Full 9th Circuit won’t block challenge to Ariz. school tax credit

Monday, October 26, 2009

PHOENIX — School-choice supporters of a groundbreaking program providing tax breaks for donations for private school scholarships has been dealt another setback as a federal appeals court let stand a ruling that revives a constitutional challenge.

According to an order released Oct. 21 in Winn v. Garriott, a majority of participating 9th U.S. Circuit Court of Appeals judges declined to have the full court review a ruling from earlier this year. In April, a three-judge panel ruled unanimously that the decade-old and first-in-the-nation program could be unconstitutional by favoring religion.

A dissent listed eight judges voting to have an “en banc” review, but the order did not specify how many judges were in the majority. Nor did the court clerk’s office return a call in time for this story for comment on how many of the court’s 27 active judges voted.

The 1997 state law provides dollar-for-dollar income tax breaks for donations to school tuition organizations.

Supporters of the law contend it gives Arizona students a wide range of education options. Challengers argue that the law has had the practical effect of channeling a disproportionate amount of donations to sectarian scholarship groups, which funnel grants to students attending religious schools.

The Arizona Supreme Court in 1999 upheld the constitutionality of the law. The current case concerns how it is being implemented.

As initial evidence indicates, according to the original three-judge panel’s concurrence with the majority order, the program has not provided a true choice on a “religious neutral basis” because most of the scholarship groups only provided aid for students to attend religious schools.

In dissent, Judge Diarmuid F. O’Scannlain, joined by seven colleagues, said the program did not steer aid to any religious school directly and that majority’s order “casts a pall” over similar programs in other states.

This case is “notable … for what it does not involve: state action advancing religion,” O’Scannlain wrote. “The government does not direct any aid to any religious school. Nor does the government encourage, promote, or otherwise incentivize private actors to direct aid to religious schools.”

At least seven states — Arizona, Florida, Georgia, Indiana, Iowa, Pennsylvania and Rhode Island — have tax-credit programs, either for individuals, corporations or both, according to research conducted by Arizona legislative staff.

A lawyer for supporters of the program, Tim Keller of the Institute for Justice, said the dissent “made a strong case for Supreme Court review.”

The three-judge panel’s April decision, which sent the case back to U.S. District Court in Phoenix for further proceedings, overturned a trial judge’s ruling to dismiss the case.

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