Madison: Wisconsin has lost its second attempt to block a long standing unemployment tax exemption claimed by a Catholic charitable organization, marking a decisive end to a legal dispute that reached the highest courts in the United States.
The Wisconsin Supreme Court has ruled that the Catholic Charities Bureau of the Diocese of Superior is entitled to a religious tax exemption under state law. The decision follows a unanimous ruling earlier this year by the United States Supreme Court, which found that Wisconsin had violated the First Amendment by denying the exemption.
The dispute began when Wisconsin authorities argued that Catholic Charities Bureau did not qualify for the exemption because its services to the poor and vulnerable were not explicitly religious in nature. State officials said the charity did not engage in worship or direct religious instruction as part of its social work, and therefore should be treated like a secular nonprofit for unemployment tax purposes.
Catholic Charities challenged that reasoning, saying its work is an expression of religious belief and mission, even when services are offered without discrimination or religious conditions. The case drew national attention because of its broader implications for faith based charities across the country.
In June 2025, the United States Supreme Court unanimously sided with Catholic Charities, stating that the state cannot decide what counts as sufficiently religious activity. The court said such judgments place government officials in the role of religious arbiters, which violates constitutional protections for the free exercise of religion.
After the Supreme Court ruling, Wisconsin officials did not immediately grant the exemption. Instead, the state sought to eliminate the unemployment tax exemption altogether, arguing that removing it for all religious organizations would avoid unequal treatment. That move triggered further legal challenges and criticism from religious liberty advocates.
This week, the Wisconsin Supreme Court rejected the state’s approach and ordered that the exemption remain in place. The court made it clear that the state could not undo a constitutional ruling by abolishing a benefit simply because a religious organization qualified for it.
Legal advocates for Catholic Charities welcomed the decision, calling it a victory for religious freedom and for charitable organizations that serve communities without regard to faith. They said the ruling protects the ability of religious groups to carry out social service work without government interference in defining their beliefs.
State officials have not indicated whether they will pursue further legislative changes, but the court’s ruling effectively ends the current dispute. Catholic Charities Bureau will continue to operate under the same unemployment tax exemptions applied to other religious organizations in Wisconsin.
The case is expected to influence similar disputes nationwide, reinforcing the principle that governments cannot penalize religious groups for serving the public in inclusive and non sectarian ways.