After losing to Catholic charity at Supreme Court, Wisconsin seeks to end religious tax break

CNA Staff, Oct 22, 2025 / 12:44 pm (CNA).

The state of Wisconsin is attempting to eliminate a tax exemption for religious organizations after it failed at the U.S. Supreme Court earlier this year when trying to block a Catholic charity from claiming that tax break.

The Supreme Court in June unanimously ruled that the state violated the First Amendment when it denied a tax exemption to the Diocese of Superior’s Catholic Charities Bureau. The state had argued that the group’s charitable undertakings were not “primarily” religious and thus failed to qualify for the tax break.

The Wisconsin Supreme Court had earlier ruled against the Catholic charity before the U.S. Supreme Court reversed that decision. But in an Oct. 21 press release, the religious liberty legal group Becket said that the state government is now asking the state Supreme Court to “eliminate the exemption entirely.”

“Rather than following the Supreme Court’s ruling, Wisconsin officials are now trying to avoid it by attacking the religious exemption itself,” the group said. 

The tax exemption directs that organizations “operated primarily for religious purposes” can be exempt from paying into the state’s unemployment system. In a brief to the state Supreme Court, state officials said the tax exemption itself is “discriminatory” and that ending the policy would “avoid collateral damage to Wisconsin workers” while satisfying the U.S. Supreme Court’s order. 

State officials did not respond to requests for comment from CNA on Oct. 22. Nick Reaves, a senior attorney with Becket, told CNA that eliminating the tax exemption would “just replace one unconstitutional rule after another.” 

Reaves said the U.S. Supreme Court justices in their ruling “clearly contemplated extending the benefit to Catholic Charities” rather than eliminating the benefit altogether. 

“If you eliminate the exemption, it doesn’t solve the constitutional problem, because the state has something like 40 other exemptions for secular groups,” he said. Union groups and organizations that do work in prisons are among the entities that have access to the exemption, he said.

“The First Amendment prohibits favoring secular activity over religious activity” in such cases, he said. “Our view is Wisconsin just can’t eliminate the exemption.”

Reaves said the Catholic charity has a high likelihood of getting its case before the Supreme Court again. “The chance of getting a hearing at the Supreme Court is low, initially,” he said. “But they’re much more likely to take a case again if the lower court gets it wrong again.”

“Obviously the Wisconsin Supreme Court will weigh in on this first,” he said. “We’re hoping our arguments are persuasive there.”

In its filing, meanwhile, Becket said Wisconsin’s “animus” toward the Catholic charity group is “anything but subtle.” 

“The only constitutional approach is to grant Catholic Charities an exemption, as the U.S. Supreme Court’s order requires,” the filing said.