The US Supreme Court continues to plow through its review of cases for the next season, making reference to its second tax case. Unlike the first (in which cert was denied), the Supreme Court agreed to put the second set on its docket. The Court agreed to hear two cases, Arizona Christian School Tuition Organization v. Winn, 09-987 (downloads as a pdf) and Garriott v. Winn, 09-991, as a consolidated matter. Each of these cases focus on the constitutionality of an Arizona tax credit for donations to organizations that provide scholarships at private schools.

Let me set the scene for you on this one: it’s a pretty big deal. It’s especially a big deal since historically, a majority of Supreme Court justices have ruled in favor of programs that provide parents with public money to help pay for tuition at private schools.

The program, as it stands in Arizona, gives donors a state tax credit for contributions of up to $1000 to private scholarship organizations. The money is then, obviously, turned over to the private schools. A large majority (and by large, I mean 92-93%, as reported by the Arizona Republic) of those private schools are religious schools. And that is what is perceived as the problem.

Opponents of the tax credit claim that the Arizona scheme is different from traditional voucher programs that have been approved in other states because those allow for a broad range of school choice. In those programs, it was argued that there was little room for church and state overlap. However, in Arizona, it has been argued that the program as created is less about school choice and more about a perceived government endorsement of religious schools. The whole point of the program, it was argued, was “to restrict parents’ opportunities to select secular educational options for their school-age children, skewing parents’ incentives to send their children to religious schools.”

The Court of Appeals ruled the tax credit unconstitutional. The court found that “Arizona’s tax-credit funded scholarship program lacks religious neutrality and true private choice in making scholarships available to parents.”

The Supreme Court will review the case in the fall based on two main issues:

  1. Whether there is standing for taxpayers when they cannot allege that the Arizona Tuition Tax Credit involves the expenditure or appropriation of state funds; and
  2. Whether the Arizona Tuition Tax Credit unconstitutionally endorses or advances religion because taxpayers choose to direct more contributions to religious organizations than nonreligious ones.

A decision is expected in spring.

You can bet that a lot of folks will be watching this one pretty closely. And by a lot of folks, I mean (at the very least), Michigan, New Jersey, Florida, Indiana, Louisiana, Pennsylvania, South Carolina and Utah, all of whom filed an amicus curiae brief to the Supreme Court (downloads as a pdf) in the matter. An amicus curiae brief (more Latin, it means “friend of the court”) is filed by someone who isn’t a party to the matter but does have an interest in the outcome. Translation in this case? There’s a lot of interest in the matter.

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Kelly Erb is a tax attorney, tax writer and podcaster.

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