The U.S. Supreme Court on March 31 seemed inclined to side with a Wisconsin Catholic charity that argues that it should not have to pay unemployment tax.

The nation’s highest court granted the petition in Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission on Dec. 13, 2024.

During the hearing, the justices seemed concerned about a lower court ruling in which the court distinguished between religiously affiliated social welfare organizations that proselytize and those, such as Catholic Charities, that do not.

Wisconsin law excuses religious organizations that are “operated, supervised, controlled, or principally supported by a church or convention or association of churches” from paying state unemployment tax.

The petitioner, Catholic Charities, argues that it is unconstitutional to allow the state to decide what work is religious in nature.

The Supreme Court of Wisconsin held 4–3 in March 2024 that Catholic Charities and its four related organizations that serve the developmentally disabled are not “operated primarily for religious purposes,” so they fail to meet the requirements for a tax exemption.

That court held that the activities of Catholic Charities do not qualify as “typical” religious activities because the organization does not “attempt to imbue program participants with the Catholic faith” and because the help it provides to those with mental and developmental disabilities could be carried out by secular organizations.

Justice Ann Walsh Bradley of the state court wrote, “If we looked to the church’s purpose in operating the organization only, then any religious affiliated organization would always be exempt.”

The organizations asked the U.S. Supreme Court to decide if Wisconsin is running afoul of First Amendment religious protections “by denying a religious organization an otherwise-available tax exemption because the organization does not meet the state’s criteria for religious behavior,” according to the petition.

Catholic Charities argues that the state court erred when it found that the services it provides “do not have a religious purpose.”

“Put another way, it doesn’t matter if Catholic Charities gives a cup of water in Jesus’ name because non-religious charities offer cups of water too,” the petition states, interpreting the rationale behind the state court’s decision.

The state court ruling provides an “absurd result [that] deepens a split between state courts that require religious entities to conform to stereotypes to qualify for the ‘religious purposes’ exemption and those that do not,” the petition reads.

During oral argument on March 31, Wisconsin Assistant Attorney General Colin Roth told U.S. Supreme Court justices that the state’s system of “religious accommodation solves a particular problem posed by the unemployment insurance system.”

Roth said that because the state has to settle disputes over whether employees have been fired for misconduct, with religious organizations, it risks being pulled into disputes in which it has to decide if employees have been compliant with religious doctrine.

To deal with the problem, the state gives leeway to employers “most likely to draw the state into doctrinal disputes,” he said.

Justice Elena Kagan told Roth: “There are lots of hard questions in this area.

“I thought it was pretty fundamental that we don’t treat some religions better than other religions. And we certainly don’t do it based on the contents of the religious doctrine that those religions preach.”

Justice Neil Gorsuch asked, “Isn’t it a fundamental premise of our First Amendment that the state shouldn’t be picking and choosing between religions?

“Doesn’t it entangle the state tremendously when it has to go into a soup kitchen, send an inspector in, to see how much prayer is going on?”

The attorney for Catholic Charities, Eric Rassbach, said the Wisconsin court “got it wrong when it interpreted a state law religious exemption to favor what it called typical religious activity, and when it held that helping the poor can’t be religious, because secular people help the poor too.”

The U.S. Supreme Court should rule that “the Constitution doesn’t allow courts to do that,” Rassbach, vice president and senior counsel at the Becket Fund for Religious Liberty, said.

“The problem here is that Wisconsin draws distinctions along theological lines, something that this court has repeatedly forbidden.”

Justice Amy Coney Barrett told Rassbach, “One of the problems here is figuring out what the line is. … if a legislature wants to … exempt certain kinds of religious activities, but not others.”

Rassbach acknowledged to Justice Samuel Alito that he was arguing that the Supreme Court of Wisconsin’s ruling has the effect of discriminating against Catholic Charities.

The federal government weighed in to support Catholic Charities’ position.

U.S. Deputy Solicitor General Curtis Gannon said the Supreme Court of Wisconsin “erred” in its interpretation of the Federal Unemployment Tax Act by issuing a ruling that “second-guesses the religious nature of sincerely held expressions of faith and, worse, risks discrimination among various faiths by singling out certain activities that are deemed inherently secular.”

Justice Clarence Thomas said the case could also be decided on constitutional—as opposed to statutory—grounds.

Gannon said the federal statute is unconstitutional as the state court applied it, but that he “would prefer not to have what … is the sensible reading of a federal statute be declared unconstitutional by this court.”

After oral argument, Catholic Bishop James Powers of the Diocese of Superior, Wisconsin, said, “At the heart of our work is Christ’s call to care for the least of our brothers and sisters—without question, without condition, and without exception.”

“Wisconsin is punishing Catholic Charities for following this example of Christian love,” Powers told The Epoch Times. “We do not help the needy because they are Catholic—we help them because we are Catholic.”

The Epoch Times reached out to Roth and the U.S. Department of Justice for comment. No replies were received by publication time.

The U.S. Supreme Court is expected to rule on the case by the end of June.

This article by Matthew Vadum appeared March 31, 2025, in The Epoch Times.