Supreme Court Weighs Arizona Tax Credit for Christian Schools


ACRU Staff


November 10, 2010

ACRU Senior Legal Analyst Ken Klukowski wrote this column appearing November 10, 2010 on

While America was talking about the election returns, the Supreme Court was talking about tax credits to fund Christian schools in Arizona. It looks like this might be yet another 5-4 decision on religious liberty, and it’s not clear which way the Court will go.

On Wednesday, November 3–the day after the conservative tsunami resulting in Republican victories across America–the U.S. Supreme Court heard arguments in Arizona Christian School Tuition Organization v. Winn. Arizona allows a $500 dollar-for-dollar tax credit if taxpayers choose to give some money to student tuition organizations (STOs) that fund all manner of private schools, including Christian schools. As could be expected, even though many of these private schools are secular–or of other faiths such as Jewish–the usual suspects filed suit against Christian schools receiving such aid, railing against any taxpayers giving money that ultimately funds such schools. The case has now made it to the High Court.

There are two issues in the case. The second issue is whether these tax credits violate the Establishment Clause of the First Amendment. But before the Court can consider that question, the first issue is whether the plaintiffs even have standing to bring this lawsuit into federal court.

The first issue (standing) was argued by Acting Solicitor General Neal Katyal, who did a very good job of arguing why Kathleen Winn and her co-plaintiffs lack standing. The general rule is that taxpayers lack standing under Article III of the Constitution to bring a federal suit just because they don’t like what the government is doing with the people’s tax dollars. The case-or-controversy requirement of Article III includes a plaintiff having suffered a personal injury that is different from the general public.

The second issue was argued by a lawyer from the office of Arizona Attorney General Terry Goddard (an outgoing Democrat). That was a shame, in that this case was defended by, and the briefs written throughout the case–including at the Supreme Court level–were written by, the Alliance Defense Fund (ADF). Arizona’s lawyer was hesitant in many of her answers. She also got some of the facts wrong (as those facts are recounted in the briefs) and obviously failed to understand one major case that the liberal justices asked about regarding racial discrimination in an attempt to derail this case, while ADF’s lead attorney in this case, David Cortman, is a well-spoken appellate lawyer who was better equipped to argue the case, and wrote the brief for the STO. (I can’t remember the last time the lawyer who wrote the brief for the Supreme Court was not allowed to argue the case.)

In the most liberal year of Supreme Court history (1968), the Court held that the sole exception to the bar on taxpayer standing is for violations of the Establishment Clause. That case, Flast v. Cohen, is regarded as a textbook example judicial activism, one that the Court has since narrowed, but never had the votes to overrule.

General Katyal did a good job of making the argument that this Arizona lawsuit doesn’t come within the narrow exception for taxpayer standing in Flast. There’s no government spending on religion here. It’s people’s private money that they send to various STOs.

The setup is somewhat complex. STOs are student tuition organizations, which are set up by private citizens to fund private schools. A taxpayer can claim a credit for a voluntary donation to an STO. The STO then gives funds to parents with children in a private school, which may or may not be religiously affiliated. The parent then uses that money to pay part of their child’s tuition. The taxpayer must give to an STO; they cannot use the funds for their own children.

According to Arizona’s lawyer, the reason for this system is that the Arizona Constitution doesn’t allow tax dollars to go directly to religious schools, so this system is set up to make a legal way to fund Christian education in Arizona.

Contrary to the statements of the ACLU lawyer arguing for the opponents of this program, STOs dole out money without regard to the religion of the recipient. Justice Stephen Breyer, who is Jewish, asked if he wanted to send his Jewish children to a Catholic high school, whether a Catholic-supporting STO would pay the tuition, or instead require that the student be Catholic. The ACLU said that the student must be Catholic, and the Arizona lawyer failed to correct that statement.

Even if that were the case, Justice Antonin Scalia says it shouldn’t matter. The decision, “of whether to give the money to … a religiously affiliated STO or a nonaffiliated one, that is in the hands of a private individual… There is no religious discrimination [by government] in that choice.”

Interestingly, the ACLU argued that money a private citizen keeps because of a tax credit is somehow government money. Chief Justice John Roberts, along with Scalia, seemed incredulous that the government could claim ownership over private citizens’ money that never went to the government in taxes.

Then Justice Anthony Kennedy weighed in on this point, saying, “In your brief you say if you are wrong on [this] point that you are folding your tent and leaving, there’s–that there is no standing and that there’s no … violation. But I must say, I have some difficulty that any money the government doesn’t take from me is still the government’s money.”

The courtroom laughed at that statement, and that could be Kennedy tipping his hand on the case. If the Christian STO wins the case, it will be because nothing the ACLU said after that point laid to rest Kennedy’s concern.

As ADF’s Cortman said, “Parents should decide what schools their children attend and where their money goes. Just because religious schools can join the program on the same basis as non-religious ones doesn’t make it unconstitutional.”

The weakest point in the ACLU’s argument is how a tax credit is different from a tax deduction. They readily conceded that the there’s a tax deduction for donations to 501(c)3 nonprofit groups, hundreds of thousands of which are churches.

The ACLU had to make this concession, because otherwise they’d be calling into doubt the federal income tax deduction for money given to churches, which they must know the Supreme Court will not strike down. Scalia sarcastically asked, “So is it really that line in the tax form that you are concerned about, and that the only relief you really need is … changing the tax form?”

Nonetheless, Justice Kagan seems to have problems with the program, in the first religious-liberty case to come before her. It seemed clear that Justice Ginsburg also objected to the tax credit. Justice Sotomayor appeared also to have an issue with the program, but didn’t say anything definitive as to which way she would go. Justice Breyer asked questions that seemed to support the STO, but he often uses that method to probe a case, only to side with the liberals in the end, so it’s not possible to know for sure how he will vote.

As often happens in such cases, it appears that Kennedy is the swing vote. This case will turn on whether Kennedy believes that the money at issue is government money. To a lesser extent it could also possibly turn on whether STOs should be considered private organizations, versus part of the government. ADF has at least four votes for the Christian STO, and it remains to be seen whether Kennedy–and possibly Breyer as well–will join them.

A decision is expected early next year.



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