Court to Hear Arguments on Corporate Tax Credit Program

J. Justin Wilson
J. Justin Wilson · March 1, 2007

Phoenix—On behalf of Arizona parents, the Institute for Justice will defend the state’s new corporate tax credit program before the Maricopa County Superior Court next Monday, March 5, at 11 a.m. Oral arguments in Green v. Garriott will be heard by the Honorable Janet E. Barton in Courtroom 701 of the Central Courtroom Building in Phoenix.

IJ and the state of Arizona have asked the court to dismiss a legal challenged filed last September by the ACLU Foundation of Arizona and the Arizona School Boards Association.

“Arizona and federal law could not be clearer: scholarship tax credits are constitutional,” said Tim Keller, executive director of the Institute for Justice Arizona Chapter. “This unfounded lawsuit flies in the face of well-settled precedent and should be dismissed.”

The corporate tax credit program expands the state’s successful individual tax credit program to encourage corporate donations to non-profit organizations that provide private-school scholarships for low- and middle-income families. A fiscal analysis of the new program projects that it will likely save the state of Arizona an estimated $57.2 million.

The Arizona Supreme Court already upheld the scholarship tax credits for individual donations against a nearly identical legal challenge under the Arizona and U.S. constitutions in 1999 in the landmark Kotterman v. Killian case, and a federal district court upheld the same program in 2005. In 2002, the U.S. Supreme Court upheld Cleveland’s school choice program under the federal Constitution.

The Honorable Thomas A. Zlaket, former Chief Justice of the Arizona Supreme Court and author of Kotterman, joined the Institute for Justice as Of Counsel in defense of corporate tax credit scholarships.

This lawsuit is wrong on the law and wrong on the facts. Arizona has a well-established history of offering tax credits to promote social welfare, including tax deductions for charitable contributions. According to a recent report, Arizona taxpayers claimed deductions for charitable contributions amounting to more than $11 billion from 1998 to 2003, and at least 20 organizations eligible for such donations are faith-based. Tax benefits for such donations are no different than scholarship tax credits.

“Opponents of school choice are asking the courts to unravel years of precedent and practice to halt a policy they don’t like,” concluded Keller. “Their legal antics should not be allowed to block educational opportunities for families in need.”