Supreme Court sides with Catholic charity in religious-rights case over unemployment taxes

Key Points

• The Supreme Court unanimously ruled that Catholic Charities is exempt from Wisconsin unemployment taxes, holding the state violated the First Amendment by taxing one faith group while exempting others.
• Wisconsin argued the charity’s largely secular disability services and decades of tax payments disqualified it from a religious exemption, but the Court said states cannot judge what work qualifies as religious.
• President Trump’s administration backed Catholic Charities, while Wisconsin warned the ruling could prompt religious hospitals and other faith-based employers to leave the state unemployment system.
• This decision reflects the conservative-majority Court’s ongoing trend of siding with religious plaintiffs in church-state disputes.

WASHINGTON (AP) — The Supreme Court on Thursday handed down a unanimous ruling in a religious rights case, finding that a Catholic charity in Wisconsin can't be required to pay unemployment taxes when other religious groups are exempt.

The high court said the state's tax decisions created an advantage for groups with a more overtly religious tone in their daily work, a violation of the First Amendment.

“It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion,’” Justice Sonia Sotomayor wrote in the opinion. ”There may be hard calls to make in policing that rule, but this is not one."

Wisconsin argued the Catholic Charities Bureau has paid the tax for more than 50 years and doesn’t qualify for an exemption because its day-to-day work doesn’t involve religious teachings. Much of the groups’ funding is from public money, and neither employees nor people receiving services have to belong to any faith, according to court papers.

Catholic Charities, though, said that it qualifies because its services to people who are disabled, low-income or elderly are motivated by religious beliefs and that the state shouldn’t be making determinations about what work qualifies as religious.

The Becket Fund for Religious Liberty, which represented the group, heralded the ruling as a major victory for religious liberty. “It was always absurd to claim that Catholic Charities wasn’t religious because it helps everyone, no matter their religion,” said Eric Rassbach, vice president and senior counsel.

The ruling is expected to allow the Catholic charity to pull out of the state’s unemployment system in favor of one operated by the faith.

The ruling could have wider effects around the country. Many states have tax exemptions for religious organizations and some big employers, like hospital systems, that have religious affiliations. “It’s awfully hard to read the tea leaves into the future, but this ruling could have seismic implications," said tax attorney Lance Jacobs, with the firm Forvis Mazars.

The group Freedom From Religion condemned the ruling. “Treating religiously affiliated nonprofits the same as all other nonprofits is not a violation of the First Amendment," co-president Annie Laurie Gaylor said.

The charity appealed to the justices after Wisconsin’s highest court ruled against it. President Donald Trump's administration weighed in on behalf of Catholic Charities.

The conservative-majority court has issued a string of decisions siding with churches and religious plaintiffs in recent years. This term, though, a plan to establish a publicly funded Catholic charter school lost when the justices deadlocked after Amy Coney Barrett recused herself.

The nine-member court is also considering a case over religious objections to books read in public schools. In those arguments, the majority appeared sympathetic to the religious rights of parents in Maryland who want to remove their children from elementary school classes using storybooks with LGBTQ characters.