Wisconsin told Catholic Charities it was not religious enough and lost 9-0

The State of Wisconsin had a theory about what makes a charity religious. If the charity feeds hungry people and asks them to pray, it is religious. If it feeds hungry people and asks nothing, it is not. Mercy without a sermon, on the state's view, is just a social service.

Put that way, the theory sounds almost insulting to anyone who has read the Gospels, where the Good Samaritan binds the wounds of a stranger and delivers no homily at all. The Supreme Court, nine justices to none, said the theory was not merely wrong but unconstitutional. This is the story of Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission, decided June 5, 2025, and why it matters to every church that does charitable work.

Terms

• Unemployment compensation tax. Employers pay into a state fund that pays benefits to workers who lose their jobs. Wisconsin's law, like the federal law it tracks, exempts certain employers.
• The religious exemption. Wisconsin exempts service for an organization that is "operated primarily for religious purposes" and is "operated, supervised, controlled, or principally supported by a church or convention or association of churches."
• Denominational neutrality. The principle that the government may not officially prefer one religious denomination over another, or treat some religious groups more favorably because of their beliefs or practices.
• Larson v. Valente (1982). The case that stated the principle, and the key precedent here.

The facts

Catholic Charities Bureau is the social-ministry arm of the Diocese of Superior, Wisconsin. It operates through four sub-entities that serve people with developmental disabilities, the elderly and the poor. The organizations are controlled by the bishop. Their mission statements describe the work as an expression of the Church's call to serve. They employ and serve people of all faiths and none, and they do not use their services to evangelize, and they do not require those they serve to share the Catholic faith.

For years, the Bureau had treated its work as exempt from Wisconsin's unemployment-compensation tax under the religious exemption. Wisconsin's Department of Workforce Development later decided the exemption did not apply. The Labor and Industry Review Commission agreed. The matter wound through the state courts. The Wisconsin Supreme Court, in 2024, ruled against the charity.

The state court's reasoning was this. To qualify as "operated primarily for religious purposes," the court said, an organization must look at the motivation for the work and the nature of the activities. Catholic Charities' motivation was religious, said the court, but its activities were not: it did not engage in worship or religious instruction or proselytize, did not limit its services to Catholics, and did not impose religious requirements on its employees or clients. The services it provided, the court said, were secular in nature, and one could not tell from the nature of the work that it was religious. So no exemption.

The Bureau petitioned. It argued that the state had made itself the judge of what counts as religious, and that it was doing so by a test that favored some religions over others.

The holding

The Supreme Court unanimously reversed and sent the case back. Justice Sonia Sotomayor wrote the opinion. This is a point worth underlining, since some readers will not expect it: an opinion for a unanimous Court on a religious-liberty case, written by one of the Court's liberal justices, for the Catholic bishop's charity.

Her analysis ran in four steps.

1. The principle. The Court started with Larson v. Valente. In that case, the Court struck down a Minnesota law that imposed registration and reporting requirements on religious organizations that solicited more than half of their funds from non-members, because the law favored some religious groups over others. The Court's statement in Larson has become a pillar of the doctrine: the clearest command of the Establishment Clause is that one religious denomination cannot be officially preferred over another. A law that grants an exemption to some religious organizations and denies it to others based on their theology or practices must meet strict scrutiny.
2. The application. Wisconsin's test, as applied by its Supreme Court, made the exemption depend on whether the organization's activities were religious in the way the state defined that term: worship, religious instruction, proselytizing, serving only coreligionists. That distinction, the Court said, cuts across denominations. Some religious groups, by their theology, proselytize and serve their own. Others, such as the Catholic Church, understand charity as a service to all, offered without conditions, as an expression of faith. A test that sorts religious groups by those characteristics grants the exemption to the first and denies it to the second. That is a denominational preference.
3. No inquiry into the beliefs of the groups. To apply Wisconsin's test, a state official would have to examine an organization's activities and decide whether they were religious enough. That requires the government to decide what counts as a religious activity. The Court said that kind of inquiry, in which the government assesses the content of religious teachings and the way they are practiced, raises serious constitutional concerns of its own.
4. Strict scrutiny and the result. Because the law, as interpreted, drew distinctions among religions, strict scrutiny applied, and the Court found that Wisconsin's application of its tax scheme was not narrowly tailored to its interest in providing unemployment coverage. The Court held that the state's interpretation violated the First Amendment and sent the case back to the state court for further proceedings consistent with the opinion.

There was no suggestion in the opinion that Catholic Charities could ignore the law or that the state could not tax charities. The ruling is narrower: the state may not apply an exemption in a way that discriminates among religious groups.

The concurrences

Justice Thomas and Justice Jackson each wrote a separate concurring opinion. I am not going to characterize them, because their precise language is best read in the text itself, and I would encourage readers to do so.

The unanimity is the point. A Court that is divided on many questions about religion agreed that this was an easy case once the question was framed properly.

The steelman: the state's best argument

Let me state Wisconsin's case at its best.

The exemption is a tax break. Tax breaks are a matter of legislative grace, and the legislature may define who gets them. Exemptions are narrow, and the state has an interest in keeping the exemption from swallowing the tax. If every nonprofit with some tie to a church could claim it, the unemployment fund would lose revenue, and workers would lose coverage. The state's test was an attempt to draw a line that is administrable: it asks whether the organization operates for a religious purpose, and not merely whether it was founded or funded by a church. Without a line of some kind, the exemption would be meaningless.

There is also the point that Catholic Charities employs many people who are not Catholic and serves clients who are not Catholic. Its workers could lose unemployment protection if the exemption applied. A state has a legitimate interest in protecting them. That is not an anti-religious interest.

Those are serious points, and I do not wave them away. But they do not answer the constitutional objection.

The answer, in numbered points

1. The legislature may draw lines, but not along denominational ones. The Court did not say the state must exempt every charity. It said the state may not distinguish among religious groups on the basis of how they practice their faith. The Wisconsin legislature drew a line, "operated primarily for religious purposes." The problem arose when the state court read that phrase to turn on proselytizing and serving one's own.
2. The test is an inquiry into theology. Telling whether a charity's activities are "religious" requires a judgment about what religion is. For some faiths, feeding the poor is worship. For some, it is a sacrament. The government cannot rank those views. That is the point of the First Amendment's text and of the long line of cases barring the courts from deciding religious questions, which was explained in the Court's church-autonomy decisions, as in The Cold War cathedral case where the Court sided with Moscow's archbishop.
3. The Catholic understanding of charity is not a loophole. The Church's teaching is that works of mercy are an expression of the faith, owed to all who are in need. To say a charity is not religious because it does not make its aid conditional on faith is to say that the more universal the charity, the less religious it is. That has the matter backward and it penalizes the traditions with the most generous understanding of service.
4. The workers' interests can be protected in other ways. A legislature that wanted to cover employees of church charities could amend the statute and say so, openly. It could not do it by reading the exemption to discriminate among religions.
5. The ruling is consistent with the Court's other cases. The state may not discriminate against religion, as in Espinoza, discussed in Espinoza v. Montana and the Blaine Amendments Against Religious Schools, and it may not discriminate among religions, as here.

What it means for church charities

The ruling matters in practice. Churches and religious groups run a large share of the charitable work in this country, from food pantries to adoption agencies to hospitals and shelters. They do it in many different ways. Some preach to those they serve. Some do not. Some limit service to their members. Many serve everyone. Under a test like Wisconsin's, the more widely a group serves, and the less it asks of the people it helps, the less religious it appears, and the more likely it is to lose a protection or benefit. After the Court's decision, a state that offers a religious exemption must define it without sorting groups by how they express their faith.

The ruling also protects the independence of the charity. A church that serves the whole community has to be free to do so without being told by a government agency that the service is not truly religious. As a matter of principle, I would like to see a world where church charities are strong, and the state leaves them alone, which is the subject of why a church charity knows things a federal program never will. And if churches are to do this work, they will need to keep a record of how their mission shapes their work, a practical subject taken up in how a small church can put its beliefs on paper before it is ever sued.

I want to be careful not to overstate it. The decision does not decide whether a particular charity qualifies for an exemption in a particular state. It sets a limit on how the state may decide. A state may still say that an exemption is available only to organizations that meet a test that does not discriminate among religions, and the Court did not tell Wisconsin what test to apply on remand. On remand, the Wisconsin courts will have to decide the case under the correct rule. Readers should check the later history, since I am reporting the ruling as of its date.

Why a conservative should care

Here is my case for why this belongs on a conservative's list of significant victories.

First, it is a defense of civil society. Conservatives have long argued that the churches and voluntary associations between the individual and the state do more good, and better, than the government does. A government that decides which charities count as religious has a power over those institutions that is hard to square with that view.

Second, it is a defense of equal treatment. The ruling does not elevate Catholics. It protects every denomination from being sorted. It would have protected a Baptist soup kitchen or a Jewish family-services agency in the same way.

Third, it is a defense of judicial method. A unanimous Court applied a precedent from 1982 to a state statute and reached a result that most Americans would find intuitive. There was no grand theory in it, just a reading of the Establishment Clause that goes back to Larson. And the Court did it without inventing a new doctrine.

Finally, the ruling reflects the older understanding in Sixteen words on religion in the First Amendment, read phrase by phrase that the clauses together bar the government from choosing among faiths. A state that says one church's charity is "really" religious and another's is not has taken a side in a theological question, and no government in America may do that.

The case in brief

1. In Catholic Charities Bureau v. Wisconsin Labor and Industry Review Commission (June 5, 2025) a unanimous Court held that Wisconsin could not deny a religious tax exemption to a church charity on the ground that it did not proselytize or serve only its own members.
2. The decision rests on Larson v. Valente (1982): one denomination may not be officially preferred over another, and laws that do so face strict scrutiny.
3. Wisconsin's test sorted religious groups by how they express their faith and required officials to judge what counts as religious activity.
4. The state's concern about revenue and workers is legitimate, but it can be met by clear statutory lines that do not discriminate among religions.
5. The ruling protects church charities of every denomination and strengthens the case for a civil society free of government rankings of faith.

What you can do: read your own state's unemployment-tax exemption for religious organizations on your legislature's website, and ask your representative whether its definition sorts groups by how they practice.