Catholic Charities, a social service agency, applied to be exempt from paying the unemployment tax in Wisconsin, based on their affiliation with the Catholic church. This was denied, so Catholic Charities turned the other cheek and sued the state and repeatedly lost, all the way up to the state supreme court::
In light of all that, Catholic Charities applied to the state for an exemption from paying unemployment taxes for its employees. But the state labor commission refused the application, on grounds that the charitable group was engaging in activities that “are not religious, per se,” and thus are not entitled to be exempt from paying unemployment taxes.
In March, a closely divided state Supreme Court agreed, citing what it called objective criteria. The state court said that the charity’s activities were mostly secular, noting that the organization does not “attempt to imbue program participants with the Catholic faith, nor supply any religious materials.” The state court also observed that the charity “did not proselytize, did not conduct worship services, religious outreach, or religious education.” Therefore, the state court concluded, the charity is not qualified to be exempt from state unemployment taxes as a religious institution
