Supreme Court skeptical of Wisconsin’s religious exemption law

The Supreme Court considered on Monday just how far states can go in defining what counts as a religious organization. The nonprofit Catholic Charities asked the court to overturn a Wisconsin Supreme Court ruling requiring the ministry to pay into the state’s unemployment compensation system.  

Like many states, Wisconsin requires employers to pay a tax that subsidizes assistance for the unemployed. But Wisconsin exempts religious organizations that are “operated primarily for religious purposes.” Catholic Charities, which serves the elderly, people with disabilities, and those in poverty from all religious backgrounds, contends it should be exempt from the tax because it is a religious organization. But the state argues that the organization isn’t religious because it doesn’t proselytize to its beneficiaries.

During oral arguments, the justices seemed skeptical of Wisconsin’s stance. “Isn’t it a fundamental premise of our First Amendment that the state shouldn’t be picking and choosing between religions?” Justice Neil Gorsuch asked. 

Catholic Charities paid into the state’s unemployment tax system for decades. In 2016, it asked for an exemption so it could join the Wisconsin Catholic bishops’ similar system. The Catholic Charities chapter, which is controlled by the Diocese of Superior, argued it had the right to join because church authorities oversee its social services, which are religiously motivated.

A state agency denied the organization’s request, sparking a long battle through state court proceedings. In 2024, a closely divided state Supreme Court ruled against Catholic Charities. 

The state’s court ruled that the nonprofit’s work doesn’t qualify as “typical” religious activity because the organization serves and employs non-Catholics and provides services found at comparable secular nonprofits. The court said that Catholic Charities doesn’t “attempt to imbue program participants with the Catholic faith.”

The nonprofit appealed the ruling to the Supreme Court, and in December, the high court agreed to take on the case. In its brief, the organization contends Wisconsin violated First Amendment religious rights by discriminating against a religious group with “more complex” corporate structures and getting overly entangled in church internal affairs.

The state argues that “religious motivations alone” don’t equate to an organization receiving religious exemptions. According to the state, if Catholic Charities wins the case, legislatures across the country would “have to choose between exempting all religious groups or none at all” from similar laws.

During Monday’s hearing, the justices leaned into the nonprofit’s accusation of discrimination. Gorsuch questioned Eric Rassbach, who represented the nonprofit, on whether the discrimination grounds were the “simplest” to rule on. 

“I do think the simplest is probably the discrimination argument,” said Rassbach, vice president at the Becket Fund for Religious Liberty. “And I think that would be enough to decide the case.” 

Justice Amy Coney Barrett asked Rassbach how the justices could define the line to exempt “certain kinds of religious activities” but not others.

“I want to be very clear: we’re not saying there’s any problem with trying to decide if something’s religious or not,” Rassbach responded. “What we’re saying is that there are limits on what you can do within that question. And one of the things that you can’t do is discriminate along theological lines.”

Arguing on behalf of the state, Assistant Attorney General Colin Roth, said that Wisconsin grants exemptions if an organization is “expressing and inculcating religious doctrine.” 

The justices took issue with this, noting that not all religions, such as Judaism, proselytize. “So, does that mean that Judaism is completely disqualified from getting the exemption?” Barrett asked.

Chief Justice John Roberts added that it seems Wisconsin just wants a test that is easy to apply instead of considering the nuances of religious organizations. 

Justice Elena Kagan said Wisconsin’s argument implies that if a faith-based soup kitchen says the Lord’s Prayer with those it serves, it could be counted as religious. But if the kitchen doesn’t, then Wisconsin might not consider the organization religious. 

“I thought it was pretty fundamental that we don’t treat some religions better than other religions,” Kagan said. “And we certainly don’t do it based on the content of the religious doctrine that those religions preach.”

Thomas Berg, a constitutional law professor at University of St. Thomas, said it’s important for the justices to determine how states can constitutionally include some, but not all, religious organizations in exemptions. 

“Agents of the state, like judges, should not be deciding what is ‘typically religious’ and that’s what the Wisconsin court did here,” he said.

If states are unable to draw a constitutional line, it will likely discourage states from granting any religious tax exemptions in the first place. “What the court says on that could have an effect beyond the unemployment tax context,” Berg added. 

Kim Colby, an attorney for Christian Legal Society, said she expects the justices to rule in favor of Catholic Charities, which could increase religious freedoms for nonprofits across the country, she noted. 

Colby attended the hearings in person and appreciated hearing the nation’s highest court discuss the Bible.

“I just was struck by the fact that 2,000 years after Jesus lived we are still talking about his healing of the sick, his care for the poor,” Colby said. “It was just great to see the gospel still being respected and understood by our highest court.”