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Christmas gift for Ariz. Christian day care: $25K tax bill reversed

ADF, allied attorney represent church-run school in Surprise that had been sacked with unwarranted taxes

PHOENIX – A state appeals board has reversed a $25,000 tax bill that had been levied against a Phoenix-area Christian day care center run by a church. The Arizona Department of Economic Security determined in 2011 that Above and Beyond Child Care, operated by Palms Christian School in Surprise, was liable for unemployment taxes even though state law specifies that organizations operated primarily for religious purposes are not subject to those taxes.

Alliance Defending Freedom and an allied attorney representing the day-care center appealed the decision to the department’s appeals board, which reversed the tax bill, finding that the day-care ministry “presented evidence sufficient to establish that it is operated primarily for religious purposes.”

“Church-run ministries shouldn’t live in fear of being punished by the government when they’ve not done anything wrong. The appeals board has reached the right conclusion in determining that this church-run day care should not have been sacked with a $25,000 tax bill that they do not owe,” said ADF Senior Counsel Bradley Abramson, co-counsel in the case, Above and Beyond Child Care v. State of Arizona, together with Wallace Larson of Carson Messinger, PLLC. Larson is one of nearly 2,500 private attorneys allied with ADF.

DES had contended that no preschool, elementary, or secondary school can have a primarily religious purpose because the primary purpose of a school is education, not religion. The appeals board rejected that argument, pointing out that assessing the taxes on the grounds that the day-care ministry’s “primary operating purpose cannot be religion, would make meaningless and unnecessary any existence of the statutory exceptions that have been enacted.”

The board’s decision recounts numerous examples of the day-care ministry’s faith-based character and points out that the Internal Revenue Service “awarded the Employer 501(c)(3) status and an exemption from reporting, based upon its religious nature…. Clearly, the Employer was organized for religious purpose, is engaged thoroughly and primarily in carrying out that religious purpose, and holds itself out to the public as an entity for carrying out that religious purpose.”

“We can’t imagine a better Christmas gift for this ministry,” added ADF Senior Counsel Joseph Infranco. “It can now continue its service to the community’s children and parents without fear of a huge tax bill that could have ended its work.”

Infranco noted that the principles articulated in the decision could have wide-ranging, positive effects for many private religious schools in Arizona in similar circumstances.


Alliance Defending Freedom is an alliance-building, non-profit legal organization that advocates for the right of people to freely live out their faith.


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