Tax Credit-Funded Programs

In tax credit scholarship programs, the state provides tax credits to businesses and individuals who donate to scholarship-granting organizations. These organizations, which are usually nonprofits, then award scholarships to parents. In other words, by letting businesses and individuals reduce their annual tax liability through donations to a scholarship organization, the state encourages citizens to support educational choice. 

• The Institute for Justice has intervened in nine lawsuits to protect tax-credit scholarships in court. 
• On behalf of three Montana moms, IJ sued the state for adopting a rule that denied educational choice to the overwhelming majority of eligible families under Montana’s scholarship program. This led to a landmark win at the U.S. Supreme Court in 2020’s Espinoza v. Montana Department of Revenue, ensuring that educational choice programs cannot discriminate against parents who choose to send their children to religious schools. 
• Each year, over 310,000 students in 22 states benefit from tax–credit scholarship programs. 

The U.S. Supreme Court has limited opponents’ ability to challenge tax-credit scholarships as unconstitutional in federal courts. In Arizona Christian School Tuition Organization v. Winn, the Court ruled that the plaintiffs did not have standing and dismissed a lawsuit attacking Arizona’s successful and popular private school scholarship tax-credit program. That 2011 decision protects these programs from most federal court challenges.   

IJ’s 2020 win in Espinoza further limited educational choice opponents’ legal arsenal against policies that encourage school choice, by declaring that programs allowing parents to direct funds to private schools cannot discriminate against parents who decide to send their children to religious schools. This win was reinforced by IJ’s 2022 victory in Carson v. Makin. In that case, the U.S. Supreme Court held that states may not prohibit families that participate in educational choice programs from selecting schools that provide religious instruction. Together, these rulings empower state policymakers to enact programs that give parents the power to direct their children’s education.  

Despite these new opportunities, however, special interests opposed to educational choice will continue to try to take down both old and new programs in the courts. With our wide-ranging litigation and legislative consulting efforts, IJ is dedicated to upholding educational choice across the country.