Months after a unanimous U.S. Supreme Court ruling found that a Wisconsin-based religious charity should be exempt from certain taxes, Wisconsin Attorney General Josh Kaul is challenging religious tax exemptions entirely.
Kaul’s action comes after the nation’s highest court ruled in favor of the Catholic Charities Bureau in Superior, striking down a decision by the Wisconsin Supreme Court from last year. The Wisconsin ruling would have subjected the charitable arm to the same unemployment taxes levied on other types of nonprofits.
At the heart of that dispute was a question of whether the faith-based social services organization was primarily a charitable group — subject to the same rules as nonreligious charities — or primarily a religious group, which would exempt them from some tax obligations, in the same way as houses of worship.
In a 9-0 decision, U.S. Supreme Court ruled that the state had violated the First Amendment’s guarantee of religious freedom by requiring the Catholic Charities Bureau to pay unemployment tax while exempting other faith groups. Justice Sonia Sotomayor wrote that the First Amendment requires the government to be neutral between religions.
“There may be hard calls to make in policing that rule, but this is not one,” Sotomayor wrote.
The ruling sent the case back to the Wisconsin Supreme Court, where in an Oct. 20 remedial brief, Kaul argued that the U.S. Supreme Court did not offer a fix for that violation.
Kaul and two assistant attorneys general argue that removing the exemption from paying unemployment taxes for all affected religious groups — rather than expanding the exemption for other similar religious social service organizations — is the preferred remedy.
“By striking the exemption, this Court can avoid collateral damage to Wisconsin workers while still curing the discrimination the U.S. Supreme Court identified,” Kaul wrote.
“Discrimination is cured by restoring equal treatment, which can be accomplished here in one of two ways: either by expanding the statutory exemption to groups like Catholic Charities or else by eliminating it altogether,” reads the brief.