Justices from both sides of the U.S. Supreme Court’s left-right divide seemed to side with a Catholic charitable organization’s bid for an exemption from state unemployment insurance tax during oral argument Monday.

The Wisconsin case centers on whether Catholic Charities Bureau Inc., a subsidiary of the Diocese of Superior, is entitled to avoid paying into the state’s unemployment insurance fund since a state statute offers an exemption for “an organization operated primarily for religious purposes.”

A state agency said Catholic Charities doesn’t qualify. The Wisconsin Supreme Court agreed, issuing a decision in March 2024 that found that, even though Catholic Charities and related entities act from religious motivations, “their activities are secular in nature.”

Catholic Charities Bureau is asking the U.S. Supreme Court to overturn the state supreme court’s decision and require the state to exempt it.

Some legal observers say the case could have wide-ranging implications for how other religious organizations function, including Catholic hospitals and other entities.

A Question of Proselytizing

The state runs an unemployment insurance program that requires most employers to pay a tax based on the first $14,000 that they pay their employees. In Wisconsin, Catholic Charities Bureau has been paying the tax since 1972, according to court papers, but wishes to stop doing so.

The Diocese of Superior, which created Catholic Charities Bureau in 1917, doesn’t pay the tax, because state law exempts a “church” or a “convention or association of churches.”

The statute also exempts “an organization operated primarily for religious purposes;” whether Catholic Charities Bureau qualifies or not is the heart of the dispute.

Catholic Charities Bureau says it does — and also says it plans to offer essentially the same unemployment benefits to employees by joining a fund set up by the state’s bishops, which it says operates in a “more efficient” manner than the state program.

A lawyer for the state, though, told U.S. Supreme Court justices Monday that the benefits are not the same, because the bishops’ unemployment program is essentially self-funded and therefore comes with more risk to employees than the state fund, and because unemployment disputes decided by administrators of the bishops’ fund aren’t subject to judicial review.

As for making a distinction between Catholic Charities Bureau and the Diocese of Superior that created it, state officials argue that they are trying to avoid “entangling questions” that might arise in cases “when religious employers decide to discharge employees based on matters of religious faith and doctrine.”

At one point during oral argument, the lawyer for the state was asked what Catholic Charities would have to do to qualify for the exemption.

“We're looking for activities that express and inculcate religious doctrine,” Wisconsin Assistant Attorney General Colin Roth told the court.

He added that “worship,” “proselytization,” and “religious education” would make Catholic Charities qualify for the exemption.

Justice Elena Kagan said the difference seems to be between whether a religious charitable organization proselytizes — meaning that it uses its charity as an overt means of making converts.

“I mean, the way the statute has been interpreted by the Wisconsin courts, it's basically saying we're giving the tax exemption to religious organizations that proselytize, but not to religious organizations that don't,” Kagan said.

She also noted, “Some religious organizations proselytize, and some religious organizations are allergic to proselytizing.”

“And for those that don’t,” she added a moment later, “sometimes it is a religious principle not to.”

‘No Nuns and Priests and Deacons’?

Several minutes later, Roth offered examples of a legal doctrine known as the “ministerial exception,” which allows religious groups to avoid the application of anti-discrimination laws when dealing with employees who carry out functions that are deemed to be religious.

Roth offered a hypothetical example that quickly got him into hot water with some of the justices.

“Ministerial exception: Imagine Catholic Charities on one hand, and we'll call it Evangelical Charities on the other. The Evangelical Charities worships, proselytizes, educates its service recipients. It's chock full of employees who receive the ministerial exception precisely because they perform those functions of expressing and inculcating doctrine that the state needs to stay away from. Catholic Charities, however, is not going to have employees who receive the ministerial exception. So we have the same exact disparate impact,” Roth said.

“Really? There are no nuns and priests and deacons at the soup kitchen?” Justice Neil Gorsuch asked.

“I’m not saying that at all, Your Honor, but if they are not when they are delivering —” Roth said.

Gorsuch interjected, “The bishop, you know, who's overseeing it? I mean, come on.”

“Right, Your Honor, it's not about who the employees are. It's about what they do,” Roth replied.

“You said ministerial exception. It was about who they are,” said Justice Amy Coney Barrett, a potential swing vote.

Roth apologized.

“What I meant is, it’s not their status as a minister, a deacon or a bishop. It is about what they do. And so if the minister, the deacon or the bishop at the soup kitchen is, when he delivers the soup, is doing the thing —"

“But the nun doesn't get the ministerial exception and neither does the priest?” Barrett interjected.

Roth paused.

“So I suppose they would because in other contexts they would be there to express and inculcate religious doctrine,” Roth replied. “But if in the context of this, if they're employed by Catholic Charities and in the course of their employment with Catholic Charities, they're not there to express and inculcate the faith.”

Barrett seemed unpersuaded.

“So you're not entangled if you have to go in and interview the nun and the priest who go in and do a shift at the soup kitchen that Catholic Charities is running to see what they're doing? Or if you have to listen — I mean, are they playing, like, hymns on the radio, or like Christian Rock at the Evangelical soup kitchen on the radio? You know, is that proselytization or not because you're forced to sit there and listen to it?” Barrett said.

Roth said courts have to answer such questions “all the time when applying the ministerial exception.”

Later, Justice Clarence Thomas asked Roth whether the exemption would apply to “someone who posts outside, ‘We believe deeply in the corporal works of mercy.’”

“Why is there a difference from your standpoint from in one and not the other — proselytizing over the corporal works of mercy?” Thomas asked.

Roth said the state of Wisconsin “recognizes that charity is an essential aspect of the Catholic religion.”

“We are not disputing that,” Roth said. “But when the employee is simply performing the corporal work of mercy without expressing an inculcating religious doctrine, this is the point — this is an anti-entanglement statute,” Roth said.

‘Generous Approach’

Justices also challenged a lawyer representing Catholic Charities Bureau during his presentation, but not as sharply as the state’s lawyer.

Barrett said she sees the Wisconsin Supreme Court’s decision as simply interpreting a state statute — something a state supreme court is the final arbiter of — and she asked how Catholic Charities Bureau might win on constitutional grounds.

Discrimination against one religious group in favor of another is one standard but not the only one, said Eric Rassbach, vice president and senior counsel at the Becket law group, who represents Catholic Charities Bureau.

“Frankly I think that the second-guessing what counts as inherently religious is just something that courts shouldn't be in the business of doing, and so that's a problem for a court to be defining what is inherently religious,” Rassbach said.

Rassbach described the dispute as a simple case that should result in Catholic Charities Bureau getting the exemption.

“You know, in the end, this is a religiously pluralistic society, and that calls for a generous approach to religious exemptions, not a stingy one,” Rassbach said.

It isn’t right when determining religious status, he said, to distinguish between the religious motivations of an organization and the charitable works it performs just because nonreligious organizations also provide charity.

“By that measure, Mother Teresa might not qualify,” Rassbach said.

Curtis Gannon, deputy solicitor general and a career employee of the office, also argued in favor of Catholic Charities, on behalf of the Trump administration.

He told the justices the dispute does not require a constitutional ruling, but that the U.S. Supreme Court should simply tell the Wisconsin Supreme Court that it incorrectly interpreted the state statute.

“If the court reaches the constitutional question,” Gannon said, “it should reject the Wisconsin Supreme Court's analysis, which second guesses the religious nature of sincerely held expressions of faith, and worse, risks discrimination among various faiths by singling out certain activities that are deemed inherently secular.”

The U.S. Supreme Court is likely to decide the case by late June or early July.