Source: https://www.pewforum.org/2010/10/19/in-brief-arizona-christian-school-tuition-organization-v-winn-and-arizona-department-of-revenue-v-winn/
Timestamp: 2019-04-24 17:59:28+00:00

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On Nov. 3, 2010, the U.S. Supreme Court will hear oral arguments in a pair of related cases involving a constitutional challenge to an Arizona tax policy aimed at providing scholarships for children to attend private – often religious – schools. The cases, Arizona Christian School Tuition Organization v. Winn and Arizona Department of Revenue v. Winn, involve a state tax credit for Arizona residents who contribute money to what are called scholarship tuition organizations (STOs), nonprofit groups that use taxpayer contributions to provide scholarships for children to attend private schools. Opponents of the tax credit contend that it violates the Establishment Clause of the First Amendment to the U.S. Constitution because, in their view, it allows the state to channel public money to religious schools. Those defending the tax credit maintain that it meets the constitutional standards set by the Supreme Court in Zelman v. Simmons-Harris, the 2002 ruling which upheld a school voucher program in Cleveland, Ohio. Before deciding the Establishment Clause issue, however, the court will consider whether those challenging the tax credit have legal standing, which is the right to bring such a lawsuit.
How did these cases arise, and how did they reach the Supreme Court?
In 1997, Arizona enacted a law that allows state residents to receive a dollar-for-dollar tax credit of up to $500 ($1,000 for married couples) for contributions to nonprofit organizations that provide scholarships to public school students who want to attend private schools. The sponsors of the law stated that its ultimate aim was to encourage greater educational choice for disadvantaged K-12 students whose families could not otherwise afford private schools. They also stated that the law was not specifically aimed at helping parents place their children in religious schools. Under the law, state residents may contribute to a host of different scholarship tuition organizations, including some that place students only in a particular type of school – either religious (such as a Catholic or Jewish school) or secular (such as a Montessori school).
In 2000, after the law had been upheld by the Arizona Supreme Court, Kathleen Winn and a number of other taxpayers in the state filed a lawsuit in federal district court alleging that the tax credit violated the Establishment Clause because a large portion of the money donated under the program – more than 50% in 2009 – went to students who attended religious schools. Furthermore, the taxpayers pointed out, some of the organizations receiving donations limited scholarships to students who agreed to go to a religious school. The district court rejected these arguments, and ruled that the program was neutral toward religion because it allowed state residents to receive the tax credit for donations to any STO and did not favor those organizations that provide scholarships only to religious schools.
Winn and the other taxpayers appealed the cases to the 9th U.S. Circuit Court of Appeals, which reversed the district court decision and sent the cases back to the lower court with instructions to examine how the law actually operates rather than just ruling on the law as written. In its instructions to the district court, the 9th Circuit said that while the tax credit might on its face appear to be neutral, in practice the statute might promote religion and thus violate the Establishment Clause. But before the lower court could reconsider the cases, the defendants in the cases – the state and several STOs – appealed the 9th Circuit’s ruling to the U.S. Supreme Court, which agreed to hear the cases.
What arguments do the two sides make regarding the question of standing – the legal right of the taxpayers to bring the lawsuit?
The state of Arizona and the STOs argue that the taxpayers who brought the suit against them do not have legal standing to do so. To have standing in a lawsuit, the person bringing that suit must show that he or she has been injured in some way by the opposing party. For example, a person injured in a car accident would have standing to sue the offending driver, but a driving instructor with a general interest in automobile safety would not have standing to sue that driver.
Ordinarily, taxpayers do not have standing in the federal courts to challenge the constitutionality of government expenditures. In other words, taxpayers generally cannot claim that particular government expenditures have injured them. But in its 1968 decision in Flast v. Cohen, the Supreme Court carved out an exception to this general rule for cases in which taxpayers are challenging government spending as a violation of the Establishment Clause. Later, in Hein v. Freedom From Religion Foundation (2007), the high court narrowed the Flast exception by ruling that taxpayers have standing in Establishment Clause cases only when a legislative body has explicitly authorized an expenditure of government funds for religion.
The state and the STOs assert that, in light of the general rule against taxpayer standing and the recent decision in Hein that narrowed the Establishment Clause exception, taxpayers should not be able to challenge Arizona’s tax credit. After all, they say, the Arizona legislature itself is not making the decision to spend tax dollars to pay for scholarships at religious schools – a condition they say would be required for standing under the ruling in Hein. Instead, they say, the state legislature has only created a benefit (the tax credit) aimed at empowering private generosity that in turn may benefit religious schools.
Winn and the other taxpayers contend that the existing case law does give them standing to sue. They point out that in Flast, the Supreme Court broadly recognized that taxpayers are injured when the government unconstitutionally provides funds for religion and religious institutions, which Winn and the other taxpayers argue Arizona is doing via the tax credit. This injury permits them to sue in federal court, they say, as long as they can credibly claim that those government expenditures violate the Establishment Clause.
Moreover, Winn and the other taxpayers say, the Supreme Court has bolstered Flast by allowing taxpayer standing in cases in which a state’s “expenditures” are the revenue lost from tax credits or deductions, rather than a direct outlay of money by the legislature. The taxpayers point out that in Committee for Public Education & Religious Liberty v. Nyquist (1973), the Supreme Court allowed state taxpayers to challenge a New York state law permitting low-income taxpayers to take a credit against state income tax for certain amounts paid by parents for tuition at religious schools. A decade later, in Mueller v. Allen (1983), the high court permitted state taxpayers in Minnesota to challenge state income tax deductions for tuition payments at private schools, including religious schools. The Arizona tax credit plan challenged in this case also creates a “tax expenditure,” they argue, in the sense that it reduces the funds in the Arizona state treasury by the amount of the credit against taxes otherwise owed to the state. As a result, the taxpayers say, existing law clearly supports their standing in this case.
Turning to the substance of the case, what arguments do the state of Arizona and the STOs make in their briefs before the Supreme Court to explain why the tax credit should be upheld?
The state and the STOs contend that the tax credit does not violate the Establishment Clause because the Arizona program meets all the requirements set down in the Supreme Court’s landmark 2002 voucher case, Zelman v. Simmons-Harris. In upholding the government-funded voucher program in Cleveland, Ohio, the court in Zelman ruled that such a program is constitutional as long as it meets some core criteria: it has a secular purpose, directs government funds to parents rather than schools, covers a broad class of beneficiaries, and offers students enough secular options to create a meaningful choice.
The state and STOs argue that the Arizona tax credit has a clear secular purpose because nothing in the law’s language or in its legislative history would lead anyone to conclude that the state legislature intended to promote religion or religious schools when it created the tax credit. They say there is ample evidence that the statute was enacted to give a greater number of poor and middle-income students, who may be in underperforming public schools, an opportunity to attend private schools.
Next, they argue that the statute also does not advance religion because it offers taxpayers, the STOs and parents of students, rather than the state, the complete choice as to where the scholarship funds will end up. More specifically, they say, because the taxpayers choose which scholarship tuition organizations to contribute to, and parents and STOs choose which schools will ultimately receive the scholarship funds, the state is clearly not involved in making those choices. Thus, they contend, the tax credit meets the second of Zelman’s core requirements.
The state and STOs also contend that the Arizona scholarship program includes a large class of potential beneficiaries, which includes all taxpayers (who can take advantage of the credit) and many students in the state (who are eligible to receive money from the scholarship organizations).
Finally, they argue that the tax credit meets Zelman’s requirement that students have ample secular options. They point out that any student in the state may choose to attend public school or a secular charter school, and that many of the STOs fund scholarships to secular private schools as well as their religious counterparts.
What arguments do Winn and the other taxpayers make in their brief before the Supreme Court to explain why the tax credit should be struck down?
Winn and the other taxpayers begin their argument by saying that they are not challenging the tax credit on its face but “as applied.” In other words, they say, while the law creating the tax credit may be religion-neutral in the abstract, in practice it favors religion. Specifically, they say, the state and the STOs have portrayed the tax credit as a program aimed at helping underprivileged students in failing public schools, but in practice it is largely a conduit to channel state money to religious schools and, as a result, it is in direct violation of the Establishment Clause.
To begin with, the taxpayers contend, the funds generated via the tax credit are not traditional charitable contributions. “Charity … involves giving something of your own, at some cost to yourself, for a charitable purpose,” they point out. In this case, Arizona residents contribute to the STOs instead of paying income taxes with those funds; this is generally not the case for traditional charitable contributions, which qualify for a tax deduction. Unlike deductions, which are subtracted from a person’s total taxable income, credits are subtracted from the amount a person actually owes in taxes. Indeed, unlike other charitable contributions, a contribution to an STO to directly offset taxes owed can literally be made on the day a state resident pays his or her taxes. In other words, a family that owes $1,500 in state taxes at the end of the year can give $1,000 to an STO and pay only $500 in taxes. Thus, the taxpayers argue, the program is not funded with private money but with public money, since the contribution directly offsets tax payments to the state. Likewise, they say, the STOs are not private charitable organizations in the traditional sense. Instead, the taxpayers claim, they are wholly creatures of the state, having been created in the wake of the tax credit law solely to disburse funds generated via the credit.
In addition, the taxpayers contend, a substantial portion of the funds generated by the tax credit, at least up to this point, have not been used to allow poor children in failing public schools to take advantage of private alternatives, as was the case in the Cleveland voucher program that the Supreme Court upheld in Zelman. Instead, many recipients of STO funds are not from low-income families but are living in middle- or higher-income households, and many are already in religious schools.
Winn and the other taxpayers also argue that even though the language of the law creating the tax credit defined STOs as organizations that would grant funds to parents to allow them to place their child in the school of their choice, the reality is quite different. For example, they point out, in 2009 more than half of the $50 million raised through the tax credit went to four STOs that provide scholarships only to faith-specific schools. This goes squarely against the court’s requirement in Zelman, they say, because it does not place the funds with parents who can then make a genuine choice. Instead, scholarships are awarded by STOs to parents willing to send their children solely to various religious schools, such as Catholic, Protestant or Jewish schools.
What might be the broad significance of these cases?
If the court rules that Winn and the other taxpayers have standing to sue, it will not break significant new ground because, as the taxpayers point out, the high court has recognized taxpayer standing in previous Establishment Clause cases involving tax credits and deductions. If, on the other hand, the taxpayers are denied standing, it would likely block or severely limit future Establishment Clause challenges in situations involving tax credits and deductions.
For example, taxpayers are currently challenging in the lower courts the special treatment in the Internal Revenue Code for the housing or housing allowances provided to clergy by their employers. A ruling against taxpayer standing in Winn might result in the dismissal of such a case. In addition, First Amendment scholars would see a denial of standing in Winn, along with the Supreme Court’s recent ruling in Hein, as part of a significant trend to narrow the Establishment Clause exception for taxpayer standing first articulated in Flast.
If the high court denies taxpayer standing, it will no longer need to rule on the Establishment Clause question in this case. If, however, standing is granted, the high court will rule on whether the Arizona tax credit potentially could violate the Establishment Clause. If the court rules for Winn and the other taxpayers and affirms the appeals court ruling, the case will go back to the district court, which will then have to determine whether or not the tax credit program, as it currently operates, unconstitutionally promotes religion. If, however, the court rules in favor of Arizona and the STOs and overturns the appeals court decision, it would make challenging similar tax plans harder in the future. Such a decision also would give states that have or create similar plans much greater certainty that they could survive a similar constitutional challenge.
This In Brief report was written by David Masci, Senior Researcher, Pew Forum on Religion & Public Life.

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