Governing the Meek’s Inheritance: SCOTUS takes on Religious Tax Exempts.

Over the last 20 years, the United States has seen a decline in people who self-identify as “Christian." However, a recent Pew Research Center study has found that throughout 2023 and 2024, the percentage of people in the United States who consider themselves Christian jumped from 60% to roughly 63% [1]. This rise is not sudden per se, with an idea of Christian identity in the United States evolving since 1603. As part of this, the role of the church and the role of the state have often been at odds. Clauses of the United States Constitution have sought to balance this, but the change of existing precedents has reinterpreted the Free Exercise and Establishment Clauses of the First Amendment. 

With Christian – particularly Catholic – churches seeking economic benefits from the state, the Establishment Clause’s promise that “Congress shall make no law respecting an establishment of religion” has been brought back to the steps of the Supreme Court [2]. A new case regarding the Establishment Clause, Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission, will be argued in front of the Court at the end of March. The case deals with the criteria for what a religious organization is, notably focusing on if the state is “denying a religious organization an otherwise-available tax exemption because the organization does not meet the state’s criteria for religious behavior" [3]. 

As stated earlier, recent shifts in the interpretation of the Establishment and Free Exercise Clauses have forced the Court to reckon with new ideas of “religious activity." Of these, perhaps the most important is Kennedy v. Bremerton  School District. In Washington State, a football coach led silent prayer on the field, causing the school district to sue, alleging that it was a violation of the separation of church and state. In a 6-3 decision with a majority opinion delivered by Justice Neil Gorsuch, the Court sided with Kennedy; in granting certiorari and agreeing, Justice Gorsuch “recognized [Lemon v. Kurtzman]’s demise and wisely left it dead" [4]. The Lemon Test was a three-prong test established by the case mentioned by Justice Gorsuch. Its purpose was to set out criteria for judging the value of religious and secular teachings when assisting religion. In this scenario, the important prongs are the first and last: “the primary purpose of the assistance is secular” and “there is no excessive entanglement between church and state" [5]. As Bremerton has overruled Lemon, the boundaries for “religious activity” have been redrawn. 

Catholic Charities Bureau (CCB) is the social ministry arm of the Diocese of Superior in Wisconsin, which represents the northern counties. The Bureau is not a church, in that they do not preach the gospel, but it do instead act to promote Catholic social policies. They work directly under the Diocese. In their mission statement, the Bureau explicitly states that they attempt to carry out the “redeeming work of our Lord by reflecting gospel values and the moral teaching of the church" [6]. However, the CCB is not the one doing the work in this case. They control four sub-entities: Barron County Developmental Services, Inc., Diversified Services, Inc., Black River Industries, Inc., and Headwaters, Inc. These four sub-entities are part of the umbrella CCB label, but they do not act under religious pretenses. They provide social services aligned with Catholic social teachings such as disability job-coaching, adult home care, and daily living services. The sub-entities act regardless of religion and do not require alliance to one denomination or belief system for someone to receive care [7]. Wisconsin's problem with the group is not their religiosity, but their status as a tax-exempt business. 

Wisconsin has a law known as the “Unemployment Compensation Act." In this law, unemployment is deemed as an “urgent public problem” in that the economic burdens of unemployment should not only be shared more fairly, but should also be decreased and prevented as far as possible [8].  In Wisconsin, employers pay unemployment tax due to the act. Importantly, there is an exemption for religious organizations. Specifically, § 108.02(15)(h)2 states that a nonprofit still must pay these taxes unless it “operated primarily for religious purposes and operated, supervised, controlled, or principally supported by a church or convention or association of churches" [9].  CCB would be covered due to the explicit religiosity of their actions and being principally a church. However, their four sub-entities did not qualify, resulting in CCB’s suing to be considered under this exemption. 

CCB’s legal standing balances more on the Free Exercise Clause than the Establishment Clause, while also relying upon broader challenges outlined in the earlier rulings of the Wisconsin Supreme Court. A large part of understanding CCB’s standing actually comes from the second question posed by this case: “In addressing federal constitutional challenges, may state courts require proof of unconstitutionality ‘beyond a reasonable doubt’?" [10]. This question relates to an earlier case from 1981, St. Martin Lutheran Church v. South Dakota. Here, SCOTUS unanimously decided that religious exemptions do not apply to neutral or generally applicable laws. In the case of St. Martin Lutheran Church, Justice Harry Blackmun wrote that the Federal Unemployment Tax Act applied to St. Martin because it “directly finances, supervises, and controls its school's operations" [11]. Prior to CCB sending their petition to Justice Amy Coney Barrett, this went through the Wisconsin Supreme Court. CCB's arguments rely on federal interpretation of a federal law, with the understanding that federal law supersedes state law which comes up frequently. 

CCB's interpretation of the Establishment Clause has alleged that this is unconstitutional due to the favoring of some religions. Particularly, they highlight the case Church of the Lukumi Babalu Aye v. City of Hialeah. The Court found that “[f]acial

neutrality” of a statute was considered, but also “the effect of a law in its real operation" [12]. Lukumi revolves around public health and animal sacrifice as religious activity, but the principles of compelling government interest, coupled with a general and applicable rule, is also carried here. For Wisconsin, the social plague of unemployment requires that the sub-entities do not count towards this rule, especially since their actions do not focus only on CCB but all religions. Although CCB argues that these taxes are helping the needy already, the question brings up the philosophical difference of whether the state or the church can better help those in need. 

Furthermore, Wisconsin has made claims about the allocation of the money. According to SCOTUSBlog, Wisconsin has declared that courts have ruled “routinely [to] deny religious tax exemptions to entities that assert religious motivations without overly entangling themselves in religious matters" [13]. With the idea that religious entities will use the money for their gain, courts have called upon the secular state. They also wrote that courts do not “regulate internal church governance or compel any church activity," in turn claiming more accountability for the usage of the money in the state [14]. As both parties try to balance causing the most good with the money, either obtained through taxes for Wisconsin or for social programs via CCB, the First Amendment’s religion clauses are placed in conflict. The recent shifts in precedent have similarly reopened previously settled questions. 

2024 was the first year in the recent past when Christian identity has risen in the United States, but one institution has not only grown more Christian but more Catholic over the last ten years: The Supreme Court. At the moment, there are six Catholics, two Protestants, and one Jewish Justice on the bench. Recent SCOTUS opinions have also aligned more with the social teachings of the Catholic Church, most famously with the overturning of Roe v. Wade with Dobbs v. Jackson Women’s Health Organization. Due to this, it is likely we will see the justices break on either a political or a religious lens with the conservative bloc or the Catholic bloc holding the majority. The case will be argued at the end of March, further clarifying a new idea of the First Amendment and economic law.

Sources:

1. Ruth Graham, Christianity’s Decline in U.S. Appears to Have Halted, Major Study Shows, N.Y. Times, Feb. 26th, 2025
2. U.S. CONST. amend. I, cl. 1.
3. Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission, No. 24-154 (2025)
4. Kennedy v. Bremerton School District, 597 U.S. 507 (2022). 
5. Lemon v. Kurtzman, 403 U.S. 602 (1971).
6. Mission Statement of Catholic Charities Bureau Diocese of Superior, 1989, published on their website 
7. Catholic Charities Bureau, Inc. v. Wisconsin Labor & Industry Review Commission, 406 Wis. 2d 586, 987 N.W.2d 778
8. Wis. Unemployment Compensation Act §108.01 (1)(2)
9. Wis. Unemployment Compensation Act §108.02(15)(h)2
10. Supra 3
11. St. Martin Lutheran Church v. South Dakota, 451 U.S. 772 (1981)
12. Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520 (1993)
13. Amy Howe, Justices take up cases on religious tax exemption and California climate change mandate, SCOTUSblog (Dec. 13, 2024, 3:38 PM), https://www.scotusblog.com/2024/12/justices-take-up-cases-on-religious-tax-exemption-and-california-climate-change-mandate/
14. Id.