School Choice & Charters

High Court Tax-Credit Ruling Could Offer New Momentum to School Choice Supporters

By Mark Walsh — April 19, 2011 | Corrected: February 21, 2019 6 min read

Corrected: An earlier version of this story misspelled the name of Ayesha N. Khan, the legal director of Americans United for Separation of Church and State.

The U.S. Supreme Court’s ruling that taxpayers may not challenge an Arizona tax credit benefiting religious schools could provide a boost in momentum to the school choice movement.

The high court held 5-4 that taxpayers opposing the Arizona tax credit lack legal standing to challenge it because any financial benefit to religion under the program is not the result of government spending choices.

The April 4 ruling came in a challenge to Arizona’s 14-year-old tuition-aid plan, under which taxpayers can receive a dollar-for-dollar credit of up to $500 (or $1,000 for married couples) on their state income-tax returns for donations to “school tuition organizations,” or STOs. Such tuition groups may limit their grants to students who will use them at religious schools, and the aid—some $54 million in 2008—has gone overwhelmingly to religious schools.

“When the government collects and spends taxpayer money, governmental choices are responsible for the transfer of wealth,” Justice Anthony M. Kennedy wrote for the majority in Arizona Christian School Tuition Organization v. Winn (Case No. 09-987). “Here, by contrast, contributions result from the decisions of private taxpayers regarding their own funds.”

A friend-of-the-court brief on Arizona’s side filed by a group of 13 states pointed out that six states have adopted similar tax measures in which the aid is permitted to flow to religious schools: Florida, Georgia, Indiana, Iowa, Pennsylvania, and Rhode Island.

Sharp Dissent

Although the justices did not explicitly rule on the legal merits of the tax credit, the majority made it extremely difficult for any legal challenge to get very far in the courts.

That point was hammered home by Justice Elena Kagan, in her first written dissent. She said the majority opinion “devastates taxpayer standing in establishment clause cases” and offers a “road map ... to any government that wishes to insulate its financing of religious activity from legal challenge.”

Legal experts who opposed the Arizona tax credits said they agreed with Justice Kagan’s dire tone.

Arizona Christian School Tuition Organization vs. Winn

From the majority opinion by Justice Anthony M. Kennedy: “Private citizens create private [school tuition organizations]; STOs choose beneficiary schools; and taxpayers then contribute to STOs. While the state, at the outset, affords the opportunity to create and contribute to an STO, the tax-credit system is implemented by private action and with no state intervention. Objecting taxpayers know that their fellow citizens, not the state, decide to contribute and in fact make the contribution. These considerations prevent any injury the objectors may suffer from being fairly traceable to the government.

From the dissenting opinion by Justice Elena Kagan: "[T]oday’s decision damages one of this nations’ defining constitutional commitments. ‘Congress shall make no law respecting an establishment of religion'—ten simple words that have stood for over 200 years as a foundation stone of American religious liberty. Ten words that this court has long understood, as James Madison did, to limit (though by no means eliminate) the government’s power to finance religious activity.”

“I think the decision bars the courthouse door to challenges to any tax credits, deductions, or exemptions” that benefit religion, said Ayesha N. Khan, the legal director for Americans United for Separation of Church and State, based in Washington.

But advocates who supported Arizona’s tax credits applauded Justice Kennedy’s reasoning.

David Cortman, a lawyer with the Alliance Defense Fund, a Scottsdale, Ariz.-based legal group that helped defend the tax-credit plan, said the ruling could prompt other states to adopt similar measures.

“This decision leaves not only Arizona’sprogram intact, but also similar tax plans in other states” that benefit religious schools, he said.

A decision striking down Arizona’s program would have cast doubt on similar laws in other states—and on what choice measures could be sustained. After all, the states pointed out, the Supreme Court only nine years ago, in Zelman v. Simmons-Harris, upheld a program providing private school vouchers that could be used, through the choice of a parent, at a religious school.

The Arizona decision leaves unclear where the justices believe the tax credits for tuition donations fit constitutionally with respect to such religious school vouchers that aid religious schools. While Arizona and its supporters claimed Zelman supported the constitutionality of the tax credits, the challengers said the 2002 decision gave ammunition to their side.

The challengers said the tax credits violate Zelman because more than half the Arizona tuition scholarships are awarded on the basis of the recipient family’s religion. That violates language in Zelman that state-funded tuition be available to participatingfamilies on a neutral basis, with no reference to religion, the challengers argue.

Neither the majority nor dissenting opinions in the Arizona case mention Zelman.

Taxpayers’ Challenge

The Arizona program was challenged by a group of taxpayers as a violation of the First Amendment’s prohibition against a government establishment of religion. In a 2009 decision, a panel of the U.S. Court of Appeals for the 9th Circuit court, in San Francisco, allowed the suit to go forward.

But at the Supreme Court, the case ran into concerns about whether the tax credits could be challenged purely based on the opponents’ status as taxpayers. Taxpayers generally may not challenge government spending decisions based on taxpayer status alone, though a 1968 high court ruling, Flast v. Cohen, created an exception that allows taxpayers to challenge a program of direct grants to religious organizations.

In the case decided April 4, Justice Kennedy said the challengers did not meet the requirements for taxpayer standing under Flast.

“The STO tax credit is not tantamount to a religious tax or to a tithe and does not visit the injury identified in Flast,” Justice Kennedy said.

Justice Kennedy’s opinion was joined by Chief Justice John G. Roberts Jr. and Justices Antonin Scalia, Clarence Thomas, and Samuel A. Alito Jr.

In her dissent, Justice Kagan said that “by ravaging Flast in this way, today’s decision damages one of this nation’s defining constitutional commitments,” referring to the interpretations of the establishment clause as limiting “the government’s power to subsidize religious activity.”

Justices Ruth Bader Ginsburg, Stephen G. Breyer, and Sonia Sotomayor joined the dissent.

Ms. Khan, of Americans United for Separation of Church and State, said there remains a narrow basis for taxpayers to challenge government aid to religion.

“What does remain of Flast is the ability to challenge direct grants to religion, but I agree with Justice Kagan that the majority decision gives state legislatures a road map around Flast,” Ms. Khan said.

Paul Bender, an Arizona State University law professor who argued the case on behalf of the taxpayers challenging the credits, called the majority opinion “unprincipled.”

“Justice Kennedy rests his decision on the fact that when taxpayers make a contribution [to an STO] and get a credit, they are spending their own money,” Mr. Bender said. “It’s just not true. It’s money they owe to the state in taxes. They can either give it to the state, or to an STO, but they can’t keep it. My definition of my own money is money I can keep.”

Mr. Bender said he believes the Arizona tax credit could remain open to a new legal challenge by parents who were denied a scholarship by school tuition organization on the basis of religion.

“I think if a parent goes to an STO and says, ‘I want a scholarship to send my child to a nonreligious school,’ and the Catholic STO says no, I think that parent has standing because he has just been denied a scholarship on the basis of religion,” Mr. Bender said.

Credits ‘Not Expeditures’

Richard W. Garnett, a law professor at the University of Notre Dame who filed a friend-of-the-court brief in support of the Arizona credits, agreed that there could be such an alternative basis for challenging the program.

But “the key focus of the majority is that even if Flast is good law with respect to challenging government expenditures, these tax credits are not expenditures,” he said. “What’s happening here, according to the majority, is that the government is letting the people keep more of their own money. Justice Kagan says the effect [on government support for religion] is the same. But for the majority, this is a distinction that matters.”

A version of this article appeared in the April 20, 2011 edition of Education Week as High Court Tax-Credit Ruling Could Offer New Momentum to School Choice Supporters


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