Arizona high court upholds tax credits in face of church-state challenge

Thursday, January 28, 1999

Arizona's high court has ruled that a tax credit for residents who donate money to private school scholarship funds, including religious ones, does not amount to government support of religion.

The Supreme Court of Arizona's 3-2 decision in Kotterman v. Killian found that the tax credit — which allows residents who contribute to a school scholarship fund to deduct up to $500 from their tax returns — did not promote religious education, but instead would help poorer parents have more say in their children's education.

“Basic education is compulsory for children in Arizona, but until now low-income parents may have been coerced into accepting public education,” Justice Thomas Zlaket wrote for the majority in the decision handed down Jan.26. “These citizens have had few choices and little control over the nature and quality of their children's schooling because they have been unable to afford a private education that may be more compatible with their own values and beliefs. Arizona's tax credit achieves a higher degree of parity by making private schools more accessible and providing alternatives to public education.”

The Arizona residents who challenged the state tax credit were represented by several civil rights groups that have fought voucher programs nationwide. Those groups, including Americans United for Separation of Church and State and People for the American Way, argued that the tax credit would encourage residents to attend private schools, the vast majority of which are religious, and undermine the Arizona Constitution.

In a lengthy majority opinion, Zlaket said the tax credit would not amount to public funding, and that the program was neutral and the benefits to religion indirect. “This tax credit may provide incentive to donate, but there is no arm twisting here,” Zlaket wrote. “Those who do not wish to support the school tuition program are not obligated to do so. They are free to take advantage of a variety of other tax benefits, or none at all.”

Zlaket also ruled that Arizona's religion clauses in the state's Constitution were not undermined by the tax credit. The Arizona Constitution states: “No public money or property shall be appropriated for or applied to any religious worship, exercise, or instruction, or to the support of any religious establishment.” It also adds that no tax “shall be laid or appropriation of public money made in aid of any church, or private or sectarian school.”

Zlaket concluded that the tax credit was not public money and that the state's religion clauses could not be interpreted too strictly.

“This court long ago rejected the strict view that in essence no public monies may be channeled through a religious organization for any purpose whatsoever without, in fact, aiding that church contrary to constitutional mandate,” Zlaket wrote.

Two of the justices, however, found that the tax credit was government funding of religion.

“Because the statute permits uncontrolled, government-reimbursed grants to private, primarily religious institutions, it directly subsidizes religious education and thus violates” the separation of church and state, Justice Stanley Feldman wrote for the dissenting judges. “The Arizona tax credit is available only to those who choose to support private, predominantly religious schools. Those who wish to contribute to public schools are allowed only a $200 credit, and their contributions can be used only to reimburse fees paid for extracurricular activities. Thus, the tax credit does not offer the same or even similar benefits to all taxpayers, it is not neutral, and the money involved represents a charge made upon the state for the purpose of religious education.”

Elliot Mincberg, legal director and executive vice president for the Washington, D.C.-based People for the American Way, said the court's decision was disappointing, but would be relatively unimportant beyond the state of Arizona.

“We obviously had hoped for a better decision, but quite frankly it is a narrow one that addresses a unique statute,” Mincberg told said. “The decision does not support much broader tax credits or voucher proposals.”

Nonetheless, Mincberg said he believed the tax credit was “set up to clearly support private religious education.”

Lawyers for the Institute for Justice, a Washington, D.C.-based libertarian law firm that defends voucher programs and also supported the Arizona tax credit, trumpeted the decision as victory for school choice.

“This decision is a triumph not only for Arizona schoolchildren, but for the school-choice movement nationwide,” said Clint Bolick, litigation director for the institute. “The decision will resonate widely as a major First Amendment precedent.”

The Arizona high court decision comes only months after Wisconsin's Supreme Court ruled that a Milwaukee voucher program, which offered public funds for students attending private schools, did not run afoul of the separation of church and state.