Supreme Court says it will review if Catholic Charities is exempt from labor taxes in a major church-state case

By John Fritze and Ella Nilsen, CNN

(CNN) — The Supreme Court agreed Friday to decide whether religious affiliated entities like Catholic Charities should be exempt from state unemployment taxes, taking up its first major religion case in more than a year.

The Catholic Charities Bureau in Wisconsin told the high court that the state’s labor department violated the First Amendment when it declined its request for an exemption from the unemployment taxes.

A decision from the conservative Supreme Court could have widespread implications if it sweeps in other types of taxes and religiously affiliated entities, such as hospitals and universities. Forty-seven states and the federal government include exemptions from unemployment taxes for organizations operated for religious purposes, according to Catholic Charities.

“If the petitioners get their way, there’s going to potentially be a fallout in these other areas,” said Patrick Elliott, legal director of the Freedom From Religion Foundation, which filed a brief opposing Catholic Charities in state court.

Wisconsin’s highest court sided with the state in March, ruling that because Catholic Charities didn’t proselytize or participate in traditional religious activities, it didn’t qualify for the religious exemption from the taxes.

“Wisconsin’s rule is both absurd and harmful,” the organization, represented by the Becket Fund for Religious Liberty, told the Supreme Court in its appeal. “The rule takes away resources that would otherwise be used to help the poor and the needy.”

Catholic Charities is the social ministry arm of the Diocese of Superior, a diocese of the Roman Catholic Church. The case also involves four “sub-entities” that mainly provide services to the disabled.

Wisconsin officials countered that Catholic Charities has participated in the state’s unemployment insurance program since 1972. People who benefit from the programs, the state said, “receive no religious training or orientation.” Employees need not ascribe to any faith.

“In one sense, the question presented in the Wisconsin case is a very narrow one – implicating only the relationship between the Constitution and a single state’s statutory exemption for religious organizations from unemployment taxes,” said Steve Vladeck, CNN Supreme Court analyst and professor at Georgetown University Law Center.

“That said, the fact that the court is agreeing to hear this case at all is perhaps a sign that the court wants to weigh in more generally on the scope of such state-law exemptions – and how they’re applied across the country,” Vladeck added. “Either way, this quickly becomes the most significant religious liberty case to receive full review from the court in the last two years.”

The Supreme Court confronted similar questions in the early 1980s, but it resolved a pair of cases without reaching the underlying First Amendment questions. Since then, the court’s conservatives have expanded protections for religious groups in a series of cases.

In 2022, the court struck down a Maine prohibition against using public money for some students to attend schools that offer religious instruction. Two years earlier, a 5-4 majority ruled that a Montana scholarship program could not exclude religious schools.

Court will determine if oil industry can challenge car emissions rules

The Supreme Court also agreed Friday to hear part of an appeal from the oil and gas industry challenging California’s ability to establish strict vehicle emission rules that effectively set the standard for the rest of the nation.

While the justices declined to take up the underlying question challenging the Environmental Protection Agency’s power to give California a waiver of nationwide emission rules, they did agree to look at the question of whether the oil and gas industry has standing to sue.

A federal appeals court ruled they did not because the industry could not establish that the waiver for California has any real world effect.

Given California’s size, automakers have for decades hewed to that state’s tighter emissions controls, which are permitted under a waiver from federal law by the EPA. The states and fuel groups argued in their Supreme Court appeal this summer that the arrangement is unlawful.

California has moved faster than the EPA toward an all-electric vehicle future. The state’s air regulators voted in 2022 to set stringent rules banning the sale of new gasoline cars by 2035 and put interim targets in place to phase the cars out.

What California decides has implications for the US car market, given how large the state’s economy is and the fact that over a dozen other states have followed its lead. In contrast to California, the Biden EPA has put in more forgiving vehicle emissions standards, allowing plug-in hybrids – vehicles that combine gas engines and EV-like batteries – to play a big role in the electric transition, along with EVs.

But the Biden administration pointed to a decision from an appeals court in Washington, DC, earlier this year that dismissed most of the case, finding that the plaintiffs lacked the ability to sue. That’s partly because, the court reasoned, car manufacturers are increasingly moving toward electric vehicles on their own based on market demand, not government regulations.

The Biden administration told the Supreme Court that the waiver’s “practical effects are greatly diminished by intervening changes in the market.”

President-elect Donald Trump could unwind the waiver entirely when he takes office in the new year. In 2019, the Trump administration rolled back California’s decades-old waiver. The Biden administration the reinstated it in 2022.

This story has been updated with additional developments.

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