SCOTUS Sides With Catholic Charities in Tax Exemption Case

While the Wisconsin Supreme Court upheld the denial, SCOTUS unanimously reversed that ruling for not maintaining “neutrality” toward the Bureau’s theological decisions and practices.

The decision returns the case back to the Wisconsin Supreme Court for further proceedings that align with SCOTUS’s opinion.

Wisconsin’s tax law, which is similar to the federal government’s, provides exemptions for religious organizations operating “primarily for religious purposes” from having to pay unemployment tax for its employees. As SCOTUS summarized in its opinion, Wisconsin denied the Catholic Charities Bureau an exemption because its work, while motivated by religious belief, was viewed as primarily “secular in nature,” was not engaged in proselytization, nor did it limit its charitable services to Catholics only. However, the Justices reasoned that by requiring religious organizations to proselytize to be religious, or to “only serve co-religionists,” the state had imposed an unconstitutional discrimination of religion.

Authoring the opinion, Justice Sonia Sotomayor wrote that the Wisconsin Supreme Court’s interpretation of the unemployment tax law “differentiates among religions” based on “theological lines” and “choices.” An exemption only available to organizations that proselytize or serve only co-religionists is thus not equally available to all denominations, and thus “cannot stand,” she wrote.

“It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion,’” wrote Justice Sotomayor. “There may be hard calls to make in policing that rule, but this is not one. When the government distinguishes among religions based on theological differences in their provision of services, it imposes a denominational preference that must satisfy the highest level of judicial scrutiny. Because Wisconsin has transgressed that principle without the tailoring necessary to survive such scrutiny, the judgment of the Wisconsin Supreme Court is reversed…”

Justice Clarence Thomas concurred stating that Wisconsin also violated the church autonomy doctrine.

“The First Amendment guarantees to religious institutions broad autonomy to conduct their internal affairs and govern themselves,” wrote Justice Thomas. “This guarantee, which we have called the ‘church autonomy doctrine,’ provides that a religious institution is not defined by the corporate entities it chooses to form.”

Justice Thomas concluded that the Wisconsin Supreme Court should have “deferred to that understanding” rather than let “an unlawful” state action impose on a religious organization’s internal governance.

Liberty Counsel Founder and Chairman Mat Staver said, “The First Amendment does not permit the government to parse how religious organizations operate for tax exemptions. Government must remain neutral toward an organization’s theology and religious practices.”