WASHINGTON -The U.S. Supreme Court on Thursday backed a bid by an arm of a Catholic diocese in Wisconsin for a religious exemption from the state’s unemployment insurance tax in the latest ruling in which the justices took an expansive view of religious rights.
The 9-0 ruling, authored by liberal Justice Sonia Sotomayor, overturned a lower court’s decision that had rejected the tax exemption bid by the Catholic Charities Bureau – a nonprofit corporation operating as the social ministry arm of the Catholic diocese in the city of Superior – and four entities the bureau oversees.
The Supreme Court concluded that the Wisconsin Supreme Court’s interpretation of the state’s tax exemption amounted to religious discrimination by treating religious denominations unequally.
At issue was whether Wisconsin’s denial of the tax exemption violated the U.S. Constitution’s First Amendment guarantee of free exercise of religion, as well as its separation of church and state. Under Wisconsin’s unemployment insurance program, the state collects taxes from employers and uses the revenue to provide a temporary source of income to eligible jobless workers.
The lower court had disfavored groups like the Catholic Charities Bureau that do not seek to inculcate their faith as part of their charitable activities and serve a wider population than just fellow Catholics, even though these practices reflect Catholic religious doctrine, the justices said.
“A law that differentiates between religions along theological lines is textbook denominational discrimination,” Sotomayor wrote for the court.
Sotomayor added that the First Amendment “mandates government neutrality between religions” and that denominational preferences by government officials are subject to the strictest form of judicial review.
The Catholic Charities Bureau since 1917, it said on its website, has provided “services to the poor, the disadvantaged, the disabled, the elderly and children with special needs as an expression of the social ministry of the Catholic Church in the Diocese of Superior.”
Bishop James Powers of the Diocese of Superior welcomed the court’s ruling.
“At the heart of Catholic Charities’ ministry is Christ’s call to care for the least of our brothers and sisters, without condition and without exception,” Powers said.
“We’re grateful the court unanimously recognized that improving the human condition by serving the poor is part of our religious exercise and has allowed us to continue serving those in need throughout our diocese and beyond,” Powers added.
EXEMPTION ELIGIBILITY STANDARD
The federal government and all states exempt certain religious entities from having to pay into unemployment insurance programs. Most of these laws, including Wisconsin’s, require that organizations be “operated primarily for religious purposes” to be eligible for a religious exemption.
The Wisconsin Supreme Court in 2024 rejected the tax exemption bid by Catholic Charities Bureau and its subsidiaries. Although the groups “assert a religious motivation behind their work,” that court found, their activities were “primarily charitable and secular” and thus were not “operated primarily for religious purposes.”
The Catholic Charities Bureau and its subsidiaries do not require their employees to be of any particular religion, nor do they seek to instill Catholic beliefs in those receiving their services. Among the subsidiary groups involved in the case are organizations that provide services to people with disabilities including job placements and training, as well as daily living services and home visitation, according to court papers.
During the Great Depression, Wisconsin in 1932 became the first U.S. state to enact an unemployment compensation law.
Three years later, Democratic U.S. President Franklin Roosevelt signed into law the landmark Social Security Act of 1935 that established, among other programs, a cooperative federal-state unemployment insurance plan that would eventually lead to all U.S. states enacting their own unemployment relief programs.
The Supreme Court, with its 6-3 conservative majority, has taken an expansive view of religious rights in a series of rulings in recent years. In May, however, the court in a 4-4 ruling blocked a bid led by two Catholic dioceses to establish in Oklahoma the nation’s first taxpayer-funded religious charter school in a major case involving religious rights in American education.
In 2017, the court in a Missouri case ruled that churches and other religious entities cannot be flatly denied public money based on their religious status – even in states whose constitutions explicitly ban such funding.
In 2020, it endorsed Montana tax credits that helped pay for students to attend religious schools.
In 2021, the court ruled in favor of a Catholic Church-affiliated agency that sued after Philadelphia refused to place children for foster care with the organization because it barred same-sex couples from applying to become foster parents.
In 2022, it backed two Christian families in their challenge to a Maine tuition assistance program that had excluded private religious schools. Also in 2022, it ruled that a Washington state public school district violated the rights of a Christian high school football coach who was suspended for refusing to stop leading prayers with players on the field after games.
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