Catholic Charities Bureau, Inc. v. Wisconsin Labor and Industry Review Comm'n.

Background

Catholic Charities Bureau and four nonprofit subentities operate under the Roman Catholic Diocese of Superior and provide job training, daily living services, and other charitable programs. They asked Wisconsin for a religious-employer exemption from the State’s unemployment tax that applies to organizations “operated primarily for religious purposes” and controlled by a church. Administrative agencies and state courts saw alternating results, and the Wisconsin Supreme Court denied the exemption because these groups do not proselytize or limit services to fellow Catholics.

Reasoning

The Court considered whether Wisconsin’s interpretation violated the First Amendment’s requirement that government remain neutral among religions. It held that the State’s test imposed a denominational preference by turning exemption eligibility on theological practices—such as proselytizing or serving only co-religionists—and therefore triggered strict scrutiny. The Court rejected the State’s arguments that the requirement was merely pragmatic or tied to “distinctively religious activities,” and found Wisconsin failed to show the rule was narrowly tailored to further its asserted interests in guaranteeing unemployment coverage or avoiding religious entanglement.

Real world impact

The Court reversed the Wisconsin Supreme Court and remanded. States and agencies that condition religious tax exceptions on proselytizing or exclusive service must either justify those distinctions under strict scrutiny or revise their rules. The opinion notes that the federal law and many States use similar language, so this decision will guide how governments treat church-affiliated charities and tax exemptions. The decision was unanimous, with separate opinions elaborating on church autonomy and statutory interpretation.

Dissents or concurrances

Two Justices wrote separate concurrences: one stressing church autonomy and arguing courts must defer to a church’s own view of its organizations, and another urging a reading of the federal statute that focuses on whether an entity performs core religious functions rather than on its motives.