Institute for Justice Asks Georgia Supreme Court to Protect Student Tax Credit Scholarships

Report shows various related tax credit programs help thousands of Georgians each year. So why the opposition?

In papers filed today, the Institute for Justice is asking the Georgia Supreme Court to affirm a lower court ruling and remove the constitutional cloud hanging over the state’s popular scholarship tax credit program. IJ also released a new report today that examines the common constitutional ground between the state’s scholarship tax credit and dozens of other tax credits that benefit Georgians, such as the Film Credit and Low Income Housing Credit.  Despite important similarities between the scholarship program and other, long-standing tax credits, none of these other credits have ever been challenged as unconstitutional—and many could be put in jeopardy by a ruling against the scholarship tax credit program.

View the Full Report Here

The scholarship program, adopted in 2008, allows individuals and businesses to claim a dollar-for-dollar tax credit for voluntary contributions to private charities that offer private school scholarships. More than 13,000 children currently rely on these scholarships to attend schools of their parents’ choice, including private, religious institutions. But despite the program’s popularity, a lawsuit filed in 2014 continues to loom over the families who benefit from the financial assistance. In February, a Fulton County Superior Court judge dismissed constitutional claims—a ruling school choice opponents promptly appealed to the state Supreme Court. IJ is asking the Georgia Supreme Court to take the case and affirm the Superior Court’s ruling that the program is on solid constitutional ground.

In the Superior Court ruling, Judge Kimberly M. Esmond Adams ruled that the plaintiffs in the case, all taxpayers, do not have “standing” to challenge the scholarship tax credit program because it is funded with private, rather than public, funds. Absent the use of public revenue to fund the program, the plaintiff-taxpayers could not demonstrate that they suffered any harm as a result of the program. The judge also found that even with standing, the lawsuit would fail because the constitutional provisions prohibiting public support of religious institutions and restricting public donations that the plaintiffs cited “only apply to government acts that use public funds,” and tax credits are not public funds. The judge further noted that under the school choice opponents’ arguments, “deductions, differential tax rates, and exclusions for income such as property tax exemptions” would constitute government spending and could thus likewise be unconstitutional.

Similarly, IJ’s report finds that Georgia’s scholarship tax credit is just one of at least six state tax credits that allow funds to be used at private, religious institutions and one of dozens of other Georgia credits that encourage private donations for the public good. Altogether, individuals and businesses claimed more than $2.4 billion in tax credits from 2009 to 2012, representing a tiny fraction of total taxes due to the state—just 5.4 percent. In that time, the scholarship tax credits accounted for just $127 million. And just like the rest of Georgia’s credits, the scholarship tax credit is constitutional because it involves private funds, not public funds.

“The Georgia Supreme Court should review this case now and affirm that the scholarship tax credit program is constitutional, not only to resolve the important constitutional issues at stake in this litigation, but also to put at ease the thousands of families who rely on the program to ensure their kids receive a good education,” said IJ Managing Attorney Tim Keller.

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