Docket 24-154
Catholic Charities Bureau, Inc. v. Wisconsin Labor and Industry Review Comm'n.
DecidedJun 5, 2025
9-0decision
Source: CourtListener.
Court rules Wisconsin cannot deny tax exemption to Catholic Charities based on its religious practices
Impact6/10
What it does
The Court struck down Wisconsin's application of its religious-employer unemployment tax exemption as unconstitutional. Because the Wisconsin Supreme Court's interpretation of the exemption effectively required organizations to proselytize or serve only members of their own faith to qualify, it drew distinctions between religions based on their theological practices. That kind of government-imposed denominational preference must pass the highest level of judicial review — called strict scrutiny — which Wisconsin failed to meet.
Who benefits
Church-affiliated nonprofit organizations whose religious doctrine prohibits proselytization or requires serving people of all faiths, such as Catholic Charities and similar religiously motivated charities affiliated with Judaism, Islam, Sikhism, Hinduism, and other traditions.
Who is affected
State governments that administer religious-employer exemptions from unemployment compensation taxes, which may now need to revise how they define eligibility to avoid drawing distinctions based on a religious organization's theological practices.
Practical impact
Catholic Charities Bureau and its four subentities are entitled to reconsideration of their exemption from Wisconsin's unemployment compensation tax, and the case is sent back to lower courts for further proceedings. More broadly, states with similar religious-employer exemptions may not condition eligibility on whether an organization proselytizes or restricts services to members of its own faith, as doing so unconstitutionally favors some religious traditions over others.
Majority — Sotomayor
Joined by: Roberts, Thomas, Alito, Kagan, Gorsuch, Kavanaugh, Barrett, Jackson
The majority held that the First Amendment's Establishment Clause forbids the government from officially favoring one religious denomination over another, and that any law doing so must survive strict scrutiny — meaning it must be narrowly tailored to serve a compelling government interest. The Court reasoned that Wisconsin's exemption, as interpreted by its Supreme Court, did exactly that: it denied the tax exemption to Catholic Charities because the organization does not proselytize or limit its services to Catholics, which are choices dictated by Catholic religious doctrine. Because eligibility for the exemption turned on inherently theological decisions — not neutral, secular criteria — the law imposed a denominational preference on its face. The Court then found that Wisconsin failed strict scrutiny on both of its asserted justifications: the interest in ensuring unemployment coverage was undermined by the fact that Catholic Charities runs its own equivalent compensation system and that the State already exempts similar church-run entities, and the interest in avoiding government entanglement with religious employment decisions was poorly served because the exemption applied at the organizational level, covering all employees regardless of whether their work involved religious instruction.
Constitutional question
Does Wisconsin's application of its unemployment tax exemption — which denied coverage to Catholic Charities because it does not proselytize or limit services to Catholics — violate the First Amendment's requirement that government remain neutral among religions?