Supreme Court Expands Religious Tax Exemptions, Raising Revenue Concerns. The unanimous ruling in favor of Catholic Charities in Wisconsin could significantly broaden eligibility for tax exemptions for religious organizations, potentially impacting federal and state tax revenue. Critics warn of a surge in exemption applications following this First Amendment-based decision, which challenges state-level restrictions on religious group tax benefits
63-year-old Northville, MI resident Dan Bezley holds a cedar cross outside the US Supreme Court following a landmark ruling on religious tax exemptions. The unanimous decision potentially impacts numerous organizations and state tax revenues
Supreme Court Expands Religious Tax Exemptions: A unanimous ruling favors Catholic Charities in Wisconsin, potentially impacting state and federal tax revenue. The court found that denying the charity a tax exemption based on the secular nature of its services—providing aid to people with disabilities—violated the First Amendment's free exercise clause. This decision could open the door for numerous religious organizations to seek similar exemptions
Supreme Court rules in favor of Catholic Charities, granting religious tax exemption. The court overturned Wisconsin's denial of an unemployment tax exemption, finding the state's criteria for religious organizations discriminatory and a violation of the First Amendment's free exercise clause. The ruling centers on whether Catholic Charities' secular disability services, offered to people of all faiths, qualify for religious tax exemption, potentially impacting state tax revenue and setting a precedent for similar organizations
Supreme Court Expands Religious Tax Exemptions: Catholic Charities Wins First Amendment Case. The Supreme Court unanimously ruled that denying Catholic Charities a Wisconsin unemployment tax exemption violated the First Amendment's free exercise clause. The Court found Wisconsin's criteria for religious tax exemptions unconstitutional, deeming its selective application discriminatory and a violation of religious neutrality. This landmark decision could significantly impact state and federal tax revenues and lead to a surge in applications for religious organization tax exemptions
Supreme Court Rules Against Religious Discrimination in Tax Exemptions: A unanimous decision protects religious charities from discriminatory state policies. Justice Sotomayor's opinion clarifies that the First Amendment mandates government neutrality regarding religion, finding Wisconsin's denial of a tax exemption to Catholic Charities unconstitutional. The court deemed the state's decision a form of religious discrimination, based on a "theological" assessment driven by religious doctrine, violating the free exercise clause. This ruling may significantly impact tax exemptions for religious organizations nationwide
Justice Sotomayor criticized Wisconsin's discriminatory application of tax exemptions for religious organizations. The state granted exemptions only when secular charitable work was performed directly by a church, not a church-affiliated nonprofit, violating the First Amendment's neutrality requirement regarding religion. This inconsistent application of the law constitutes religious discrimination, favoring direct church involvement over affiliated nonprofits
The court’s ruling could clear the way for other organizations to now seek tax exemptions, such as Catholic hospitals, which the International Municipal Lawyers Association warned could create a “snowballing loss of revenue” for state and local governments.
“It is fundamental to our constitutional order that the government maintain ‘neutrality between religion and religion,’” Sotomayor wrote in her opinion for the court. “There may be hard calls to make in policing that rule, but this is not one.”
The Supreme Court overturned the Wisconsin Supreme Court’s decision but didn’t explicitly rule that Catholic Charities can be granted the tax exemption, so it will now be up to the lower courts to rule on the organization’s fate, using the high court’s ruling as guidance. Thursday’s ruling could prompt more organizations to now seek tax exemptions due to religious affiliations, with the Freedom from Religion Foundation arguing in a brief prior to the court’s ruling that doing so could have “a profound, detrimental impact on employees at every religiously-affiliated nonprofit, who are meant to be protected by government regulations similar to Wisconsin’s unemployment insurance program.” The biggest impact would likely be at hospitals with religious affiliations, which the Freedom from Religion Foundation notes make up six of the 10 largest health systems in the country. The International Municipal Lawyers Association argued to the court that if a deluge of organizations now start claiming religious affiliations in order to get tax exemptions, that could seriously hurt government revenue—and possibly lead to officials choosing to end exemptions for religious groups altogether, if the losses become too overwhelming.
While it wasn’t a party in the case, the Trump administration filed a brief urging the court to rule in favor of Catholic Charities being granted the tax exemption. The federal government claimed the Wisconsin Supreme Court’s ruling was based on a “misunderstanding” of the law, and the exemption applies for any organization that conducts its activities “primarily for sincere religious motivations,” even if the activities it conducts aren’t directly religious acts like proselytizing. The Trump administration also suggested it has an interest in the case because any ruling could also affect federal rules on tax exemptions for religious groups, noting the language of Wisconsin’s law “mirrors” the Federal Unemployment Tax Act.
The Supreme Court’s ruling is the latest in a string of decisions the high court has made regarding religious liberty, which have typically come out in favor of broadening parties’ religious rights. The 6-3 conservative court has ruled in recent terms to rule in favor of letting religious adoption agencies refuse to work with same-sex couples, a high school football coach who prayed on the field, a Christian group who wanted to fly a flag at Boston City Hall, a web designer who wanted to deny services to same-sex couples and that a state-funded school voucher program in Maine can be used to pay for religious school tuition, among other cases. Justices did issue a notable ruling in May against a proposed religious charter school in Oklahoma, splitting 4-4, which meant the lower court’s ruling against the school will stay in place. The court could still take up other cases in the future on religious charter schools, however.
This story is breaking and will be updated.
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