Wisconsin officials are weighing the elimination of a religious tax exemption altogether rather than extending it to a Catholic charity that won a unanimous U.S. Supreme Court ruling in June.
In a remedial brief filed Monday with the Wisconsin Supreme Court, Attorney General Josh Kaul addressed the dispute involving the Catholic Charities Bureau (CCB), noting that the U.S. Supreme Court “did not prescribe a particular remedy” when it sided with the charity earlier this year regarding its request for an exemption from the state’s unemployment insurance program.
Kaul, a Democrat, told the court that he sees two paths forward: “expanding the statutory exemption to groups like Catholic Charities” or “eliminating it altogether.”
“And over the past 50 years, the Legislature has consistently expanded the universe of nonprofit employers that must participate in the unemployment system. Enlarging this exemption would reverse that trend,” he stated.
Kaul urged the justices to remove the exemption to cure the constitutional problem without new fallout. “By striking the exemption, this Court can avoid collateral damage to Wisconsin workers while still curing the discrimination the U.S. Supreme Court identified. It should so hold, thereby bringing this long-running case to a close.”
Earlier this year, in Catholic Charities Bureau, Inc. v. Wisconsin Labor Review Commission et al., the U.S. Supreme Court held that the Catholic charity could qualify for an exemption from the unemployment insurance program even though state officials had characterized its services as nonreligious.
The ruling vacated a prior decision by the Wisconsin Supreme Court and remanded the matter for further proceedings.
Responding to Kaul’s proposal, the Becket Fund for Religious Liberty—counsel for CCB—filed a supplemental brief opposing any move to abolish the exemption, asserting that “Wisconsin long ago forfeited any claim to request that Catholic Charities' remedy be anything other than receiving the exemption.”
Becket criticized the timing of the state’s position. “Wisconsin should have raised that issue well before reversal and remand by the United States Supreme Court,” the brief continued. “It should have made those arguments in a timely fashion so that this Court and the United States Supreme Court had an opportunity to evaluate them.”
CCB serves as an umbrella for multiple ministries within the Roman Catholic Diocese of Superior. In 2016, it asked the Wisconsin Department of Workforce Development (WDWD) for a religious exemption from the state unemployment system.
WDWD denied the application, concluding the organization was not primarily religious. CCB appealed, and an administrative law judge reversed the agency’s determination.
The department then sought review from the Wisconsin Labor and Industry Review Commission, which ruled against CCB, determining the group did not qualify for a religious exemption.
In March 2024, the Wisconsin Supreme Court ruled 4–3 that CCB was “not operated primarily for religious purposes” and therefore ineligible for the exemption.
Justice Ann Walsh Bradley, writing for the majority, said, “CCB and the sub-entities, which are organized as separate corporations apart from the church itself, neither attempt to imbue program participants with the Catholic faith nor supply any religious materials to program participants or employees.”
In June, the U.S. Supreme Court unanimously reversed, with Justice Sonia Sotomayor writing the opinion that concluded the charity could not be denied the exemption on the basis that its services were considered secular.
Sotomayor emphasized that any “law that differentiates between religions along theological lines is textbook denominational discrimination” and that “differentiation on theological lines is fundamentally foreign to our constitutional order.”
Reiterating the principle of neutrality, she wrote, “It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion.’ There may be hard calls to make in policing that rule, but this is not one.”
