Arizona Christian School Tuition Organization v. Winn

Summary Question

1. Do Respondents lack taxpayer standing because they do not allege, nor can they, that the Arizona Tuition Tax Credit involves the expenditure or appropriation of state funds?
2. Is the Respondents' alleged injury-which is solely based on the theory that Arizona's tax credit reduces the state's revenue-too speculative to confer taxpayer standing, especially when considering that the credit reduces the state's financial burden for providing public education and is likely the catalyst for new sources of state income?
3. Given that the Arizona Supreme Court has authoritatively determined, under state law, that the money donated to tuition granting organizations under Arizona's tax credit is private, not state, money, can the Respondents establish taxpayer standing to challenge the decisions of private taxpayers as to where they donate their private money?

Summary Answer

YES. The plaintiffs, Arizona taxpayers, lacked standing to sue. They could present no injury in fact impacting them directly. They could show no misuse of tax dollars, no increase in costs to Arizona’s budget that would necessarily require a tax increase. They also could not show that their tax dollars were being collected and then used for a purpose that is unconstitutional. Their main assertion, that tax credits are government expenditures, was soundly dismissed by the Court. The Court said, “Private citizens create private STOs; 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.”

Litigation

Challenging Arizona’s ”Original Individual Income Tax Credit Scholarships” law, the nation’s first tax credit scholarship program, enacted in 1997. An earlier case, Kotterman v. Killian, was rejected for review by the U.S. Supreme Court. This case, challenging that the program violated the Establishment Clause of the First Amendment to the federal constitution, was accepted.

Opposed to educational choice program : American Association of School Administrators, American Ethical Union, American Humanist Association, American Jewish Committee, Americans United for Separation of Church and State, Anti-Defamation League, Arizona Education Association, Arizona School Boards Association, Atheist Alliance International, Baptist Joint Committee for Religious Liberty, Center for Inquiry, Council for Secular Humanism, Freedom From Religion Foundation, Institute for Humanist Studies, Interfaith Alliance Foundation, National Education Association, National School Boards Association, Secular Coalition for America, Secular Student Alliance, Society for Humanistic Judaism, Unitarian Universalist Association.

In support: Advocates for Faith and Freedom, Agudath Israel of America, American Center for Law and Justice, American Center for School Choice, Association for Biblical Higher Education, Association of Christian Schools International, Becket Fund for Religious Liberty, Black Alliance for Educational Options, Catholic Tuition Organization of the Diocese of Phoenix, Catholic Tuition Support Organization of the Diocese of Tucson, Cato Institute, Center for Arizona Policy, Center for Constitutional Jurisprudence, Christian Educators Association International, Christian Legal Society, Convocation of Anglicans in North America, Council of Christian Colleges & Universities, Ethics and Religious Liberty Commission of the Southern Baptist Convention, Florida Assoc. Of Academic Nonpublic Schools, Florida School Choice Fund, Foundation for Excellence in Education, Friedman Foundation for Educational Choice, Goldwater Institute, Hispanic Council for Reform and Educational Options, Indiana and 12 states (AL, CO, FL, GA, LA, MI, MS, PA, SC, TX, UT, WA), Jewish Tuition Organization, Justice and Freedom Fund, Liberty Counsel and American Association of Christian Schools, Lutheran Education Foundation, National Assoc. Of Evangelicals, New Way Learning Academy, Pacific Legal Foundation, Rutherford Institute, Union of Orthodox Jewish Congregations of America, United States, U.S. Conference of Catholic Bishops, U.S. Representative Trent Franks.

Outcomes

On April 4, 2011, the U.S. Supreme Court, in a landmark decision, upheld Arizona’s personal tax-credit scholarships, ruling that taxpayers do not have standing under the U.S. Constitution’s First Amendment Establishment Clause to challenge a tax-credit scholarship program. The court rejected opponents’ position that personal income is government property, declaring: “Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.”

Why it Matters

This opinion placed tax credit scholarship programs in a favorable position to fend off litigation at the state level. It clearly explained that since funding for the scholarships comes from the voluntary action of private donors, tax credit programs are private, not state, programs. Furthermore, the court was clear that tax credits are a reduction in tax owed to the state; they are not appropriations of funds taken from a state’s treasury.

Effects

Arizona has four tax credit scholarship programs, enacted in 1997, 2006, 2009, and 2012. Over 98,000 scholarships are awarded each year. Also, since this U.S. Supreme Court ruling in 2011, only one state supreme court has ruled a tax credit scholarship program to be unconstitutional. The Montana Supreme Court ruling in Espinoza v. Montana Dept of Revenue was overturned by the U.S. Supreme Court in a 2020 landmark ruling.