Supreme Court weighs tax exemptions for religious organizations

The Supreme Court is hearing arguments that could have far-reaching implications for organizations seeking an exemption from certain state taxes. Catholic Charities is in a dispute over whether religiously affiliated groups are entitled to an exemption from certain state taxes.

The case stems from Catholic Charities Bureau and four affiliate organizations saying the state of Wisconsin violated the First Amendment’s religious protections by denying exemptions from the state’s unemployment taxes.

Churches already receive that exemption, so the question for the justices was, in essence, whether religiously affiliated entities that don’t teach religion should also qualify. Opponents say Catholic Charities’ position could jeopardize unemployment benefits for hundreds of thousands of people who work at religiously affiliated organizations.

Stephen Montoya, Partner of Montoya, Lucero and Pastor, joined us to discuss.

Montoya said the facts are that “a private, non-profit, a Catholic charity, affiliated with the Catholic church was disallowed from a local state tax exemption because even though the motivation was religious, the service they were providing was not religious.”

The state of Wisconsin denied the tax exemption because the Catholic charity is providing the same service as other groups without religious affiliation. Montoya said the Catholic group is not exempt because they are not performing religious acts, “such as conducting a mass or praying or doing something explicitly, almost uniquely religious.”

“Feeding the poor is spreading the gospel by action rather than deed, and that’s a valid religious philosophy according to the Court. I think this whole area of law needs to be reworked because the Court is having to define religion,” Montoya said.

Another problem is what defines an organization as religious and exempt from state taxes. Montoya gave an example of the St. Joseph Hospital in Phoenix; they do not practice religion there, but they also do not perform abortions because it is against the tenants of their religion. Are their employees supposed to be tax-exempt?

Montoya predicted the decision will be finalized by the end of June 2025 and be “a unanimous decision for the petitioner.” If it does pass, Montoya said there will be arguments on what is considered religious and exempt from taxes.