Supreme Court rules that Catholic groups were unlawfully barred from a religious tax exemption

WASHINGTON — The Supreme Court on Thursday ruled in favor of Catholic 
Church-affiliated charitable groups, saying they were wrongly denied 
religious exemptions from a Wisconsin tax that funds unemployment 
benefits.

The justices ruled unanimously that the state's decision unlawfully 
discriminated against the groups on the basis of religion under the free 
exercise clause of the Constitution's First Amendment.

The court rejected a Wisconsin Supreme Court decision that said that the 
groups operating under the Catholic Charities Bureau of the Diocese of 
Superior were not sufficiently religious in purpose. The state already 
provided exemptions for religious institutions.

Religious entities have long received tax exemptions at the state and 
federal level.

Writing for the court, liberal Justice Sonia Sotomayor noted the 
importance of the government remaining neutral when it comes to different 
religions.

“When the government distinguishes among religions based on theological 
differences in their provision of services, it imposes a denominational 
preference that must satisfy the highest level of judicial scrutiny,” 
Sotomayor said. But Wisconsin had “transgressed that principle,” she 
added.

The groups involved in the case — Headwaters, Barron County Developmental 
Services, Diversified Services and Black River Industries — primarily 
serve developmentally disabled people. Their programs are open to non-
Catholics.

The Wisconsin Labor and Industry Review Commission had concluded the 
charitable groups were not “operated primarily for religious purposes” 
under state law.

The Wisconsin Supreme Court in 2024 upheld the state commission’s finding, 
saying the groups’ activities were mostly secular in nature and that they 
do not “attempt to imbue program participants with the Catholic faith nor 
supply any religious materials.”

The Wisconsin unemployment compensation system was set up in 1932 to 
provide a safety net for people who lose their jobs. Similar programs in 
other states and the Federal Unemployment Tax Act also include religious 
exemptions.

The Catholic groups had strong backing at the Supreme Court from other 
Christian sects and different religious faiths.

https://www.nbcnews.com/politics/supreme-court/supreme-court-rules-
catholic-groups-unlawfully-barred-religious-exempt-rcna202654