Tax Credit Scholarships and the Constitution


Some people think that any program that helps nonpublic schools is unconstitutional.  However, the U.S. Supreme Court has ruled that private school choice programs are fully constitutional.  In addition, every state that has taken up the issue of tax credit scholarships has ruled that the programs do not violate their state’s constitutions. Even Florida—which ruled its voucher program unconstitutional because it violated the state’s requirement to fund a uniform education system—has never seen significant litigation against their $250 million tax credit program.

Separation of Church and State 

The U.S. Supreme Court has ruled that well-designed school choice programs are fully constitutional in several cases. The court found that a program is constitutional so long as it is does not favor religion over non-religion, has a secular purpose and, where relevant, the aid to a religious schools flowed there based on the independent choice of private citizens, not of the state.  All criteria met by tax credit scholarship programs.

In Arizona Christian School Tuition Organization v. Winn the U.S. Supreme Court held that taxpayers lack even the standing to challenge tax credit programs under the Establishment Clause and that tax credits are not considered expenditures – in other words, since uncollected taxes are not considered government spending, they are not constitutionally an issue.

State Constitutional Issues 

Of the 11 states that have passed any type of tax credit scholarship program, only Arizona has seen any legal challenges.  However, as you can see in both cases, the U.S. Supreme Court and the State courts ruled in favor of the tax credit program’s constitutionality.  Tax credit scholarship programs do not violate their states’ constitutions because under tax credit programs the money never enters the treasury and therefore does not come from the education formula or the general fund.

Arizona Personal Tax Credits for School Tuition Organizations

April 4, 2011, the U.S. Supreme Court upheld Arizona’s personal tax-credit scholarships, ruling that taxpayers do not have standing under the Establishment Clause to challenge a tax-credit scholarship program. The Court rejected opponents’ position that personal income is government property, stating, “Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands. That premise finds no basis in standing jurisprudence. Private bank accounts cannot be equated with the Arizona State Treasury.” Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436, 179 L. Ed. 2d 523 (2011)

Arizona Corporate Tax Credits for School Tuition Organizations

March 12, 2009, the Arizona Court of Appeals upheld Arizona’s corporate tax-credit scholarships and the Arizona Supreme Court refused to hear an appeal. Green v. Garriott, 212 P.3d 96 (Ariz. App. 2009).