Justices Signal Support for Catholic Groups’ State Tax Fight (1)

The US Supreme Court appeared likely to side with Catholic-affiliated charities claiming they were wrongly denied a religious exemption from having to pay into Wisconsin’s unemployment tax program.

Justices on both sides of the ideological divide suggested they felt the state was discriminating against certain religious organizations in questioning why Wisconsin only gives an exemption to organizations that instill their religious doctrine through worship, proselytization, and religious education.

“Some religions proselytize, other religions don’t,” Justice Elena Kagan said. “Why are we treating some religions better than others based on that element of religious doctrine?”

Justice Neil Gorsuch wanted to know if the state has to send an inspector into a soup kitchen, for example, to see how much prayer is going on. “I would have thought this would entangle the state in religion a whole lot more than a nondiscrimination rule between religions,” he said.

The case is being closely watched for its ability to expand religious rights. Opponents fear a ruling in favor of these charitable groups could make it easier for religiously affiliated employers to claim tax exemptions and put workers at risk of losing unemployment benefits. The Service Employees International Union estimates 1.6 million people in the U.S. work for religiously affiliated organizations.

Wisconsin Assistant Attorney General Colin Roth argued the state is reasonably limiting the exemption to employers most likely to have disputes over unemployment benefits that would force the state to determine if an employee was fired for failing to comply with religious doctrine.

The charities’ “motive-only test has no such limits,” Roth said. “It would leave potentially over one million employees nationwide without unemployment coverage, like nurses and janitors at religiously affiliated hospitals even though the state can virtually always determine their benefit eligibility without confronting religious doctrine.”

Catholic Charities Bureau, however, says the state violated its rights under the First Amendment to exercise religion freely when it denied it and its affiliates the tax exemption.

“They are disfavoring Catholic Charities because they serve non-Catholics, because they hire non-Catholics, and because they don’t proselytize,” said the group’s attorney Eric Rassbach, vice president and senior counsel at the Becket Fund for Religious Liberty.

Statutory Text

Catholic Charities is a social ministry arm of a diocese of the Catholic Church and oversees four affiliate organizations that provide various services for individuals with developmental and mental-health disabilities, including subsidized housing, job placement and training, in-home support services, and transportation.

While Catholic Charities is “operated, supervised and controlled or principally supported by a church,” the state said it isn’t “operated primarily for religious purposes” within the meaning of the exemption.

A state trial court ultimately said Catholic Charities and its affiliates are entitled to the religious-employer exemption, but a state appeals court reversed that ruling in a decision the Wisconsin Supreme Court affirmed.

It was unclear from the oral arguments if the Supreme Court will rule for Catholic Charities based on its claim the state unconstitutionally discriminated against it or if it will reverse based on the Wisconsin Supreme Court’s interpretation of the state law.

The federal government said the state Supreme Court wrongly construed the law’s language to require courts to consider not only the motivations that drive the organization to conduct its activities, but also whether those activities are inherently religious or secular.

Justice Clarence Thomas wanted to know why the federal government wants the court to simply say the state court read the text wrong.

“What would be the problem with deciding this on a constitutional basis?” he asked.

Deputy Solicitor General Curtis Gannon said the state law, as it was applied in this case, would be unconstitutional if the court rules the state had discriminated against the chairites Because the language for the exemption in Wisconsin’s law is verbatim to the language in the Federal Unemployment Tax Act, that could raise questions about the constitutionality of the federal statute, he reasoned.

Justice Amy Coney Barrett doubted a ruling on the charities’ discrimination claim would call into question the federal law.

“It’s hard for me to see, frankly, in the Wisconsin Supreme Court’s opinion that it thought its reading was compelled by the federal statute,” she said.

The case is Catholic Charities Bureau, Inc. v. Wisconsin Labor & Indus. Review Comm’n, U.S., No. 24-154, arguments 3/31/25.