Opinion ID: 3064621
Heading Depth: 4
Heading Rank: 1

Heading: Aid to Private Institutions

Text: Defendants first argue that because STOs do not receive direct government funding, Section 1089 is no different from other programs that accord tax benefits to individuals who contribute to nonprofit, religious institutions. See, e.g., Hernandez v. Comm’r, 490 U.S. 680, 695 (1989) (upholding federal tax deduction for contributions to charitable and religious organizations); see also Walz, 397 U.S. at 666-67 (upholding state property tax exemption for religious and secular nonprofit organizations). As with any program of government aid, however, whether such programs violate the Establishment Clause depends on whether they have “either . . . the purpose or effect of ‘endorsing’ religion.” County of Allegheny, 492 U.S. at 592; see Texas Monthly, Inc. v. Bullock, 489 U.S. 1, 17 (1989) (plurality opinion) (holding sales tax exemption exclusively available to religious periodicals violated Establishment Clause because it “lack[ed] a secular objective that would justify this preference along with similar benefits for nonreligious publications or groups, and because it effectively endorses religious belief”); Nyquist, 413 U.S. at 783 (holding program including grants and tax deductions for private 4608 WINN v. ARIZONA CHRISTIAN SCHOOL school tuition had valid secular purpose, but violated Establishment Clause because “the effect of the aid [wa]s unmistakably to provide desired financial support for nonpublic, sectarian organizations”). The parallels defendants contend exist between Section 1089 and tax deduction programs that the Supreme Court has held “easily pass[ ] constitutional muster,” Hernandez, 490 U.S. at 695, are therefore instructive, but only to the extent they shed light on the secular objectives, if any, that Section 1089 was enacted to promote. [11] The secular objectives defendants argue Section 1089 promotes differ significantly from those advanced by tax deduction programs the Supreme Court has upheld. The federal system addressed in Hernandez, for example, permits tax deductions for “any charitable contribution” to a qualified entity “organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition.” 26 U.S.C. §§ 170(a), (c)(2)(B); see also Regan v. Taxation with Representation of Wash., 461 U.S. 540, 544 (1983) (observing Congress’ system of tax deductions and exemptions provides “subsidy to non profit civic welfare organizations generally”). This system, the Court held, makes deductions available for contributions to an array of religious and secular organizations, and thus has “the primary effect of . . . encouraging gifts to charitable entities, including but not limited to religious organizations.” Hernandez, 490 U.S. at 696. Section 1089, by contrast, offers narrowly targeted, dollar-for-dollar tax credits designed to fully reimburse contributions to STOs, most of which restrict recipients’ choices about how to use their scholarships. Although defendants contend these credits were enacted to provide Arizona schoolchildren equal access to a wide range of schooling options, defendants do not — and could not — suggest the credits are designed to promote donations of individual wealth or charitable giving to a broad array of institutions.12 Likewise, defendants do not suggest 12 As the Court recognized in Hernandez, 490 U.S. at 696, tax deductions promote the secular purpose of encouraging individuals to use their WINN v. ARIZONA CHRISTIAN SCHOOL 4609 that Section 1089 has a secular purpose in common with laws granting tax exemptions to a broad range of nonprofit organizations, including churches. See Walz, 397 U.S. at 672-75 (holding law granting property tax exemptions to array of religious and secular nonprofit institutions served to promote “beneficial and stabilizing influences in community life” and minimize “[t]he hazards of churches supporting government”); see also id. at 678 (noting the “unbroken practice of according . . . exemption[s] to churches, openly and by affirmative state action, not covertly or by state inaction, is not something to be lightly cast aside”). Thus, we are not persuaded that Section 1089 conforms with the Establishment Clause simply because it bears some superficial resemblance to programs that do. own private wealth to make charitable gifts. By contrast, the one-to-one tax credits offered under Section 1089 encourage individuals to give money to private STOs, but allow them to obtain full reimbursement from the state for their contributions. See Nyquist, 413 U.S. at 789 (explaining that “the usual attribute of a tax credit” is that it is “designed to yield a predetermined amount of tax ‘forgiveness’ in exchange for performing a specific act which the State desires to encourage”). In this respect, the tax credits offered under Section 1089 resemble those that encourage individuals to provide public financing for the Federal Election Commission’s Presidential Election Campaign Fund (“PECF”) but which do not, by design, encourage private charitable donations to the PECF. See 26 U.S.C. §§ 9001-13. As we explained in our prior opinion in this litigation: a tax credit differs from a tax deduction in that where a tax deduction is involved, giving money to a religious institution is not, as is the case of a tax credit, a free gift. In the case of a tax credit, the taxes due are reduced by the full amount of the gift. In contrast, when a taxpayer is entitled to a tax deduction, the taxpayer must in most if not all instances still pay a majority of the tax involved: it is only his taxable income that is reduced by the amount of the gift, and, thus, his tax liability is reduced only by a percentage of the gift that is equal to the tax rate applicable to his income bracket. Winn v. Killian, 307 F.3d at 1015 n.5, aff’d Hibbs v. Winn, 542 U.S. 88. The tax credits offered under Section 1089 therefore do not promote the same secular purpose as the tax deductions upheld in Hernandez. 4610 WINN v. ARIZONA CHRISTIAN SCHOOL