On June 5, 2025, the U.S. Supreme Court unanimously ruled that Wisconsin violated the First Amendment of the United States Constitution by denying a Catholic social ministry group the same unemployment tax exemption granted to churches and other religious organizations. The decision, authored by Justice Sonia Sotomayor, emphasized that the state’s refusal constituted religious discrimination, violating the principle of government neutrality between religions.
The case centered on the Catholic Charities Bureau of the Diocese of Superior, which provides services such as housing and job training. Wisconsin had denied the group an exemption from the state’s unemployment tax, arguing that its activities were secular and not primarily religious. However, the Supreme Court found that the group’s charitable work was motivated by religious principles, and the state’s selective exemption based on theological practices amounted to denominational discrimination.
Justice Sotomayor applied strict scrutiny, the highest level of constitutional review, and concluded that Wisconsin’s exemption scheme was both underinclusive and overinclusive. It was underinclusive because it excluded certain religious organizations like the Catholic Charities Bureau while exempting others, and overinclusive because it applied to all employees, including those with no religious duties.
Justice Clarence Thomas concurred, arguing that the Wisconsin Supreme Court erred by treating the Catholic Charities Bureau as separate from the diocese, thus violating the church autonomy doctrine, which protects religious institutions’ rights to define their own governance structures.
Justice Ketanji Brown Jackson also concurred, noting that the federal unemployment tax exemption focuses on the functions an organization performs, rather than its motivations or methods, suggesting a narrower scope for state exemptions.
For further questions regarding the update, please contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade or Kevin Naccari, Jr. and visit our Tax practice page.