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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.
But in interpreting the law – and siding with state officials – Wisconsin’s highest court determined that the work Catholic Charities was performing wasn’t inherently religious. It did so in part by noting that the group did not attempt to “imbue” beneficiaries with the Catholic faith or “supply religious materials” to them.
The problem with that analysis, Sotomayor wrote, is that Catholic teaching forbids using works of charity for proselytism. That meant the state tax law, as interpreted by the state’s highest court, discriminated against Catholicism.
“A law that differentiates between religions along theological lines is textbook denominational discrimination,” Sotomayor wrote for the court. “This case involves that paradigmatic form of denominational discrimination.”
The Catholic Charities 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.
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.
His approach, which the court did not adopt, would have had much broader implications. No other justice joined Thomas’ opinion.
“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,” Vladeck said, “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.”
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.
In a footnote, the court said that Wisconsin had not cited any decisions in which federal or other state laws appeared to divide groups on whether they proselytize.
Religious groups applauded the decision.
“Government has no business second-guessing the way a faith organization lives out its ministry,” said John Bursch, senior counsel at the religious law group Alliance Defending Freedom. “Religious ministries that aid a diverse range of people outside their congregations are still engaged in religious activity.”
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, both conservatives and liberals agreed that the Wisconsin policy went too far.
There were signs at oral argument earlier this year that that might be the case. Justice Elena Kagan, a member of the court’s liberal wing, signaled 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.
Aides to Wisconsin Attorney General Josh Kaul did not immediately respond to a request for comment.
“Wisconsin shouldn’t have picked this fight in the first place,” said Eric Rassbach, vice president and senior counsel at Becket, which represented Catholic Charities in the case. “It was always absurd to claim that Catholic Charities wasn’t religious because it helps everyone, no matter their religion.”
This story has been updated with additional details.
