05-06-2025
Supreme Court unanimously sides with Catholic charity group in tax exemption bid
The Supreme Court ruled Thursday that a Catholic charity group is entitled to tax relief it was denied on the basis that its operations were not primarily religious, a decision that could expand eligibility for religious tax exemptions.
In a unanimous decision, the justices reversed the Wisconsin Supreme Court's determination that a chapter of Catholic Charities, a social services arm of Catholic diocese nationwide, does not qualify for a state unemployment tax because it doesn't sway those it serves to become Catholic.
'Much like a law exempting only those religious organizations that perform baptisms or worship on Sundays, an exemption that requires proselytization or exclusive service of co-religionists establishes a preference for certain religions based on the commands of their religious doctrine,' Justice Sonia Sotomayor wrote in the majority opinion.
Catholic Charities Bureau is controlled by the Diocese of Superior, and insists its services reflect 'gospel values and the moral teaching of the church.' However, it serves and employs non-Catholics, completes work that could be administered by nonreligious groups and doesn't attempt to proselytize.
Wisconsin's top court denied its request for religious exemption from the state's unemployment tax system after determining its activities were 'primarily charitable and secular,' instead of religious.
Sotomayor noted that it's 'fundamental' to the constitutional order that 'neutrality between religion and religion' is maintained by the government.
'There may be hard calls to make in policing that rule, but this is not one,' she wrote.
In a concurring opinion, Justices Clarence Thomas said he would have taken the court's ruling a step further to find that the lower court incorrectly deemed Catholic Charities as the primary 'organization' the group belongs to, as opposed to the broader Catholic Diocese of Superior.
'The First Amendment's guarantee of church autonomy gives religious institutions the right to define their internal governance structures without state interference,' Thomas wrote. 'Religious institutions may create different corporate entities to help manage their temporal affairs, but those entities do not define the broader religious institution's internal structure.
'Here, although Catholic Charities and its subentities are separately incorporated from the Diocese of Superior, they are, as a matter of church law, simply an arm of the Diocese,' he continued.
Justice Ketanji Brown Jackson wrote a separate concurring opinion to further argue that the Federal Unemployment Tax Act (FUTA)'s religious exemption does not differentiate between charities based on their religious motivations, whom they serve or how.
'Rather, both the text and legislative history of FUTA's religious-purposes exemption confirm that Congress used the phrase 'operated primarily for religious purposes' to refer to the organization's function, not its inspiration,' she wrote. 'Put differently, (the law) turns on what an entity does, not how or why it does it.'
The decision marks another victory for religious plaintiffs in disputes with states, a trend in recent years at the Supreme Court.
The tax exemption case is one of three religion cases the justices agreed to hear this term, in addition to weighing whether parents of children in public school can opt out of LGBTQ book instruction and whether an online Catholic school can become a charter school in a nationwide first.
Updated 10:51 a.m. EDT
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