Supreme Court to Hear Wisconsin Catholic Diocese's Unemployment Tax Exemption Bid

By John Kruzel

WASHINGTON (Reuters) – The U.S. Supreme Court agreed on Friday to hear an appeal from the Catholic Charities Bureau, part of the Catholic diocese in Wisconsin's Superior city, regarding a sought religious exemption from the state's unemployment insurance tax. This case could significantly impact constitutional religious rights.

The appeal challenges a lower court's decision that denied the bureau's exemption request. A favorable ruling could mandate Wisconsin and similar states to extend their exemptions under the First Amendment protections.

Arguments are expected to be heard by the Supreme Court, with a decision likely by June.

In 1932, Wisconsin became the first state to enact an unemployment compensation law during the Great Depression, taxing employers to provide temporary payments to unemployed individuals. This law inspired a federal-state program established by Congress three years later, leading to the adoption of unemployment plans across the U.S.

Currently, Wisconsin exempts certain religious entities that are "operated primarily for religious purposes" from contributing to its unemployment insurance program, while three states apply different eligibility criteria.

Since 1917, the Catholic Charities Bureau has offered services for the poor, disadvantaged, disabled, elderly, and children with special needs in alignment with the social ministry of the Catholic Church.

In 1972, state officials determined the bureau was subject to the unemployment compensation law. However, after a subsidiary received a favorable ruling in a similar case, the bureau, along with four subsidiaries, sought religious exemptions in 2016.

Among those subsidiaries are groups that provide support for individuals with disabilities through job placements, training, daily living services, and home visitation.

In March 2024, the Wisconsin Supreme Court ruled against the groups, stating they were not primarily religious and thus ineligible for tax exemption. The court emphasized that the bureau's offerings were predominantly charitable and secular, open to all participants regardless of faith.

Following this ruling, the bureau appealed to the Supreme Court, asserting the state court's decision violated the First Amendment by favoring some religions, creating entanglement with religious issues, and intruding on church autonomy. They argued the state court set an unreasonably high proof standard for First Amendment claims.