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Congressional ______
*Research Service
Supreme Court Hears Argument on Religious
Tax Exemptions
April 10, 2025
When can corporations claim a religious exemption to avoid paying taxes? On March 31, 2025, the
Supreme Court heard oral arguments in a case that may address this question: Catholic Charities Bureau,
Inc. v. Wisconsin Labor & Industry Review Commission. Specifically, the Court is reviewing a Wisconsin
decision requiring Catholic Charities Bureau, Inc. (CCB) and four of its sub-entities to pay state
unemployment taxes. At the Supreme Court, the plaintiffs argue that Wisconsin's test for whether
organizations are eligible for a religious exemption draws unconstitutional distinctions between different
religious organizations, violating the First Amendment's Religion Clauses. As this Legal Sidebar
discusses, Wisconsin's law-along with the laws of other states-uses language that mirrors the Federal
Unemployment Tax Act (FUTA). Accordingly, the Supreme Court's ruling in this case could have
implications for other federal and state laws that exempt organizations operated for religious purposes.
Legal Background and Procedural History
Wisconsin's Unemployment Compensation Act requires employers to contribute to an unemployment
insurance program that pays benefits to eligible unemployed individuals. Wisconsin's law excludes
employment by an organization [1] operated primarily for religious purposes and [2] operated,
supervised, controlled, or principally supported by a church or convention or association of churches.
This exemption mirrors language in federal law. Among other provisions, FUTA creates a state tax credit
scheme under which the Department of Labor certifies that states have imposed a FUTA-compliant tax to
fund unemployment insurance benefits. Federal law allows certain organizations to participate in the state
unemployment insurance program by reimbursing the program in lieu of paying state taxes. FUTA further
excludes from this reimbursement scheme services performed in the employ of... an organization
which is operated primarily for religious purposes and which is operated, supervised, controlled, or
principally supported by a church or convention or association of churches. In this way, a state law can
be certified as compliant without regard to whether it taxes a religious entity. Wisconsin's unemployment
insurance exemption tracks this federal provision. Catholic Charities Bureau involves the Wisconsin law,
but other federal laws have come up as potentially relevant context over the course of the litigation. For
example, FUTA imposes a federal unemployment tax to help fund the program. The federal tax does not
Congressional Research Service
https://crsreports.congress.gov
LSB11283
CRS Legal Sidebar
Prepared for Members and
Committees of Congress](ViewImageLocal?handle=hein.crs/smecthsa0001&div=1&collection=&method=preview&ext=.png&size=3)
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