In 1997, the Arizona legislature enacted a statute allowing taxpayers in the state to donate their own money to a charitable school tuition organization (STO) of their choice.
These nonprofit organizations help provide tuition for students who wish to attend private schools—religious or nonreligious—in Arizona. Following the donation, Arizona taxpayers receive a dollar-for-dollar tax credit on their state income tax for the donation.
STOs must follow certain guidelines under the statute. They must give at least 90 percent of their income to children attending private schools, and they cannot limit scholarships to just one school. Some of the STOs, like the Arizona Christian School Tuition Organization (ACSTO), use their income to provide scholarships specifically to religious schools.
But a group of Arizona taxpayers represented by the American Civil Liberties Union (ACLU) filed a lawsuit against the program, asserting that it violated the Establishment Clause simply because religious schools could benefit from it.
While the resolution took more than a decade, the Supreme Court ultimately dismissed the ACLU’s lawsuit and ruled in favor of ACSTO, allowing the organization and others like it to continue receiving donations from the tuition tax credit program.
What is the Arizona Christian School Tuition Organization (ACSTO)?
There are many STOs in Arizona today, but ACSTO was the very first one. It was founded in 1998, not long after the state legislature enacted the statute allowing for the tuition tax credit.
ACSTO’s stated vision is to help families who want their children to have a Christian education but cannot afford to pay for the tuition. The organization is working toward a future in which any family who wants to send their children to a Christian school can do so without fear of financial ruin.
In its 24 years of existence, ACSTO has provided over $300 million in scholarships to 44,000 students attending Christian schools in Arizona. This work has been possible thanks to 97,600 taxpayers who generously donated under the state’s tuition tax credit program.
Joyful as these accomplishments are, none of them would have been possible if the ACLU and a handful of taxpayers it represented had had their way.
In February 2000, a group of Arizona taxpayers filed a lawsuit alleging the state’s tuition tax credit violated the First Amendment. They specifically took issue with religious STOs like ACSTO because they provided scholarships exclusively for students who attended religious private schools.
Under the tuition tax credit, each Arizonan can choose whether to donate to a STO. If they choose to do so, they can choose which STO they would like to donate to. They are then given a dollar-for-dollar tax credit for the amount they donated, up to $500 for the individual.
Each one of the Arizona taxpayers represented by the ACLU in the lawsuit could choose not to give to a STO, and the tax credit was not harming them in any way. Still, they claimed the credit was unconstitutional because it allowed people to receive credit for donating to organizations like ACSTO, which provided tuition for students at schools at schools that “discriminate on the basis of religion in selecting students.”
The federal district court initially dismissed the lawsuit. It ruled the taxpayers had no standing to sue over the tax credit since they were not harmed by it. However, the U.S. Court of Appeals for the 9th Circuit reversed the decision, allowing the ACLU’s case to move forward.
ADF attorneys appealed the 9th Circuit decision to the U.S. Supreme Court, which agreed to hear the case in May 2010. Just under a year later, the Court ruled in favor of ACSTO in a 5-4 decision.
Delivering the opinion of the court, Justice Anthony Kennedy wrote that the taxpayers who didn’t like the program had no legal standing to challenge how private organizations used funds donated by private individuals.
The Supreme Court’s ruling gives state legislatures more freedom to enact school choice programs that include religious schools without fear of lawsuits demanding that religious schools be excluded.
It opens up new innovative pathways to fund school choice programs through tax credit scholarships that allow families to decide how best to educate their children.
The donations made as a result of this victory have also helped make high-quality private schools a reality for lower-income families who might have only dreamed about the opportunity, previously.
- February 2000: The ACLU filed a lawsuit on behalf of a group of Arizona taxpayers alleging Arizona’s tuition tax credit was unconstitutional because religious schools were allowed to participate in the program.
- March 2005: The Arizona federal district court granted a motion to dismiss the case, ruling that the taxpayers had no standing to sue over the tuition tax credit.
- April 2009: The U.S. Court of Appeals for the 9th Circuit reversed the district court’s decision. The appeals court ruled the Arizona taxpayers had standing to sue and that the case should be allowed to move forward.
- May 2009: ADF attorneys filed a petition asking for the case to be reheard by the full 9th Circuit.
- October 2009: The 9th Circuit denied the petition to rehear the case, but seven judges disagreed and thought the case should be reheard.
- February 2010: ADF attorneys asked the U.S. Supreme Court to grant review of the 9th Circuit’s decision.
- May 2010: The Supreme Court agreed to hear the case.
- April 2011: The Supreme Court reversed the 9th Circuit’s ruling in a 5-4 decision and dismissed the lawsuit brought by the ACLU, who represented the Arizona taxpayers. It ruled the taxpayers did not have standing to sue over the tuition tax credit, thus allowing religious schools, and the Arizona families they serve, to continue benefiting from the program.
The bottom line
Parents have a right to choose schools for their children, and Arizona’s tuition tax credit affirms that right. Arizona taxpayers who are not harmed by the credit have no legal standing to attack it.