In Catholic Charities Bureau, Inc. v. Wisconsin Labor and Industry Review Commission, (Sup. Ct., June 5, 2025), the U.S. Supreme Court, in an opinion by Justice Sotomayor, unanimously held that Wisconsin violated the First Amendment's religion clauses when it held that Catholic Charities Bureau does not qualify for the exemption from unemployment compensation tax that is granted by state statute to nonprofits "operated primarily for religious purposes". The Wisconsin Supreme Court had held that Catholic Charities' activities were no different than those offered by a secular organization; they did not involve worship services, religious outreach, ceremony, or religious education. In reversing the Wisconsin supreme Court, the U.S. Supreme Court said in part:
A law that differentiates between religions along theological lines is textbook denominational discrimination....
This case involves that paradigmatic form of denominational discrimination....
Put simply, petitioners could qualify for the exemption while providing their current charitable services if they engaged in proselytization or limited their services to fellow Catholics. Petitioners’ Catholic faith, however, bars them from satisfying those criteria. Catholic teaching, petitioners say, forbids “‘misus[ing] works of charity for purposes of proselytism.’” ... It also requires provision of charitable services “without making distinctions ‘by race, sex, or religion.’” ... Many religions apparently impose similar rules.... Others seemingly have adopted a contrary approach....
Wisconsin’s exemption, as interpreted by its Supreme Court, thus grants a denominational preference by explicitly differentiating between religions based on theological practices.
Justice Thomas filed a concurring opinion, saying in part:
As a matter of church law, Catholic Charities and its sub-entities are an arm of the Diocese of Superior, and thus, for religious purposes, are not distinct organizations. But, when determining whether Catholic Charities was a religious organization entitled to a tax exemption, the Wisconsin Supreme Court nevertheless relied on Catholic Charities’ separate corporate charter to treat it as an entity entirely distinct and separate from the Diocese. That holding contravened the church autonomy doctrine....
Justice Jackson filed a concurring opinion, saying in part:
The Federal Unemployment Tax Act (FUTA) allows a State to exempt from its unemployment-coverage mandate any “organization which is operated primarily for religious purposes and which is operated, supervised, controlled, or principally supported by a church or convention or association of churches.”... The State treats church affiliated charities that proselytize and serve co-religionists exclusively differently from those that do not.... Because I agree that this distinction violates the neutrality principle of the Constitution’s Religion Clauses, I join the Court’s opinion in full.
... [B]oth the text and legislative history of FUTA’s religious-purposes exemption confirm that Congress used the phrase “operated primarily for religious purposes” to refer to the organization’s function, not its inspiration....
Congress sought to extend to most nonprofit workers the stability that unemployment insurance offers, while exempting a narrow category of church-affiliated entities most likely to cause significant entanglement problems for the unemployment system—precisely because their work involves preparing individuals for religious life. It is perfectly consistent with the opinion the Court hands down today for States to align their §3309(b)(1)(B)-based religious-purposes exemptions with Congress’s true focus.
SCOTUSblog reports on the decision.
