IJ and Arizona Parents Ask Full Ninth Circuit To Reconsider Scholarship Tax Credit Ruling

J. Justin Wilson
J. Justin Wilson · May 14, 2009

Phoenix—The Institute for Justice and its Arizona Chapter today filed an en banc petition asking the full Ninth U.S. Circuit Court of Appeals to reconsider a ruling by a three-judge panel of the court holding that Arizona’s individual scholarship tax credit program may be unconstitutional.

“The panel’s ruling flatly contradicts U.S. Supreme Court precedent and should be corrected by the full court,” said Tim Keller, executive director of the Institute for Justice Arizona Chapter, which is defending the program on behalf of parents and the Arizona School Choice Trust, a scholarship-granting organization.  “Overturning this ruling is important to preserve the full range of choices that parents, students and taxpayers currently enjoy thanks to Arizona’s scholarship tax credit.”

In a ruling last month, the panel affirmed that scholarship tax credit programs are constitutional under the Establishment Clause of the U.S. Constitution, but held that Arizona’s program may be unconstitutional because it allows taxpayers to receive a credit for donations to scholarship-granting organizations that give scholarships only to students attending religious schools—and many taxpayers choose to donate to such organizations.  The ruling did not halt the 10-year-old program, but sent the case back to a federal trial court to determine whether, in fact, the program is unconstitutional.

But in its petition, IJ points to several ways in which the panel’s ruling directly conflicts with established U.S. Supreme Court precedent.  First, the Establishment Clause restricts the actions of government, not private citizens exercising free choice of where to donate funds.  If the fact that some or even most taxpayers choose to donate to religious organizations invalidates a program, then all manner of tax credits and deductions for charitable giving could suddenly become unconstitutional.  Second, the Court failed to take into account the full range of educational options available to parents.

In short, the key question under the Establishment Clause is whether the scholarship tax credit program coerces taxpayers to donate to religious organizations or parents to send their children to religious schools.  Arizona’s program does not.  It is religiously neutral—neither favoring nor disfavoring religion—and offers both taxpayers and parents a wide range of choices.  Nothing in the tax credit law or its implementation by the state encourages taxpayers or parents to choose religious organizations or schools.

Indeed, choice is the defining feature of the program.  Taxpayers may choose to donate to any of 55 scholarship organizations, some religious and some non-religious, or choose not to donate at all.  Parents are free to apply to any scholarship organization and, by extension, can receive scholarships to a wide array of schools.  In 2008, 373 private schools had children with tax-credit scholarships.  Parents can also choose among Arizona’s many public school options, including regular public schools and charter schools.

“For ten years, Arizona’s tax credit program has expanded the educational opportunities open to Arizona schoolchildren to include private schools,” said Keller.  “To suggest that this law somehow limits parental choice is flat-out wrong.”

More than 28,000 Arizona schoolchildren participate in the program, and last year Arizona taxpayers donated more than $55 million to support their scholarships.

“Arizona’s tax credit program has demonstrated both in the state and across the nation that school choice works,” said Keller.  “This flawed ruling must not be allowed to limit parental choice in any way.”