SCOTUS once again grapples with First Amendment religion clauses in Wisconsin employment tax case
While cases stemming from the second Trump administration’s torrent of executive actions begin to work their way up to the U.S. Supreme Court on the emergency docket, the court still has some important cases to hear in the final two months of argument for the term.
On March 31, the justices will take up Catholic Charities Bureau Inc. v. Wisconsin Labor and Industry Review Commission. The court will decide whether a state violates the First Amendment’s religion clauses by refusing to provide an unemployment tax exemption to a religion’s charitable arm when it provides such a break to churches, religious schools and some other religious groups.
The case is one of three potentially significant religion cases the justices will hear in March and April. Decisions on these case are expected by the end of the court’s term in late June or early July.
The other two cases are perhaps broader in scope than the Wisconsin dispute. In Mahmoud v. Taylor, the court will decide whether public schools must provide an opt-out to parents who object on religious grounds to lessons on gender and sexuality for their children. In Oklahoma Statewide Charter School Board v. Drummond, the justices will weigh whether a state violates the free exercise clause by excluding a religious-based school from its publicly funded charter school program.
“There is a continuing strong view on the court in favor of free exercise rights,” says Thomas C. Berg, a law professor and religious liberty scholar at the University of St. Thomas Law School in Minneapolis, alluding to decisions by the justices in recent years that include supporting a public school football coach’s right to lead post-game prayers, greater inclusion of religious schools in state school choice programs and allowing a large cross memorializing war dead to remain on public property.
“We might figure the court will rule in favor of the religious claimants” in the cases being argued this spring, Berg adds. “But it’s not certain, and there are arguments both ways.”
A long quest through administrative and court proceedings
U.S. Supreme Court Justice Brett Kavanaugh was photographed volunteering with a Catholic Charities chapter in Washington, D.C., in 2018 when his nomination to the court was being considered. (Photo by Alex Brandon/The Associated Press)The Catholic Charities case involves the charitable entity of the Diocese of Superior in northern Wisconsin, which serves the elderly, the poor and people with disabilities. The organization carries out its mission based on Catholic faith and social teaching but does not proselytize those it serves.
Beginning in 2004, Catholic Charities sought a religious exemption from participating in the state’s unemployment system in order to join a statewide Catholic unemployment plan. A state agency denied the request, concluding that the charitable organization was not “operated primarily for religious purposes.”
After a long journey through state administrative and lower-court proceedings, the Wisconsin Supreme Court in 2024 ruled against an exemption for Catholic Charities. It held that the state must consider the activities as well as the motivations of the organization and that Catholic Charities’ activities were primarily secular in nature.
Catholic Charities does not “attempt to imbue program participants with the Catholic faith nor supply any religious materials to program participants or employees,” the state high court said, and employment with and services offered by the organization were open to all participants regardless of religion.
A dissenting state justice said no activity is inherently religious, but a “religious motivation” makes something religious.
Catholic Charities appealed to the U.S. Supreme Court, which granted review.
“What the Wisconsin Supreme Court did here is very unusual and breaks with a long tradition,” says Nicholas R. Reaves, senior counsel with the Becket Fund for Religious Liberty, which is representing Catholic Charities. “The [Wisconsin] court is second-guessing sincere religious exercise and is drawing distinctions along religious lines. Those are things that courts historically have avoided because they create constitutional problems.”
The state and state supreme court’s actions violate the principle of church autonomy by penalizing Catholic Charities for its structure of being incorporated separately from the Catholic diocese, the organization’s advocates argue. Second, the state is unconstitutionally entangling itself with religion by second-guessing the Catholic Church’s beliefs about how to carry out its charitable mission. And third, Wisconsin is discriminating among religions by offering the unemployment tax exemption to religious groups that serve only those of its own faith or that proselytize, the group argues.
“That’s not an appropriate line for the government to be drawing,” Reaves says.
Berg, who helped write an amicus brief filed by the Christian Legal Society and other groups in support of Catholic Charities, says the U.S. Supreme Court will face a delicate task in writing an opinion that says the state cannot dismiss the organization as not operating for a religious purpose while also not forcing states to widen religious exemptions to a degree that might lead them to eliminate exemptions altogether.
The court will want to avoid “creating a sort of poison pill in which whenever a legislature creates an exemption, it will have to be expanded and expanded,” he says.
Catholic Charities has the support of other scholars and religious groups, as well as the Trump administration, which argues that the Wisconsin high court misinterpreted how the federal unemployment statute applies religious exemptions and violates the First Amendment’s religion clauses by “inviting inquiries into whether an action is intrinsically religious or nonreligious.”
State unemployment system designed to avoid entanglements over religion
Wisconsin argues that its unemployment system, which it describes as the first state program in the nation when it was enacted in 1932, aims to keep the state out of “entangling” decisions over benefit eligibility when religious employers discharge someone based on matters of faith and doctrine.
That is why it exempts churches, ministers, religious schools and some other religious organizations operated primarily for religious purposes, the state says in a brief.
In deciding on an exemption, Wisconsin “asks whether an organization primarily engages in distinctively religious activities like worship services, religious outreach, ceremony or religious education,” the state says.
“If the First Amendment did not allow religious accommodations to be tailored to particular religious groups on a nondenominational basis, legislatures (and courts) would have to choose between exempting all religious groups or none at all,” the state says in its brief.
Wisconsin has the support of groups including the American Civil Liberties Union, Americans United for Separation of Church and State, the Freedom from Religion Foundation, and American Atheists.
“If the Supreme Court accepts [Catholic Charities’] arguments, it will harm a lot of people employed by religious organizations” because those involved in secular activities would not have any unemployment protections, says Alex J. Luchenitser, the associate legal director of Americans United.
Some of the arguments by Catholic Charities and its allies “would not be confined to existing religious exemptions,” he says, such as those in the unemployment system or excluding “ministerial” workers from employment discrimination laws.
“These arguments would effectively give religious organizations the right to exempt themselves from any law they don’t like,” Luchenitser says, including those protecting the rights of LGBTQ+ individuals and other minorities.
He agreed, to a degree, with the point made by Berg about the delicate line faced by the high court in not wanting to discourage Congress or state legislatures from offering religious exemptions.
“In the long run,” Luchenitser says, a decision for Catholic Charities in this case “might lead legislatures to restrict exemptions, and that would hurt the religious freedom of religious organizations themselves.”
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