Wisconsin Supreme Court Upholds Religious Tax Exemption for Catholic Charity

Wisconsin Supreme Court Upholds Religious Tax Exemption for Catholic Charity

The Wisconsin Supreme Court has handed down a decision affirming the right of a Catholic charity to be exempt from state unemployment insurance taxes. This decision aligns with a prior ruling by the United States Supreme Court.

On Monday, the state’s high court issued an order determining that Catholic Charities Bureau (CCB), Inc. and its four affiliated entities qualify for a religious purposes exemption from unemployment taxation.

The ruling directs the case back to a circuit court to overturn a previous decision by the Labor and Industry Review Commission (LIRC) against the CCB. Additionally, the court rejected a push by state officials to remove the religious exemption entirely, as highlighted by Becket, the religious liberty law firm representing the CCB.

Eric Rassbach, vice president and senior counsel at Becket, commented in a statement, “You’d think Wisconsin would take a 9-0 Supreme Court loss as a hint to stop digging. But apparently Attorney General [Josh] Kaul and his staff are gluttons for punishment. Thankfully, the Wisconsin Supreme Court put an end to the state’s tomfoolery and confirmed that Catholic Charities is entitled to the exemption it already won.”

Back in 2016, CCB approached the Wisconsin Department of Workforce Development (WDWD) to request a religious exemption from paying into the state’s unemployment insurance program. The request was initially denied, with WDWD arguing the organization’s nature was not primarily religious.

CCB appealed, resulting in an administrative law judge overturning this initial denial. However, WDWD brought the matter before the Wisconsin LIRC, which ruled against the charity, stating it did not meet state law criteria for a religious exemption.

Previously, the Wisconsin Supreme Court had ruled 4-3 that CCB and its sub-entities did not operate primarily for religious purposes and were thus ineligible for the exemption. This decision was overturned by a unanimous June decision from the U.S. Supreme Court.

Justice Sonia Sotomayor, writing for the U.S. Supreme Court, argued that denying the exemption constituted denominational discrimination. “It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion,'” she stated. “There may be hard calls to make in policing that rule, but this is not one.”

In a recent development, Wisconsin Attorney General Josh Kaul submitted a remedial brief in October advocating for the elimination of the religious exemption. The brief contended that expanding the exemption could undermine the unemployment system’s reach over nonprofit employers.

“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,” the brief argued.