Home -> Law Blog Directory -> Religion & Law Blogs -> Religion Clause

Religion & Law

: Religion Clause

Arizona Appellate Court Upholds Corporate Scholarship Tax Credits

By Howard M. Friedman

In a 2-1 decision in Green v. Garriott, (AZ Ct. App., March 12, 2009), an Arizona state court of appeals has rejected state and federal constitutional challenges to the state's income tax credit for scholarship contributions from corporations. Contributions are made to non-profit school tuition organizations that use the funds for scholarships to nonpublic schools. 70% of the scholarships are awarded through religious STO's. Rejecting a federal Establishment Clause challenge, the majority said that:

Given the neutrality of the statute, and the multiple layers of private choice that stand between the legislature?s decision to provide a corporate tax credit and the eventual acceptance of scholarship funds by sectarian schools, we do not believe the Establishment Clause has been violated.

The court also rejected the argument that the tax credit violates state constitutional provisions prohibiting the laying of taxes or appropriation of public money to aid any private or religious school. Finally the court rejected the argument that the tax credit violates the state's responsibility , set out in the Arizona Enabling Act, to maintain a system of public schools.

Dissenting in part, Judge Kessler argued that the tax credit raises Establishment Clause problems because "the record raises questions as to the tax program's secular purpose, that Arizona tax scheme is not neutral with respect to religion and does not provide benefits directly to a wide spectrum of individuals defined without reference to religion." He explains:

The statutory scheme does not limit either the STOs or the recipient private schools from discriminating on the basis of religion on who will receive tuition scholarships from the tax credits. Indeed, the complaint alleges both the STOs and the recipient schools do and will discriminate on the basis of religion....

§ 43-1183 has an aggregate annual limit of tax credits. Thus, it is possible ... to have several corporations use the entire aggregate tax credit in any year ... to fund scholarships to one STO, which will only fund schools of one religious denomination....

The Arizona Capitol Times reports on the decision.

Full post as published by Religion Clause on March 13, 2009 (boomark / email).