Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission

Catholic Charities Bureau, Inc., and four sub-entities sought exemption from Wisconsin unemployment compensation taxes under a statute exempting nonprofits “operated primarily for religious purposes” and controlled by a church. Controlled by the Roman Catholic Diocese of Superior, they were denied by the Wisconsin Supreme Court, which held they were not “operated primarily for religious purposes” because they neither engaged in proselytization nor limited services to Catholics. The U.S. Supreme Court granted certiorari, heard arguments on March 31, 2025, and issued its unanimous decision on June 5, 2025, reversing the Wisconsin Supreme Court. On remand, the Wisconsin Supreme Court ruled on December 15, 2025, that the Charities are eligible for the religious purposes exemption.

The U.S. Supreme Court unanimously reversed the Wisconsin Supreme Court's judgment and remanded for further proceedings. Justice Sotomayor delivered the opinion, joined by a unanimous Court, holding that the statute as applied violated the First Amendment's Establishment Clause. The Court found the interpretation imposed a denominational preference subject to strict scrutiny, which the State failed to satisfy. On December 15, 2025, the Wisconsin Supreme Court on remand ordered that Catholic Charities Bureau and its sub-entities are eligible for the religious purposes exemption to unemployment taxation.

Whether the Wisconsin Supreme Court's application of §108.02(15)(h)(2) to deny Catholic Charities Bureau a religious tax exemption violated the First Amendment by imposing a denominational preference based on theological lines—requiring proselytization or service exclusively to co-religionists—rather than applying neutral secular criteria.

The unanimous decision strengthened First Amendment protections for religious organizations, clarifying that states cannot define “religious purposes” based on theological criteria such as proselytization or restrictions on service recipients. It reinforced denominational neutrality principles and strict scrutiny for laws differentiating among religions. The ruling has substantial implications for religious charities nationwide, affirming that religious motivation for charitable work, rather than the secular nature of activities, can qualify organizations for religious exemptions. It also prevented states from forcing religious organizations to choose between tax burdens and altering their religious mission.