Supreme Court backs Catholic Charities' push to object to state taxes on religious grounds

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The Supreme Court on Thursday cleared the way for a Catholic Charities chapter in Wisconsin to secure an exemption from certain state taxes in a decision that could expand the type of religious entities entitled to tax breaks under the First Amendment's protections for religion.
It was the latest in a series of decisions from the Supreme Court in recent years that have sided with religious groups on everything from public funding for sectarian schools to allowing coaches to offer private prayers on the field after high school football games.
'It is fundamental to our constitutional order that the government maintain 'neutrality between religion and religion,'' Justice Sonia Sotomayor wrote for a unanimous court.
'There may be hard calls to make in policing that rule, but this is not one. When the government distinguishes among religions based on theological differences in their provision of services, it imposes a denominational preference that must satisfy the highest level of judicial scrutiny,' she added.
The Catholic Charities Bureau and four affiliate organizations had claimed that Wisconsin violated the First Amendment's religious protections by denying exemptions from the state's unemployment taxes. Churches already receive that exemption and so the question for the justices was, in essence, whether religiously affiliated entities that don't perform traditionally religious functions – such as services – should also qualify.
The bureau describes itself as the 'social ministry arm of the Diocese of Superior' of Wisconsin and says that it carries out a 'wide variety of ministries for the elderly, the disabled, the poor,' and others.
Wisconsin had argued that Catholic Charities had been participating in its unemployment insurance program without complaint since 1971.
Forty-seven states and the federal government include exemptions from unemployment taxes for religious organizations similar to Wisconsin's, suggesting the court's decision could have an impact beyond the Badger State. The Trump administration sided with Catholic Charities, and it was concerned a broad ruling might affect the similar federal law. The Justice Department told the court it interprets federal law to exempt Catholic Charities and similar groups.
Justice Clarence Thomas, a member of the court's conservative wing, wrote separately to argue in favor of a doctrine of 'church autonomy' that would further insulate religious institutions from taxes and government regulations. Thomas argued that the state court went too far by looking into how Catholic Charities was structured.
'The First Amendment's guarantee of church autonomy gives religious institutions the right to define their internal governance structures without state interference,' Thomas wrote.
'Perhaps the most important feature of today's ruling is that there was not a majority to take up the issue Justice Thomas wrote separately to underscore—whether regulations governing the tax-exempt status of religious organizations implicates, in Thomas's words, 'the First Amendment's guarantee of church autonomy,'' said Steve Vladeck, CNN Supreme Court analyst and professor at Georgetown University Law Center. 'By deciding this case (unanimously) on narrower grounds, the Court saves the much more fraught question of the extent to which the First Amendment does require church autonomy—and what that would mean for all kinds of local, state, and federal regulations—for a future case.'
The majority concluded that Wisconsin's law, as interpreted by the state's top court, discriminated between religions because the groups performing the charity work did not proselytize – even though the group's faith bars practitioners from doing so.
'A law that differentiates between religions along theological lines is textbook denominational discrimination,' Sotomayor wrote for the court.
'Wisconsin's exemption, as interpreted by its Supreme Court, thus grants a denominational preference by explicitly differentiating between religions based on theological practices,' she wrote.
Though technical, the case raised fundamental questions about the ability of courts to look behind the pulpit to assess the religiosity of certain organizations. Chief Justice John Roberts pressed the attorney representing Catholic Charities in March by asking whether a vegetarian restaurant might be entitled to an exemption from state taxes in the group's view if its owners claimed they were following a religious tenet against eating meat.
Along those same lines, a question lurking behind the case was how it might apply to religiously affiliated hospitals. Approximately 787,000 employees work for six multibillion-dollar Catholic-affiliated health care systems, according to the Freedom from Religion Foundation, which filed a brief supporting the state. The Service Employees International Union, which also backs the state, estimated that more than a million workers are employed by religiously affiliated organizations.
The conservative justices on the Supreme Court have in recent years blurred the line that once clearly separated church from state in a series of rulings siding with religious entities. They have done so in part on the theory that some government efforts intended to comply with the First Amendment's establishment clause have been overbroad and discriminated against religion.
The court has expanded the circumstances under which taxpayer money may fund religious schools, for instance, it allowed a public high school football coach to pray on the 50-yard line and ruled that Boston could not block a Christian group from raising a flag at City Hall.
But in this case, liberal Justice Elena Kagan signaled during the argument that she, too, had concerns with the idea that courts might take it upon themselves to second guess what sorts of activities might count as religious.
It was clear in March that a majority of the justices were alarmed by the decision from the Wisconsin Supreme Court, which concluded that the work Catholic Charities performed was 'wholly' secular.
'Such services can be provided by organizations of either religious or secular motivations, and the services provided would not differ in any sense,' the majority wrote.
In a dissent, two Wisconsin justices said that the court's decision 'looks through a seemingly Protestant lens to deem works of charity worthy of the exemption only if accompanied by proselytizing – a combination forbidden by Catholicism, Judaism, and many other religions.' By choosing which religions may benefit from the break, the dissent said, the state court's interpretation violated the First Amendment.
Catholic Charities argued that its employees would continue to have unemployment coverage but that it would be provided by a church-affiliated entity rather than the state. The group's opponents say employees in other workplaces may not be so lucky and have noted that the state cannot guarantee that those plans will pay out when employees lose their jobs.
This story has been updated with additional details.