St. Martin Lutheran Church v. South Dakota,
451 U.S. 772 (1981)

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U.S. Supreme Court

St. Martin Lutheran Church v. South Dakota, 451 U.S. 772 (1981)

St. Martin Evangelical Lutheran Church v. South Dakota,

No. 80-120

Argued March 3, 1981

Decided May 26, 1981

451 U.S. 772


Petitioner Church, located in South Dakota, is a member of the Wisconsin Evangelical Lutheran Synod. It operates an elementary Christian day school that is not a separate legal entity from the Church, but is financed by the Church's congregation and controlled by a Board elected from the congregation. Petitioner Academy is a secondary school in South Dakota owned, supported, and controlled by the Synod, and it also is not separately incorporated. Petitioners claim exemption with respect to their school employees from unemployment compensation taxes imposed by the Federal Unemployment Tax Act (FUTA) and South Dakota's complementary statutes. Title 26 U.S.C. § 3309(b) provides an exemption with respect to, inter alia,

"service performed -- (1) in the employ of (A) a church or convention or association of churches, or (B) an organization . . . which is operated, supervised, controlled, or principally supported by a church or a convention or association of churches."

A previous exemption under § 3309(b)(3) for service performed in the employ of a school that is not an institution of higher education was repealed in 1976 when FUTA was amended. After petitioners' unsuccessful administrative appeal from South Dakota's imposition of the taxes upon them and a successful appeal to a state court, the South Dakota Supreme Court held petitioners subject to the taxes.

Held: Petitioners are exempt from unemployment compensation taxes under § 3309(b)(1)(A). Pp. 451 U. S. 780-788.

(a) Section 3309(b)(1)(A), as enacted in 1970, applies to schools, like petitioners', that have no separate legal existence from a church, or, as in the Academy's case, from a "convention or association of churches." The employees working within these schools plainly are "in the employ of . . . a church or convention or association of churches" within the meaning of § 3309(b)(1)(A). And instead of construing the term "church" in § 3309(b) as being limited to the actual house of worship, a construction that would contradict the phrasing of FUTA, such term must be construed as referring to the congregation or the hierarchy itself, that is, the church authorities who conduct the business of hiring, discharging, and directing church employees. Pp. 451 U. S. 781-785.

Page 451 U. S. 773

(b) The legislative history, including the repeal of § 3309(b)(3), discloses no intent by Congress to alter the scope or meaning of § 3309(b)(1). Pp. 451 U. S. 785-788.

290 N.W.2d 845, reversed and remanded.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined. STEVENS, J., filed an opinion concurring in the judgment, post, p. 451 U. S. 788.

Page 451 U. S. 774

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