catholic Charities’ stated mission is “to provide service to people in
need, to advocate for justice in social structures and to call the entire church and
other people of good will to do the same.” During the administrative proceedings
in this case, Archbishop Jerome Listecki testified that this mission is “rooted in
scripture,” which “mandate[s]” that the Catholic Church “serve the poor.”
According to Archbishop Listecki, inherent in the church’s teachings is a “demand”
that Catholics respond in charity to those in need.

¶5 CCB is the Catholic Charities entity for the Diocese of Superior,
Wisconsin. CCB’s statement of philosophy provides that the “purpose” of CCB is

4
This opinion was first released on December 13, 2022. Subsequently, on our own
motion, we withdrew our prior opinion on February 9, 2023, which was within the deadline
provided under WIS. STAT. RULE 809.24(3).

3
No. 2020AP2007

“to be an effective sign of the charity of Christ” by providing services that are
“significant in quantity and quality” and are not duplicative of services already
adequately provided by public or private organizations. CCB provides these
services according to an “Ecumenical orientation,” such that “no distinctions are
made by race, sex, or religion in reference to clients served, staff employed and
board members appointed.”

¶6 Under CCB’s umbrella, numerous separately incorporated nonprofit
sub-entities operate sixty-three “programs of service,” which provide aid “to those
facing the challenges of aging, the distress of a disability, the concerns of children
with special needs, the stresses of families living in poverty and those in need of
disaster relief.” As noted above, four of those sub-entities are at issue in this appeal.

¶7 Barron County Developmental Services, Inc. (BCDS) is a
“[c]ommunity rehabilitation program providing services to individuals with
developmental disabilities” that focuses “on the development of vocational and
social skills that allow a person to reach their highest potential within the
community.” BCDS contracts with DWD’s Division of Vocational Rehabilitation
(DVR) to perform job placement, job coaching, and other employment services to
assist individuals with disabilities to obtain employment in the community. BCDS
is funded “primarily” through government funding via DVR, but it also receives
some funding from private companies. It receives no funding from the Diocese of
Superior. BCDS was formerly known as Barron County Developmental Disabilities
Services, but in December 2014, its board of directors “requested to become an
affiliate agency” of CCB and its name was changed. Prior to becoming a sub-entity
of CCB, BCDS had no religious affiliation. The type of services and programming
provided by the organization did not change after it became affiliated with CCB.

4
No. 2020AP2007

¶8 Black River Industries, Inc. (BRI) provides “in-home services,
community-based services, and facility-based services” to individuals with
developmental disabilities, mental health disabilities, and limited incomes. To serve
those in need, BRI works with DVR to provide participants with job training skills;
it provides transportation services to disabled adults and seniors; it has a contract
with Taylor County to provide mental health services; and it has a food service
production facility, a paper shredding program, and a mailing services program to
serve the community and provide job training. “[M]uch” of BRI’s funding comes
from government organizations, including “county services, Department of Health
Services, Long-Term Care Division[,] as well as” DVR. BRI receives no funding
from the Diocese of Superior.

¶9 Diversified Services, Inc. (DSI) provides services to individuals with
developmental disabilities. To do so, DSI offers “meaningful employment
opportunities” to these individuals and also hires individuals without disabilities to
do production work. Most of DSI’s funding comes from Family Care, a Medicaid
long-term care program, and from private contracts. DSI receives no funding from
the Diocese of Superior.

¶10 Headwaters, Inc., provides “various support services for individuals
with disabilities,” including “training services related to activities of daily living,”
employment-related training services, and job placement. In addition, Headwaters
has work-related contracts for individuals to learn work skills while earning a
paycheck; provides Head Start home visitation services to eligible families with
children; and provided birth-to-three services before Tri-County Human Services
assumed providing those services. The majority of Headwaters’ funding comes
from government grants, and it too receives no funding from the Diocese of
Superior.

5
No. 2020AP2007

¶11 CCB’s role is to provide management services and consultation to its
sub-entities, establish and coordinate the sub-entities’ missions, and approve capital
expenditures and investment policies. CCB’s executive director, who is not
required to be a Catholic priest, oversees each sub-entity’s operations. Nonetheless,
CCB’s internal organizational chart establishes that the bishop of the Diocese of
Superior oversees CCB in its entirety, including its sub-entities, and is ultimately
“in charge of” CCB. New CCB employees are provided with CCB’s mission
statement, statement of philosophy, and code of ethics, and they are informed that
their employment “is an extension of Catholic Social Teachings and the Catechism
of the Church.” Employees of CCB and its sub-entities are not required to be
members of the Catholic faith, but they are prohibited from engaging in activities
that violate Catholic social teachings.

¶12 As noted above, CCB’s sub-entities provide services to all people in
need, regardless of their religion, pursuant to the Catholic social teaching of
“Solidarity,” which is a belief that “we are our brothers’ and sisters’ keepers,
wherever they live. We are one human family.” Program participants are not
required to attend any religious training or orientation to receive the services that
CCB’s sub-entities provide. Neither CCB nor its sub-entities engage in devotional
exercises with their employees or program participants nor do they disseminate
religious materials to those individuals, except for providing new hires with the
CCB mission statement and code of ethics and philosophy. Neither CCB nor its
sub-entities “try to inculcate the Catholic faith with program participants.”

¶13 CCB became subject to Wisconsin’s Unemployment Compensation
Act, WIS. STAT. ch. 108, in 1972, following CCB’s submission of an employer’s
report stating that the nature of its operations was charitable, educational, and

6
No. 2020AP2007

rehabilitative.5 CCB’s sub-entities report their employees under CCB’s
unemployment insurance account. In 2015, a Douglas County Circuit Court judge
ruled that Challenge Center, Inc.—another CCB sub-entity providing services to
developmentally disabled individuals—was operated primarily for religious
purposes and was therefore exempt from the Unemployment Compensation Act
under the religious purposes exemption, WIS. STAT. § 108.02(15)(h)2. CCB and the
four sub-entities at issue in this appeal then sought a determination from DWD that
they, too, were exempt.

¶14 DWD determined that CCB and the sub-entities did not qualify for the
religious purposes exemption. CCB sought administrative review of that
determination, and an administrative law judge (ALJ) reversed, concluding that
CCB and the sub-entities qualified for the exemption because they were operated
primarily for religious purposes. DWD appealed to LIRC, which reversed the ALJ’s
decision. CCB then sought judicial review, and the circuit court again reversed,
agreeing with the ALJ that CCB and the sub-entities qualified for the exemption.
DWD appeals.

5
CCB and its sub-entities are exempt from federal income tax under section 501(c)(3) of
the Internal Revenue Code under a group exemption. The group exemption includes “the agencies
and instrumentalities and the educational, charitable, and religious institutions operated by the
Roman Catholic Church in the United States, its territories, and possessions” that are subordinate
to the United States Conference of Catholic Bishops.

7
No. 2020AP2007

DISCUSSION

¶15 “Wisconsin’s unemployment compensation statutes embody a strong
public policy in favor of compensating the unemployed.” Operton v. LIRC, 2017
WI 46, ¶31, 375 Wis. 2d 1, 894 N.W.2d 426. When the Wisconsin Legislature
enacted the Unemployment Compensation Act, it recognized that unemployment in
Wisconsin is “an urgent public problem, gravely affecting the health, morals and
welfare of the people of this state. The burdens resulting from irregular employment
and reduced annual earnings fall directly on the unemployed worker and his or her
family.” WIS. STAT. § 108.01(1). The legislature acknowledged that “[i]n good
times and in bad times unemployment is a heavy social cost, directly affecting many
thousands of wage earners.” Id. As a result, the legislature concluded that “[e]ach
employing unit in Wisconsin should pay at least a part of this social cost, connected
with its own irregular operations, by financing benefits for its own unemployed
workers.” Id. “Consistent with this policy, WIS. STAT. ch. 108 is ‘liberally
construed to effect unemployment compensation coverage for workers who are
economically dependent upon others in respect to their wage-earning status.’”
Operton, 375 Wis. 2d 1, ¶32 (quoting Princess House, Inc. v. DILHR, 111 Wis. 2d
46, 62, 330 N.W.2d 169 (1983)).

I. WISCONSIN STAT. § 108.02(15)(h)

¶16 Nevertheless, Wisconsin’s unemployment insurance law exempts
some services from the “employment” services that are covered by WIS. STAT.
ch. 108.6 The issue in this case, then, is whether CCB and its sub-entities qualify

6
For purposes of the Unemployment Compensation Act, the term “[e]mployment” means
“any service, including service in interstate commerce, performed by an individual for pay.” WIS.
STAT. § 108.02(15)(a).

8
No. 2020AP2007

under one of those exemptions. WISCONSIN STAT. § 108.02(15)(h) sets forth the
statutory formula for the type of exemption that CCB argues is applicable here. That
statute provides:

(h) “Employment” as applied to work for a nonprofit
organization, except as such organization duly elects
otherwise with the department’s approval, does not include
service:

1. In the employ of a church or convention or association
of churches;

2. In the employ of an organization operated primarily for
religious purposes and operated, supervised, controlled, or
principally supported by a church or convention or
association of churches; or

3. By a duly ordained, commissioned or licensed minister
of a church in the exercise of his or her ministry or by a
member of a religious order in the exercise of duties required
by such order.

Sec. 108.02(15)(h). Here, the parties’ dispute is focused on subd. 2., the religious
purposes exemption, which has two requirements: (1) the nonprofit organization is
“operated primarily for religious purposes”; and (2) the nonprofit organization is
“operated, supervised, controlled, or principally supported by a church or
convention or association of churches.”7 Sec. 108.02(15)(h)2. There is no dispute
that CCB and its sub-entities are nonprofit organizations and that they are “operated,
supervised, controlled, or principally supported by a church.” Thus, the only issue
before us is whether CCB and its sub-entities are “operated primarily for religious
purposes” and are therefore exempt from paying unemployment tax on behalf of
their employees. See id.

7
For ease of reading, we will refer to the controlling entity as “a church” throughout this
decision rather than as “a church or convention or association of churches.” See WIS. STAT.
§ 108.02(15)(h)2.

9
No. 2020AP2007

¶17 To date, no Wisconsin Supreme Court decision or published court of
appeals decision has addressed the interpretation of the religious purposes
exemption in WIS. STAT. § 108.02(15)(h)2. Our statute, however, is essentially
identical to the exemption found in the Federal Unemployment Tax Act (FUTA).
See 26 U.S.C. § 3309(b)(1)(B). DWD asserts—and CCB does not dispute—that
§ 108.02(15)(h)2. was enacted to “conform Wisconsin’s unemployment law with
[the] federal law in 26 U.S.C. § 3309(b)(1)(B).” See 1971 Wis. Laws, ch. 53, § 6.
Other states have also included religious purposes exemptions in their
unemployment insurance laws; however, there is a distinct lack of consensus as to
the proper interpretation of the relevant statutory language among these different
jurisdictions.8 Our task, then, is to determine the statute’s meaning based on its
language and relevant legal authority.

II. Standard of Review

¶18 On appeal, we review LIRC’s decision, rather than the decision of the
circuit court. Operton, 375 Wis. 2d 1, ¶18. Our scope and standard of judicial
review of LIRC’s decisions concerning unemployment insurance are established in
WIS. STAT. § 108.09(7). We may confirm or set aside LIRC’s order, but its decision
may be set aside only upon one or more of the following grounds: (1) LIRC acted
without or in excess of its powers; (2) the order or award was procured by fraud;
and (3) LIRC’s findings of fact do not support the order. Sec. 108.09(7)(c)6. An
agency acts outside its power, contrary to § 108.09(7)(c)6.a., when it incorrectly

8
For this reason, we certified the question in this case to our supreme court, but it denied
certification. We subsequently held oral argument in this case on August 3, 2022, in Superior,
Wisconsin.

10
No. 2020AP2007

interprets a statute. See DWD v. LIRC, 2018 WI 77, ¶12, 382 Wis. 2d 611, 914
N.W.2d 625.

¶19 We will uphold LIRC’s findings of fact if they are supported by
credible and substantial evidence. Operton, 375 Wis. 2d 1, ¶18. Whether an
employer has proven that it is exempt from coverage under Wisconsin’s
unemployment system involves the application of facts to a particular legal
standard, which is a conclusion of law that we review independently. See Nottelson
v. DILHR, 94 Wis. 2d 106, 116, 287 N.W.2d 763 (1980). Because the facts of this
case are undisputed, the only issue on appeal is the proper interpretation of WIS.
STAT. § 108.02(15)(h)2. We are not bound by LIRC’s interpretation of a statute.
Operton, 375 Wis. 2d 1, ¶19.9 Therefore, we review LIRC’s legal conclusions de
novo. Mueller v. LIRC, 2019 WI App 50, ¶17, 388 Wis. 2d 602, 933 N.W.2d 645.

9
Relying on Tetra Tech EC, Inc. v. DOR, 2018 WI 75, ¶108, 382 Wis. 2d 496, 914
N.W.2d 21, and Mueller v. LIRC, 2019 WI App 50, ¶17, 388 Wis. 2d 602, 933 N.W.2d 645, the
previous version of this decision suggested that while we no longer defer to administrative agency
decisions on questions of law, we may still afford “due weight” to those decisions as a matter of
persuasion. Although the parties did not address this question on appeal, on our own motion for
reconsideration, we questioned whether “due weight” is appropriately afforded to proceedings
under WIS. STAT. ch. 108, rather than only to general administrative proceedings under WIS. STAT.
ch. 227. We need not and do not resolve this issue, however, as our conclusions remain the same
whether or not we give “due weight” to LIRC’s interpretation of WIS. STAT. § 108.02(15)(h)2.

11
No. 2020AP2007

III. Statutory Interpretation

¶20 DWD and CCB have framed this case as a disagreement over whether
WIS. STAT. § 108.02(15)(h)2. requires a reviewing body to consider either the
activities or the motivations of either the nonprofit organization or the church. In
particular, DWD faults the circuit court for defining “purposes” as the “reason
something is done” and for holding that it is the religious motivation of the Diocese
of Superior in operating CCB and its sub-entities that determines whether the
organizations are operated for religious purposes. Instead, DWD argues that the
term “religious purposes” requires an examination of an organization’s activities,
rather than its motivation, and that the “purpose” we are to examine is that of the
nonprofit organization, not the church. Here, DWD asserts, CCB and its sub-entities
are engaged in purely secular activities.

¶21 In contrast, CCB argues that an organization is operated primarily for
religious purposes when it is operated primarily “for a religious motive or reason.”
Thus, motivation is the important consideration, specifically the church’s motive in
operating, supervising, controlling, or principally supporting the organizations.
According to CCB, CCB and its sub-entities are operated primarily for a religious
motive or reason—specifically, to comply with the Catholic Church’s scriptural and
doctrinal mandate to serve the poor and respond in charity to those in need.

¶22 We begin, as we must, with the language of the statute. See State ex
rel. Kalal v. Circuit Ct. for Dane Cnty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681
N.W.2d 110. We give statutory language its common, ordinary, and accepted
meaning, except that technical or specially defined words or phrases are given their
technical or special definitional meanings. Id. We interpret statutory language “in
the context in which it is used; not in isolation but as part of a whole; in relation to

12
No. 2020AP2007

the language of surrounding or closely-related statutes; and reasonably, to avoid
absurd or unreasonable results.” Id., ¶46. “If this process of analysis yields a plain,
clear statutory meaning, then there is no ambiguity, and the statute is applied
according to this ascertainment of its meaning.” Id. (citation omitted). If, however,
the statute “is capable of being understood by reasonably well-informed persons in
two or more senses,” then the statute is ambiguous. Id., ¶47.

¶23 We first consider each word used in the phrase “operated primarily
for religious purposes.” Operate means “to work, perform, or function,” “to act
effectively; produce an effect; exert force or influence,” or “to perform some process
of work or treatment.” Operate, https://www.dictionary.com/browse/operate (last
visited Dec. 2, 2022). The term “operate” therefore connotes an action or activity.
Primarily means “essentially; mostly; chiefly; principally” or “in the first instance;
at first; originally.” Primarily, https://www.dictionary.com/browse/primarily (last
visited Dec. 2, 2022). The statute’s use of the term “primarily” suggests that there
may be other purposes for which an organization operates, and it need not be
operated exclusively for religious purposes. Religious means “of, relating to, or
concerned with religion.” Religious, https://www.dictionary.com/browse/religious
(last visited Dec. 2, 2022). And purpose means “the reasons for which something
exists or is done, made, used, etc.” or “an intended or desired result; end; aim; goal.”
Purpose, https://www.dictionary.com/browse/purpose (last visited Dec. 2, 2022).
Purpose can also mean “something that one sets before himself [or herself] as an
object to be attained” and “an object, effect, or result aimed at, intended, or
attained.” Purpose, WEBSTER’S THIRD NEW INT’L DICTIONARY (unabr. 1993).
While these terms generally have a plain meaning interpretation, they are not
necessarily dispositive of the meaning of the statute as a whole. Instead, they
provide guidance in determining the statute’s overall meaning.

13
No. 2020AP2007

a. The Nonprofit Organization’s Purpose Controls

¶24 The first question we must address to determine the statute’s meaning
is which entity’s purpose the reviewing body is to consider: the purpose of the
nonprofit organization or the purpose of the church in operating, supervising,
controlling, or principally supporting the nonprofit organization. In other words,
are we to consider “the reasons for which something exists or is done” from the
perspective of the nonprofit organization or from the perspective of the church? As
noted, the parties disagree on this point. We conclude that the statute is not
ambiguous as to this question and that the plain language of WIS. STAT.
§ 108.02(15)(h)2. demonstrates that the reviewing body is to consider the purpose
of the nonprofit organization, not the church’s purpose in operating the organization.

¶25 First and foremost, the religious purposes exemption applies to
“service … [i]n the employ” of the nonprofit organization, not service in the employ
of the church. WIS. STAT. § 108.02(15)(h)2. As noted, we must consider the
statutory language in the context in which it is used. See Kalal, 271 Wis. 2d 633,
¶46. Each of the subdivisions of § 108.02(15)(h) apply to an individual’s “service”
in a different context: § 108.02(15)(h)1. addresses church employees,
§ 108.02(15)(h)2. addresses employees of “an organization operated primarily for
religious purposes,” and § 108.02(15)(h)3. addresses ministers and members of a
religious order. Therefore, considering the context of the surrounding subdivisions,
we conclude that employees who fall under subd. 2. are to be focused on separately
in the statutory scheme from employees of a church. Compare § 108.02(15)(h)1.
with § 108.02(15)(h)2. The exemption under subd. 2. applies specifically to
employees of the organizations, so the focus must be on the organizations.

14
No. 2020AP2007

¶26 Second, under the rules of statutory interpretation, an interpretation
that focuses on the church’s purpose could render the religious purposes exemption
language unnecessary. In order to give meaning to every word in the statute, all
words need to be read together. See, e.g., Kalal, 271 Wis. 2d 633, ¶46 (“Statutory
language is read where possible to give reasonable effect to every word, in order to
avoid surplusage.” (citations omitted)); State v. Martin, 162 Wis. 2d 883, 894, 470
N.W.2d 900 (1991) (“A statute should be construed so that no word or clause shall
be rendered surplusage and every word if possible should be given effect.” (citation
omitted)). WISCONSIN STAT. § 108.02(15)(h)2. has two parts. The first part of subd.
2. addresses “religious purposes,” and the second part, which is not at issue in this
appeal, provides that the employment must be “for a nonprofit organization” that is
“operated, supervised, controlled, or principally supported by a church.”
Sec. 108.02(15)(h)2. These distinct requirements are separated by a conjunction—
“and”—meaning that both elements are required. Thus, the analysis of whether a
nonprofit organization is “operated primarily for religious purposes” would need to
be conducted only where the organization is also “operated, supervised, controlled,
or principally supported by a church.” Whatever “religious purposes” the church
may have in operating these organizations, for purposes of the unemployment
taxation law, the fact that both elements are required means we should focus on the
organization, not the “parent” church.

15
No. 2020AP2007

b. Both the Motives and the Activities of the Nonprofit Organization
Determine Whether It Is Operated for a Religious Purpose

¶27 The second question we must address is how the reviewing body is to
determine whether a nonprofit organization has a religious purpose and whether the
organization is being operated primarily for that religious purpose. As noted above,
DWD argues that it is the activities of the nonprofit that dictate the analysis, while
CCB claims that “an enterprise must be created or exist ‘chiefly/mostly for a
religious motive or reason’” in order for it to be operated primarily for a religious
purpose. (Emphasis added.) For the reasons that follow, we conclude that the
reviewing body must consider both the organization’s activities as well as the
motivation behind those activities to determine whether the religious purposes
exemption applies.

¶28 We again look first to the plain language of the statute to determine
whether the reviewing body must consider the nonprofit organization’s motives or
its activities. The phrase “religious purposes” is not defined in the statutory scheme,
and DWD argues in its reply brief that the language is ambiguous, such that it is not
clear from the statute’s language how a reviewing body is to determine when a
nonprofit organization has a religious purpose. In support of its position, DWD
observes that courts in other jurisdictions have interpreted the religious purposes

16
No. 2020AP2007

exemption in different ways, with some courts focusing on an organization’s
activities, others focusing on its motivations, and some considering both.10

¶29 As previously discussed, a statute is ambiguous if it is capable of
being understood by reasonably well-informed persons in two or more senses.
Kalal, 271 Wis. 2d 633, ¶47. However, “[i]t is not enough that there is a
disagreement about the statutory meaning; the test for ambiguity examines the
language of the statute ‘to determine whether well-informed persons should have
become confused, that is, whether the statutory … language reasonably gives rise
to different meanings.’” Id. (emphasis added; citation omitted). “An otherwise
unambiguous provision is not rendered ambiguous solely because it is difficult to
apply the provision to the facts of a particular case.” Stuart v. Weisflog’s
Showroom Gallery, Inc., 2008 WI 86, ¶20, 311 Wis. 2d 492, 753 N.W.2d 448.

¶30 Looking at the language of the statute, we disagree that the phrase
“operated primarily for religious purposes” is ambiguous. Instead, we conclude that
phrase is reasonably susceptible to only one interpretation based on the plain
language of the statute and when viewed in the context of the statutory scheme. See
Kalal, 271 Wis. 2d 633, ¶¶45-46. That interpretation requires the reviewing body
to consider both the nonprofit organization’s motivations and its activities to
determine whether the organization qualifies under the religious purposes
exemption.

¶31 We first return to the text and structure of the statute to determine its
meaning “so that it may be given its full, proper, and intended effect.” See id., ¶44.
Here, we note the use of both the words “operated” and “purposes” within the same
statutory provision. As recognized above, the word “operated” connotes an action
or activity—to act, to work, to perform—meaning what the nonprofit organization

17
No. 2020AP2007

10
Compare Concordia Ass’n v. Ward, 532 N.E.2d 411, 413-14 (Ill. App. Ct. 1988)
(concluding cemetery formed by several Lutheran churches not operated primarily for religious
purposes because “[b]urial of the dead is a matter of public concern” and “[t]he functions performed
by [the cemetery] are no different than those performed in a secular cemetery”); Terwilliger v. St.
Vincent Infirmary Med. Ctr., 804 S.W.2d 696, 699 (Ark. 1991) (concluding Catholic hospital not
operated primarily for religious purposes because although the hospital’s motivation may have been
religious in nature, evidence showed it was operated primarily for purpose of providing health
care); Samaritan Inst. v. Prince-Walker, 883 P.2d 3, 7-8 (Colo. 1994) (concluding organization
providing administrative support and accreditation for religiously affiliated counseling centers not
operated primarily for religious purposes because “[a]n organization that provides essentially
secular services falls outside of the scope of” the religious purposes exemption); DeSantis v. Board
of Rev., 372 A.2d 1362, 1364 (N.J. Super. Ct. App. Div. 1977) (concluding Catholic social service
agency not operated primarily for religious purposes because provision of “nondenominational
community service” for senior citizens was “eleemosynary and not religious”); Cathedral Arts
Project, Inc. v. Department of Econ. Opportunity, 95 So. 3d 970, 973 (Fla. Dist. Ct. App. 2012)
(concluding church-affiliated organization not operated primarily for religious purposes because
although motivation may have been religious, primary purpose in operating—i.e., giving art
instruction to underprivileged children—was not religious); St. Augustine’s Ctr. for Am. Indians,
Inc. v. Department of Lab., 449 N.E.2d 246, 249 (Ill. App. Ct. 1983) (concluding organization
providing aide to Native Americans in Chicago not operated primarily for religious purposes,
considering the organization’s activities and not its motivation); Imani Christian Acad. v.
Unemployment Comp. Bd. of Rev., 42 A.3d 1171, 1175 (Pa. Commw. Ct. 2012) (holding Christian
school not operated primarily for religious purposes because no evidence as to the extent of
religious underpinnings that pervade curriculum), with Department of Emp. v. Champion Bake-
N-Serve, Inc., 592 P.2d 1370, 1371-73 (Idaho 1979) (holding commercial bakery operated by
Seventh Day Adventists exempt because students perform work under tenets of religion stressing
value of labor and work); Schwartz v. Unemployment Ins. Comm’n, 2006 ME 41, ¶¶1-3, 11, 13,
895 A.2d 965 (finding that nondenominational charitable work did not prevent the organization
from being operated primarily for religious purposes where mission was to demonstrate “God’s
love and compassion to marginalized people in the area [it] serve[s]” (alterations in original));
Kendall v. Director of Div. of Emp. Sec., 473 N.E.2d 196, 198-99 (Mass. 1985) (“The fact that the
religious motives of the [Catholic] sisters … also serve the public good by providing for the
education and training of the mentally [handicapped] is hardly reason to deny the Center a religious
exemption.”); Peace Lutheran Church v. Unemployment Appeals Comm’n, 906 So. 2d 1197 (Fla.
Dist. Ct. App. 2005) (concluding child care organization operated by the church, located on the
church property, and subsidized by the church exempt because its services and church outreach
were religious purposes); see also By the Hand Club for Kids, NFP, Inc. v. Department of Emp.
Sec., 2020 IL App (1st) 181768, ¶¶21, 39, 51-54, 188 N.E.3d 1196 (noting that courts “generally
have been ‘quite cautious in attempting to define, for tax [and unemployment insurance] purposes,
what is or is not a “religious” activity or organization—for obvious policy and constitutional
reasons’” and concluding that a court will instead consider “all the facts and circumstances of a
particular case in order to decide whether an organization is engaged in primarily religious
activities” (alteration in original; citations omitted)); Community Lutheran Sch. v. Iowa Dep’t of
Job Serv., 326 N.W.2d 286, 287, 291-92 (Iowa 1982) (finding that religious schools separately
incorporated from church were operated primarily for religious purposes, but considering both the
school’s activities and statement of purpose).

18
No. 2020AP2007

does and how it does it. “Purpose,” in contrast, has been defined to mean “the
reasons for which something exists or is done,” Purpose,
https://www.dictionary.com/browse/purpose (last visited Dec. 2, 2022), suggesting
that motive should be considered such that we should ask why the organization acts.
While the appearance of both words in the statute might suggest ambiguity, we
conclude that those words reveal the intended effect of the religious purposes
exemption.

¶32 In that way, DWD and CCB are not necessarily wrong in their
respective plain language analyses. The problem is that each party focuses on
different words and fails to read the statute as a whole. For example, if we focus on
the word “purposes,” as CCB does, we may conclude that qualification for the
exemption is based on the organization’s reason for acting or its motivation, without
considering whether the work performed or the services provided are inherently
“religious.” If, however, we focus on the word “operated,” as DWD appears to do,
we may conclude that the focus of the exemption is on the actions of the
organization, meaning its activities and the work it is performing, without allowing
any consideration of whether the work is part of a central mission of a religion. Both
words appear in the statute and therefore both must be given meaning.

¶33 The only reasonable interpretation of the statute’s language is that the
reviewing body must consider both the activities of the organization as well as the
organization’s professed motive or purpose. Neither consideration alone is
sufficient under the statute. If the reviewing body considered only the activities of
the nonprofit organization, it would essentially render the word “purposes”
superfluous because the organization’s reason for acting, or motivation, would not
be a consideration. Given the mandate that statutes are to be “read where possible
to give reasonable effect to every word,” see Kalal, 271 Wis. 2d 633, ¶46, this

19
No. 2020AP2007

interpretation would be unreasonable. Therefore, under a plain language reading of
the statute, 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.

¶34 There are other reasons why an organization’s motivation cannot be
the sole determination. Here, again we highlight the use of the term “operated,” this
time as it is used in conjunction with “primarily.” Had the legislature intended that
the reviewing body focus on only the motives of the organization to determine a
religious purpose, there would be no need to include the phrase “operated
primarily.” Instead, those words could have been removed from the statute to
provide that an employee’s services are exempt from taxation if they are “in the
employ of an organization with religious purposes.” To give effect to the phrase
“operated primarily,” rather than render the phrase unnecessary within the statutory
scheme, the only reasonable reading of the statute is that the reviewing body should
also look to the organization’s operations—its activities, meaning the particular
services individuals receive—and determine if they are primarily religious in nature.

¶35 This reading of the religious purposes exemption—considering both
the motivations and the activities of the nonprofit organization—is also in line with
the rules of statutory interpretation. As DWD argues, the unemployment insurance
law is remedial in nature; therefore, the statutes must be “liberally construed” to
provide benefits coverage, and exceptions to the law must be interpreted narrowly.
See Princess House, 111 Wis. 2d at 62; see also Wisconsin Cheese Serv., Inc. v.
DILHR, 108 Wis. 2d 482, 489, 322 N.W.2d 495 (Ct. App. 1982) (“In order to foster
a reduction of both the individual and social consequences of unemployment, courts
have construed the statutes broadly.”). “A general rule of statutory construction is
that exceptions within a statute ‘should be strictly, and reasonably, construed and

20
No. 2020AP2007

extend only as far as their language fairly warrants.’ If a statute is liberally
construed, ‘it follows that the exceptions must be narrowly construed.’” McNeil v.
Hansen, 2007 WI 56, ¶10, 300 Wis. 2d 358, 731 N.W.2d 273 (citations omitted);
see also Dominican Nuns v. La Crosse, 142 Wis. 2d 577, 579, 419 N.W.2d 270
(Ct. App. 1987) (“Taxation is the rule, and exemption the exception. As a result,
‘[s]tatutes exempting property from taxation are to be strictly construed and all
doubts are resolved in favor of its taxability.’” (alteration in original; citation
omitted)). “[T]he burden of proving entitlement to [a tax] exemption is on the one
seeking the exemption. ‘To be entitled to tax exemption the taxpayer must bring
himself [or herself] within the exact terms of the exemption statute.’” Wauwatosa
Ave. United Methodist Church v. City of Wauwatosa, 2009 WI App 171, ¶7, 321
Wis. 2d 796, 776 N.W.2d 280 (citation omitted).

¶36 Here, DWD argues, and we agree, that a narrow interpretation is
appropriate because it protects an employee’s eligibility for benefits. As noted
above, WIS. STAT. ch. 108 is “liberally construed to effect unemployment
compensation coverage for workers who are economically dependent upon others
in respect to their wage-earning status.” Princess House, 111 Wis. 2d at 62. The
more broadly the religious purposes exemption is read, the more employers are
exempt and the larger impact the exemption will have on unemployment
compensation coverage for employees of those organizations as well as all
employees who are impacted by the reserve fund being depleted. See WIS. STAT.
§§ 108.02(4)(a) (benefits are dependent on employee’s base period, which is
impacted if employer is exempt), 108.18(1) (requiring employer to pay
contributions to the unemployment reserve fund based on yearly payroll).
Construing the statute broadly ignores the stated public policy purposes of the
unemployment insurance compensation program. See WIS. STAT. § 108.01.

21
No. 2020AP2007

¶37 For this reason, LIRC’s decision rejected an approach that considered
only an organization’s motivations because it would cast too broad a net. As DWD
explained, if the reviewing body looked only at motives, “it would allow the
organization to determine its own status without regard to its actual function.” This
analysis could allow any nonprofit organization affiliated with a church to exempt
itself from unemployment insurance by professing a religious motive without being
required to provide support for that motive. See Living Faith, Inc. v.
Commissioner, 950 F.2d 365, 372 (7th Cir. 1991) (noting, in an income tax
exemption case, that “[w]hile we agree with Living Faith that an organization’s
good faith assertion of an exempt purpose is relevant to the analysis of tax-exempt
status, we cannot accept the view that such an assertion be dispositive” and further
observing that “[p]ut simply, saying one’s purpose is exclusively religious doesn’t
necessarily make it so”). Allowing an organization to possibly create its own
exemption would effectively render the “operated primarily for religious purposes”
language unnecessary and without effect under the law. Such a broad reading of the
statute is contrary to the requirement that we must construe the religious purposes
exemption narrowly to guarantee that the exemption is applied only when necessary.
An interpretation that considers the activities of each individual organization
seeking the exemption in addition to its professed motives accomplishes that
directive.

¶38 CCB’s response is that “[a]ll Catholic entities (and many other
religious entities) operate their own unemployment system(s). The church provides
equivalent benefits to CCB employees, more efficiently at lesser cost.” CCB
therefore claims, quoting the circuit court, that “CCB employees are all ‘covered.’”
This argument is a nonstarter. Whether an organization provides private
unemployment insurance to its employees is not a factor under the religious

22
No. 2020AP2007

purposes exemption. CCB has not identified any language in the statute altering the
analysis if an employer provides additional or other coverage, and, as DWD argues,
considering the availability of such coverage in the analysis would impermissibly
add words to the statute. See State v. Simmelink, 2014 WI App 102, ¶11, 357
Wis. 2d 430, 855 N.W.2d 437 (a court “should not read into [a] statute language
that the legislature did not put in” (citation omitted)). Further, as DWD observes,
the religious purposes exemption “cannot be interpreted one way for Catholic
entities and another way for entities affiliated with different faiths.” Thus, we
decline to rewrite the religious purposes exemption to consider the availability of
private unemployment insurance; that fact is therefore immaterial to the statute’s
interpretation or application.

¶39 Instead, DWD directs our attention to the Seventh Circuit Court of
Appeals’ decision in United States v. Dykema, 666 F.2d 1096 (7th Cir. 1981), which
we find instructive. The question before the Seventh Circuit in that case was
whether a church was an exempt organization under 26 U.S.C. § 501(c)(3), which
grants tax exempt status to “[c]orporations … organized and operated exclusively
for religious … purposes.”11 Dykema, 666 F.2d at 1099. In considering the “term

11
As noted previously, CCB and its sub-entities are exempt from federal income tax under
26 U.S.C. § 501(c)(3) under a group exemption. See supra note 5. CCB therefore argues in its
briefing and at oral argument that “[f]ederal law has already decided the issue” in this case as
“[p]ursuant to that interpretation by [the] IRS, each CCB entity in this case has been continuously
determined by the IRS to be operating ‘exclusively’ for a religious purpose.” (Formatting altered.)

We agree with DWD that CCB’s assertion is not supported by the record. The IRS did not
determine that CCB and its sub-entities are operated exclusively for religious purposes. According
to the record, the organizations are covered under a group exemption, “[s]ubordinate organizations
under a group exemption do not receive individual exemption letters,” and the exemption applies
to educational and charitable institutions, not just religious organizations. See 26 U.S.C.
§ 501(c)(3) (“Corporations, and any community chest, fund, or foundation, organized and operated
exclusively for religious, charitable, scientific, testing for public safety, literary, or educational
purposes ….”). Thus, the IRS group ruling did not determine that the employers in this case are
operated exclusively for religious purposes.

23
No. 2020AP2007

‘religious purposes,’” the court stated that it is “simply a term of art in tax law.” Id.
at 1101. According to the court, the IRS’s role is “to determine whether [the
organization’s] actual activities conform to the requirements which Congress has
established as entitling them to tax exempt status.” Id. The Seventh Circuit
explained:

In connection with this inquiry, it is necessary and proper
for the IRS to survey all the activities of the organization, in
order to determine whether what the organization in fact
does is to carry out a religious mission or to engage in
commercial business. Such a survey could be made by
observation of the organization’s activities or by the
testimony of other persons having knowledge of such
activities, as well as by examination of church bulletins,
programs, or other publications, as well as by scrutiny of
minutes, memoranda, or financial books and records relating
to activities carried on by the organization.

Typical activities of an organization operated for
religious purposes would include (a) corporate worship
services, including due administration of sacraments and
observance of liturgical rituals, as well as a preaching
ministry and evangelical outreach to the unchurched and
missionary activity in partibus infidelium; (b) pastoral
counseling and comfort to members facing grief, illness,
adversity, or spiritual problems; (c) performance by the
clergy of customary church ceremonies affecting the lives of
individuals, such as baptism, marriage, burial, and the like;
(d) a system of nurture of the young and education in the
doctrine and discipline of the church, as well as (in the case
of mature and well developed churches) theological
seminaries for the advanced study and the training of
ministers.

Id. at 1100. The court also concluded that an objective inquiry into the activities of
an organization would not run afoul of the First Amendment, but that entering into
a subjective inquiry with respect to the truth of the organization’s religious beliefs
would “be forbidden.” Id.

¶40 In summary, the Dykema court’s decision endorses an interpretation
of the religious purposes exemption that considers both motives and activities. The

24
No. 2020AP2007

court expressly held that under a similar inquiry in the federal tax code, “it is
necessary and proper for the IRS to survey all the activities of the organization, in
order to determine whether what the organization in fact does is to carry out a
religious mission.” See id. (emphasis added); see also Living Faith, 950 F.2d at
372 (“Put simply, saying one’s purpose is exclusively religious doesn’t necessarily
make it so. This [c]ourt and others have consistently held that an organization’s
purposes may be inferred from its manner of operations.”). Thus, a review
considering both the organization’s activities and its motivations would comport
with the Dykema court’s analysis, which we conclude is sound.

¶41 DWD also cites our supreme court’s decision in Coulee Catholic
Schools v. LIRC, 2009 WI 88, 320 Wis. 2d 275, 768 N.W.2d 868, which LIRC
relied on in reaching its decision. There, our supreme court held that the Free
Exercise Clause of the First Amendment to the United States Constitution and
article I, section 18 of the Wisconsin Constitution precluded a teacher who had been
laid off from a Catholic school from bringing an age discrimination claim against
her former employer under the Wisconsin Fair Employment Act. Coulee, 320
Wis. 2d 275, ¶¶1-3. The court explained that the state may not “interfere with the
hiring or firing decisions of religious organizations with a religious mission with
respect to employees who are important and closely linked to that mission”—a
principle that is colloquially called the ministerial exception. Id., ¶¶39, 67.

¶42 In order to determine whether the ministerial exception is applicable,
our supreme court explained that courts must conduct a two-part test. Id., ¶¶45, 48.
The first part of the test asks whether the organization “has a fundamentally
religious mission” “in both statement and practice.” Id., ¶48. In other words, “does
the organization exist primarily to worship and spread the faith?” Id. That
determination is fact-specific, as

25
No. 2020AP2007

[i]t may be, for example, that one religiously-affiliated
organization committed to feeding the homeless has only a
nominal tie to religion, while another religiously-affiliated
organization committed to feeding the homeless has a
religiously infused mission involving teaching, evangelism,
and worship. Similarly, one religious school may have some
affiliation with a church but not attempt to ground the
teaching and life of the school in the religious faith, while
another similarly situated school may be committed to life
and learning grounded in a religious worldview.

Id. The second part of the ministerial exception test then asks how close an
employee’s work is to the organization’s fundamental mission. Id., ¶49. After
applying this test, the Coulee court determined that the employer in that case—a
school committed to the inculcation of the Catholic faith—had a fundamentally
religious mission and that the teacher’s position was closely linked to that mission,
and it thereafter dismissed her claim. Id., ¶¶72-80.

¶43 The analysis conducted in Coulee provides guidance in understanding
the religious purposes exemption here. While we acknowledge that Coulee is
factually and legally distinguishable, we cite the decision as a tool to help further
understand the language in WIS. STAT. § 108.02(15)(h)2. In Coulee, to determine
an organization’s mission, our supreme court considered not only the motives of the
organization or its stated purpose, but it also required that the motive or mission be
clear “in both statement and practice.” Id., ¶48 (emphasis added). “Practice” means
the “actual performance or application.” Practice, https://www.merriam-
webster.com/dictionary/practice (last visited Dec. 2, 2022). Stated differently,
practice means the organization’s activities. Accordingly, Coulee is instructive as
to the type of analysis that can inform the meaning of the religious purposes
exemption and lends support to an interpretation that considers both an
organization’s motives and activities.

26
No. 2020AP2007

¶44 Finally, DWD cites a report of the House Ways and Means Committee
(the House Report) pertaining to an amendment to FUTA. DWD claims that the
House Report on the bill to amend FUTA informs the interpretation of the
Wisconsin statute because WIS. STAT. § 108.02(15)(h)2. was enacted to conform
Wisconsin law to 26 U.S.C. § 3309(b)(1)(B).12 See Leissring v. DILHR, 115
Wis. 2d 475, 485-88, 340 N.W.2d 533 (1983) (relying on congressional committee
reports on bills amending FUTA when interpreting Wisconsin laws enacted to
conform with FUTA).

¶45 The House Report explains the federal religious exemption in 26
U.S.C. § 3309(b)(1)(B). It provides, in relevant part, that § 3309(b)(1)(B)

excludes services of persons where the employer is a church
or convention or association of churches, but does not
exclude certain services performed for an organization
which may be religious in orientation unless it is operated
primarily for religious purposes and is operated, supervised,
controlled, or principally supported by a church (or
convention or association of churches). Thus, the services
of the janitor of a church would be excluded, but services of
a janitor for a separately incorporated college, although it
may be church related, would be covered. A college devoted
primarily to preparing students for the ministry would be
exempt, as would a novitiate or a house of study training
candidates to become members of religious orders. On the
other hand, a church related (separately incorporated)
charitable organization (such as, for example, an orphanage

12
CCB challenges DWD’s reliance on the House Report, arguing that these types of
reports “have been repeatedly called into question” because “[l]egislative history is a ‘rival text’
created by a group other than the voting legislature, which has no authority.” Thus, CCB argues
that it is improper to rely upon any extrinsic source. However, courts may consider an extrinsic
source if that source confirms the plain reading of the text, so long as the extrinsic source is not
treated as authoritative on the meaning of the text. United Am., LLC v. DOT, 2021 WI 44, ¶18,
397 Wis. 2d 42, 959 N.W.2d 317; State ex rel. Kalal v. Circuit Ct. for Dane Cnty., 2004 WI 58,
¶51, 271 Wis. 2d 633, 681 N.W.2d 110. Further, DWD argues that the House Report is a reliable
extrinsic source because it was relied on by the United States Supreme Court to discern legislative
intent as to 26 U.S.C. § 3309. See St. Martin Evangelical Lutheran Church v. South Dakota, 451
U.S. 772, 781 (1981). Accordingly, we see no reason to ignore the House Report.

27
No. 2020AP2007

or a home for the aged) would not be considered under this
paragraph to be operated primarily for religious purposes.

H.R. Rep. No. 91-612, at 44 (1969). DWD argues, and we agree, that the House
Report demonstrates that the religious purposes exemption was not intended to
apply to religiously affiliated organizations whose activities are primarily
comprised of the provision of what are otherwise viewed as not inherently religious,
charitable services, despite the asserted “religious in orientation” or “church related”
nature of the organization. Instead, the House Report is clear that the focus of the
religious purposes exemption is on the type of religious activities engaged in by the
organization even where the religious motive of the organization is clear.

28
No. 2020AP2007

c. The First Amendment Is Not Implicated

¶46 CCB, however, rejects an interpretation of the religious purposes
exemption focusing on activities rather than only motives, arguing that it violates
the First Amendment because “[a] determination by the state that CCB is not
‘religiously purposed enough,’ represents a constitutionally impermissible Free
Exercise violation.” (Formatting altered.) In essence, CCB argues that considering
activities favors those religious entities that engage in proselytizing and provide
services only to members of their own religion, which would impermissibly burden
CCB’s free exercise of the Catholic tenet of “solidarity”—i.e., “[b]eing ecumenical
in social ministry.” As CCB stated during oral argument, we should look at the
religious purposes exemption under First Amendment standards, beginning with the
requirement that the organization hold a sincerely held religious belief. See Coulee,
320 Wis. 2d 275, ¶62; see also Kennedy v. Bremerton Sch. Dist., 142 S. Ct. 2407,
2421-22 (2022).

¶47 We disagree that the First Amendment is implicated in this case. The
First Amendment to the United States Constitution provides in pertinent
part: “Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof.”13 U.S. CONST. amend. I. First, we note that

13
“The first portion of this provision contains what is called the ‘Establishment Clause,’
and the second portion is called the ‘Free Exercise Clause.’” Coulee Cath. Schs. v. LIRC, 2009
WI 88, ¶35, 320 Wis. 2d 275, 768 N.W.2d 868. The First Amendment has been held applicable to
the states under the terms of the Fourteenth Amendment. Kennedy v. Bremerton Sch. Dist., 142
S. Ct. 2407, 2421 (2022) (citing Cantwell v. Connecticut, 310 U.S. 296, 303 (1940)).

29
No. 2020AP2007

the parties do not argue that the statute itself violates the First Amendment, meaning
that CCB does not assert a facial constitutional challenge. Second, neither DWD
nor this court dispute that the Catholic Church holds a sincerely held religious belief
as its reason for operating CCB and its sub-entities. As we addressed previously,
however, we do not look to the church to determine “religious purposes” under the
statute; we look to the employing organizations themselves.

¶48 Third, and finally, CCB does not develop a proper First Amendment
argument aside from its statements at oral argument that it has a sincerely held
religious belief and that it is being denied a benefit as a result of that belief. Our
review demonstrates, however, that the religious purposes exemption is not a
generally available benefit that is being denied to CCB; CCB is simply being treated
like every other employer in the state, including other nonprofit organizations
operated by a church. To the extent that CCB is arguing that it is not being treated
the same as other nonprofit organizations operated by churches that condition the
availability of their services on adherence to, or instruction in, religious doctrine,
that result is what the statute provides, and, as noted, CCB does not assert a facial
challenge.

¶49 Further, neither the statute itself nor any purported interpretation of
the statute seeks to penalize, infringe, or prohibit any conduct of the organizations
based on religious motivations, practice, or beliefs. See Tony & Susan Alamo

Our state constitution also provides for religious freedom under article I, section 18 of the
Wisconsin Constitution, known as the Freedom of Conscience Clauses. Coulee, 320 Wis. 2d 275,
¶¶56, 58. Our supreme court “has stated that Article I, Section 18 serves the same dual purposes
as the Establishment Clause and Free Exercise Clause of the U.S. Constitution.” Id., ¶60. The
rights provided by the Wisconsin Constitution, however, “are far more specific” and “contain[]
extremely strong language, providing expansive protections for religious liberty.” Id. Although
CCB asserted during oral argument that the Wisconsin Constitution offers more protection than the
First Amendment, this argument was undeveloped. Accordingly, we will not address this argument
further. See State v. Pettit, 171 Wis. 2d 627, 646-47, 492 N.W.2d 633 (Ct. App. 1992).

30
No. 2020AP2007

Found. v. Secretary of Lab., 471 U.S. 290, 303 (1985) (“It is virtually self-evident
that the Free Exercise Clause does not require an exemption from a governmental
program unless, at a minimum, inclusion in the program actually burdens the
claimant’s freedom to exercise religious rights.”); see also Coulee, 320 Wis. 2d 275,
¶65 (“We do not mean to suggest that anything interfering with a religious
organization is totally prohibited. General laws related to building licensing, taxes,
social security, and the like are normally acceptable.”). We see no free exercise
concern.

¶50 DWD also raises its own First Amendment argument, asserting that
the religious purposes exemption must be interpreted to avoid excessive state
entanglement with church matters. According to DWD, any interpretation of the
religious purposes exemption that “requires the state to interpret religious doctrine
and examine religious leaders as to their religious motivations risks excessive
unconstitutional entanglement of the state and church,” which would violate the
First Amendment’s Establishment Clause. Indeed, “[e]xcessive entanglement
occurs ‘if a court is required to interpret church law, policies, or practices.’”
St. Augustine Sch. v. Taylor, 2021 WI 70, ¶43, 398 Wis. 2d 92, 961 N.W.2d 635
(citation omitted).

¶51 DWD argues that its interpretation of the phrase “operated primarily
for religious purposes” avoids this concern because it “focuses on an organization’s
activities and does not require the state or the court to examine or interpret church
canons or internal church policies.” DWD asserts that “[i]n contrast[,] an
interpretation focusing on a religious entity’s religious motivation requires an
examination of church doctrine and an inquiry into the motivations of the church’s
religious leaders.” See Pritzlaff v. Archdiocese of Milwaukee, 194 Wis. 2d 302,
326, 533 N.W.2d 780 (1995) (“[T]he First Amendment to the United States

31
No. 2020AP2007

Constitution prevents the courts of this state from determining what makes one
competent to serve as a Catholic priest since such a determination would require
interpretation of church canons and internal church policies and practices.”).

¶52 Conversely, CCB argues that DWD’s interpretation of the religious
purposes exemption would result in an Establishment Clause violation because
“[b]y allowing exemption to those religions which view ‘proselytizing’ and
discriminating against non-adherents in the provision of services as part of their
mission, [DWD] is favoring those religions over Catholicism.” CCB contends the
“easiest way” for a reviewing body to “‘entangle’ itself in religion is to promote one
practice (proselytizing, etc.) over another (ecumenical delivery of charity).”

¶53 We conclude that an interpretation considering both the motivations
and the activities of the organization appropriately balances an employee’s ability
to receive unemployment benefits with a religious organization’s right to be free
from state interferences, thereby avoiding excessive entanglement concerns. For
support, we again turn to Dykema, where the court observed that an analysis
considering the activities of an organization was constitutionally appropriate:

Objective criteria for examination of an organization’s
activities thus enable the IRS to make the determination
required by the statute without entering into any subjective
inquiry with respect to religious truth which would be
forbidden by the First Amendment. [United States] v.
Ballard, 322 U.S. 78, 86-88 (1944). Likewise there is no
“establishment of religion” involved in determining that
entitlement to tax exemption has been demonstrated vel non.
As well said by Chief Justice Burger in Walz v. Tax
Commission, 397 U.S. 664, 675 (1970): “There is no
genuine nexus between tax exemption and establishment of
religion.” Indeed, it should be emphasized that no real
questions regarding “religion” as referred to in the First
Amendment are involved in the case at bar at all; the word
“religious” concerns us merely in its statutory meaning as a
description of a type of organization which Congress chose
to exempt from taxation, believing that such relief from the
tax burden would be beneficial and desirable in the public
interest.

32
No. 2020AP2007

Dykema, 666 F.2d at 1100-01 (footnotes omitted); see also Wisconsin Evangelical
Lutheran Synod v. Prairie Du Chien, 125 Wis. 2d 541, 553-54, 373 N.W.2d 78
(Ct. App. 1985) (“[T]here is no ‘establishment of religion’ involved in determining
that a church or religious organization is entitled to a tax exemption,” and “a
determination denying a tax exemption is similarly not a violation of the religion
clauses of the federal constitution.” (citation omitted)). Thus, the way for a
reviewing body to avoid excessive entanglement under the religious purposes
exemption is to conduct a neutral review based on objective criteria.

¶54 Based on the foregoing, we conclude that the only reasonable
interpretation of the phrase “operated for religious purposes” requires the reviewing
body to consider the motivations as well as the activities of the nonprofit
organization to determine whether the religious purposes exemption applies. This
interpretation is consistent with the plain language of the statute, case law, and
extrinsic sources, and it does not run afoul of constitutional considerations. Further,
focusing on the stated motivations and the organization’s activities allows the
reviewing body to conduct an objective, neutral review that is “highly
fact-sensitive” without examining religious doctrine or tenets. See Coulee, 320
Wis. 2d 275, ¶48; Dykema, 666 F.2d at 1100.

33
No. 2020AP2007

d. CCB and Its Sub-entities at Issue in this Case Are Not Operated
Primarily for Religious Purposes

¶55 Having determined the proper interpretation of the religious purposes
exemption, our final responsibility is to apply the statutory language to the facts of
this case. In doing so, we conclude that CCB and its sub-entities failed to meet their
burden to establish that they are exempt from Wisconsin’s unemployment insurance
program and that LIRC properly determined that each of the employers was
“operated primarily to administer [or provide] social service programs” that are not
“primarily for religious purposes.” We reiterate that there are no factual disputes in
this case, and CCB does not challenge LIRC’s factual findings. Furthermore, we
conclude that the evidence in the record supports LIRC’s determination that CCB
and its sub-entities at issue in this case are not operated primarily for religious
purposes.

¶56 Our first consideration is whether the nonprofit organizations have a
professed religious motivation. In other words, do the nonprofit organizations
themselves assert that their reason for existing or acting is motivated by a religious
purpose? This first step is not demanding, however, as it based on the organization’s
own words and statements, including its mission statement. If the organization
states that it has a religious motive, then the reviewing body must accept that
assertion and move on to the next consideration, which is whether the activities of
the nonprofit organization are primarily religious.

¶57 As to the first consideration, we conclude that the nonprofit
organizations in this case have a professed religious motivation. We acknowledge
that the professed reason that CCB and its sub-entities administer these social
service programs is for a religious purpose: to fulfill the Catechism of the Catholic
Church. CCB itself is the organization, as the diocese’s social ministry arm, with

34
No. 2020AP2007

the most clearly professed religiously purposed motivation: “The mission of
Catholic Charities is to provide service to people in need, to advocate for justice in
social structures, and to call the entire church and other people of good will to do
the same.” We note, however, that when we look to the motivations of the
individual sub-entities of CCB, not the mission of CCB or the church, the religious
purpose is less evident. As is clear from the mission statements, as well as from the
Form 990 that each organization filed with the IRS, the sub-entities’ missions are to
provide charitable services to everyone without any reference to religion.14 While
we conclude that the sub-entities do not appear to have an independent professed
religious motivation, we acknowledge that there is a professed religious motivation
for CCB overseeing and supporting these sub-entities and, in turn but to a lesser
degree, in those sub-entities’ own work.

¶58 As to the second consideration—whether the activities of the
organizations are primarily religious—we agree with LIRC that the activities of
CCB and its sub-entities are the provision of charitable social services that are
neither inherently or primarily religious activities. CCB and its sub-entities do not
operate to inculcate the Catholic faith; they are not engaged in teaching the Catholic
religion, evangelizing, or participating in religious rituals or worship services with
the social service participants; they do not require their employees, participants, or

14
For example, Headwaters’ mission statement is as follows: “We believe all people
deserve the right to achieve their fullest potential. Therefore, we exist for the purpose of providing
individualized services that are designed to maximize each person’s daily living and vocational
skills in order to be integrated into the community to the fullest extent possible.” Similarly, BCDS’s
stated mission “is to provide person-centered services to adults based on the needs of each
individual so that they are able to live their lives to the fullest.” BRI states that its mission is to
“[i]n partnership with the community, provide people with disabilities opportunities to achieve the
highest level of independence.” Finally, DSI’s mission is “[t]o provide a prevocational and
vocational program by using real work situations, such as subcontract and other production oriented
work, to develop appropriate work behaviors, to maximize earnings and to increase an individual’s
potential for community employment. To provide employment opportunities for adults with
disabilities.”

35
No. 2020AP2007

board members to be of the Catholic faith; participants are not required to attend
any religious training, orientation, or services; their funding comes almost entirely
from government contracts or private companies, not from the Diocese of Superior;
and they do not disseminate any religious material to participants. Nor do CCB and
its sub-entities provide program participants with an “education in the doctrine and
discipline of the church.” See Dykema, 666 F.2d at 1100.

¶59 Instead, the work that CCB and its sub-entities engage in is primarily
charitable aid to individuals with developmental and mental health disabilities. As
noted previously, the employers provide work training programs, life skills training,
in-home support services, transportation services, subsidized housing, and
supportive living arrangements. While these activities fulfill the Catechism of the
Catholic Church to respond in charity to those in need, the activities themselves are
not primarily religious in nature. This fact is demonstrated most significantly by
one of CCB’s sub-entities, BCDS. LIRC found that BCDS—which was not brought
under the CCB umbrella until 2014—had “no previous religious affiliation” and that
“[t]he type of services and programming provided by the organization did not
change” following its affiliation with CCB. The fact that the manner in which
BCDS carried out its mission did not change after it became an affiliate of CCB
supports our conclusion that BCDS’ purpose and operations are not primarily
religious.

¶60 Regarding CCB itself, as noted above, we acknowledge the clear
religious motivation of CCB in supporting and operating its sub-entities. However,
the actual activities in which CCB engages involve providing administrative support
for its sub-entities which we have determined do not engage in primarily religious
activities. CCB is not separately and directly involved in religiously oriented
activities. We are cognizant that the result in this case would likely be different if

36
No. 2020AP2007

CCB and its sub-entities were actually run by the church, such that the
organizations’ employees were employees of the church. See WIS. STAT.
§ 108.02(15)(h)1. Instead, CCB and its sub-entities are structured as separate
corporations—and CCB makes no claims to the contrary—so we must view their
motives and activities separate from those of the church. The corporate form does
make a difference, especially with respect to the statutory scheme we must apply in
this case. When considered independent of the church’s overarching doctrine and
purposes, CCB and its sub-entities are clearly operated to provide services in a
manner that is neither inherently nor primarily religious.

¶61 We agree with LIRC’s conclusion that the employers here are “akin
to ‘the religiously-affiliated organization committed to feeding the homeless that
has only a nominal tie to religion’ recognized by the Coulee court.” Like the school
in Coulee, CCB and its sub-entities are affiliated with the Catholic Church and
under the control of the bishop; as LIRC recognized, however, unlike the school in
Coulee, “CCB and its sub-entities are not operated with a focus on the inculcation
of the Catholic faith and worldview and do not operate in a worship-filled
environment or with a faith-centered approach to fulfilling their mission.” Any such
spreading of Catholic faith accomplished by the organizations providing such
services—while genuine in deriving from and adhering to the Catholic Church’s
mission—is only indirect and not primarily the service that they provide to
individuals. We further observe parallels between CCB and its sub-entities and the
example in the House Report of “a church related (separately incorporated)
charitable organization (such as, for example, an orphanage or a home for the aged)
[that] would not be considered under [the religious purposes exemption] to be
operated primarily for religious purposes.” See H.R. Rep. No. 91-612, at 44.

37
No. 2020AP2007

¶62 We recognize that CCB and its sub-entities perform important and
vital work in our communities. Nevertheless, the fact that a church operates,
supervises, controls, or supports an organization in charity with a religious
motivation does not, by itself, mean that the organization is operated primarily for
religious purposes. While the Catholic Church’s tenet of solidarity compels it to
engage in charitable acts, the religious motives of CCB and its sub-entities appear
to be incidental to their primarily charitable functions. Thus, CCB and its
sub-entities have not demonstrated through their activities a primarily religious
purpose. Accordingly, we affirm LIRC’s decision and reverse the circuit court’s
order reversing that decision.

By the Court.—Order reversed.

38