The Wisconsin Supreme Court reversed a state effort to strip a religious exemption, siding with Catholic Charities and rejecting an aggressive move by Attorney General Josh Kaul to roll back tax relief for faith-based nonprofits.
The dispute goes back to 2016 when Catholic Charities sought an exemption from Wisconsin’s unemployment insurance tax that applies to religious organizations. State regulators at the Department of Workforce Development denied the claim, arguing the group was not “operated primarily for religious purposes,” and that decision eventually landed in court. That initial state ruling said Catholic Charities didn’t “proselytize and serve everyone,” a characterization that set up a long legal fight.
Becket Fund took the case up to the U.S. Supreme Court, which ruled unanimously for Catholic Charities, finding the state’s approach unconstitutional. Instead of accepting that clear 9-0 rebuke, Wisconsin Attorney General Josh Kaul went back to the state courts and asked them to remove the unemployment tax exemption for every religious organization across the state. Yesterday, the Wisconsin Supreme Court rejected that tactic and sided with Catholic Charities.
Becket issued a press release praising the decision, noting that the state had tried to defy the U.S. Supreme Court’s unanimous ruling in Catholic Charities Bureau v. Wisconsin Labor & Industry Review Commission. They pointed out that in June all nine justices rejected the argument that Catholic Charities’ work for the poor and needy wasn’t religious enough to qualify for the exemption. Rather than abide by that ruling, state officials asked the state’s high court to eliminate the exemption entirely, but the Wisconsin court denied that request and confirmed Catholic Charities’ entitlement to the exemption.
The Wisconsin Supreme Court today blocked the state’s recent effort to defy the U.S. Supreme Court’s unanimous ruling in Catholic Charities Bureau v. Wisconsin Labor & Industry Review Commission. In June, all nine Justices rejected Wisconsin Attorney General Josh Kaul’s argument that Catholic Charities’ care for the poor and needy wasn’t religious enough to qualify for a religious exemption from the state’s unemployment tax law. (Watch this video to learn more). But instead of complying with that decision, state officials asked the state’s high court to eliminate the exemption entirely. In its ruling today, the Wisconsin Supreme Court denied this request and ruled that Catholic Charities is entitled to the exemption.
In the Supreme Court’s 9-0 ruling this past summer, Justice Sonia Sotomayor explained that Wisconsin had violated federal law by “impos[ing] a denominational preference by differentiating between religions based on theological lines.” The Court further recognized that “whether to express and inculcate religious doctrine through worship, proselytization, or religious education when performing charitable work are, again, fundamentally theological choices driven by the content of different religious doctrines.”
“You’d think Wisconsin would take a 9-0 Supreme Court loss as a hint to stop digging,” said Eric Rassbach, vice president and senior counsel at Becket. “But apparently Attorney General Kaul and his staff are gluttons for punishment. Thankfully, the Wisconsin Supreme Court put an end to the state’s tomfoolery and confirmed that Catholic Charities is entitled to the exemption it already won.”
Following that unanimous national decision, the state high court’s recent order makes clear that Catholic Charities is “eligible for the religious purposes exemption.” That language restores the narrow, longstanding carve-out that exempts faith-based organizations from paying employment taxes that flow into the unemployment insurance system. For the organizations involved, the ruling means immediate relief from a costly mandate they were never meant to shoulder.
This outcome matters beyond one charity in Milwaukee; it protects all religious organizations in Wisconsin from a precedent that would have treated religious motivation and practice as somehow less deserving of equal treatment. Removing the exemption would have forced houses of worship and faith-based nonprofits into a bureaucratic test about how they pray or teach, which federal precedent rejects. For many congregations and ministries, preserving that exemption means preserving mission work in poor neighborhoods and social services that rely on donations, not government subsidies.
Put the potential damage in dollars and cents: state and federal unemployment insurance taxes translate to roughly $440 to $490 per employee each year. For small charities or parish-run programs, those numbers add up quickly. Depending on staff size, organizations could face annual increases that move a thin operating budget from manageable to unsustainable, threatening programs that serve vulnerable people.
Attorney General Kaul’s move to try to strip the exemption broadens the story beyond administrative law into politics. Kaul pushed the state into an extended legal battle after losing at the U.S. Supreme Court, and that pattern looks like political theater as much as legal strategy. And Kaul is running for reelection. Keep that in mind.
“That’s a pretty clear indiciation that its intent is to go after religion. Again, people, we have a First Amendment,” Taske wrote. That blunt line captures why many voters and faith leaders saw Kaul’s filings as an overreach that threatened constitutionally protected religious exercise. The court’s decision restores a baseline respect for religious liberty and avoids the costly, doctrinal inquiries the state had proposed.
For conservative observers, the ruling is welcome proof that judicial checks still matter when state officials try to expand power at the expense of liberty. The case will likely resonate in other states where officials eye similar moves, and it underscores that clear Supreme Court precedent can curb efforts to single out religion for unfavorable treatment. The practical effect is simple: faith-based organizations in Wisconsin can continue serving without being forced to shoulder a new payroll tax that undermines their mission.
