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Federal judge tosses Arizona school tax-credit case

By The Associated Press
03.28.05

PHOENIX — A federal judge last week rejected a second challenge to Arizona’s dollar-for-dollar state income tax break for donations for private school scholarships.

U.S. District Judge Earl Carroll on March 24 granted a motion by school-choice advocates to dismiss a 2000 suit backed by the American Civil Liberties Union of Arizona.

Carroll’s ruling rejected the suit’s contention that the tax credit violates the U.S. Constitution’s prohibition on government establishment of religion.

The credit is part of a state effort to promote school-choice opportunities in both public and private schools for students and parents from a broad spectrum of groups, Carroll wrote.

“Money which would otherwise go to the state can only go to religious schools after being filtered through multiple layers of private choice,” Carroll’s ruling said.

At issue in the case was an income-tax credit that helped raise 58,122 donations totaling $29.5 million for scholarships and grants in 2003, most of it going to religious groups.

The tax break, enacted in 1997 at the urging of school-choice advocates, allows bottom-line tax savings of up to $500 for an individual and $625 for a married couple.

In a related development, the state House on March 24 approved, 33-26, a Senate-passed bill to create a new corporate income-tax credit for donations for private school tuition. The bill now goes to Democratic Gov. Janet Napolitano. Gubernatorial spokeswoman Jeanine L’Ecuyer declined comment.

The Arizona Supreme Court narrowly rejected a similar challenge to the individual income tax credit in 1999.

“The time has come for opponents of school choice to stop filing baseless legal actions,” said Tim Keller, executive director of the Institute for Justice’s Arizona chapter.

Eleanor Eisenberg, executive director for the ACLU of Arizona, said ACLU officials were disappointed by the ruling. The group had not decided whether to appeal, she said.

Carroll’s ruling relied on the 2002 U.S. Supreme Court ruling Zelman v. Simmons-Harris, which upheld a school-voucher program in Cleveland. In that ruling, the high court said the Cleveland program’s indirect aid to religious schools based on independent choices made by students and their parents did not violate the First Amendment’s ban on any law “respecting an establishment of religion.”

Last June, the U.S. Supreme Court, ruling in Hibbs v. Winn, upheld a 9th U.S. Circuit Court of Appeals ruling that ordered Carroll to hear the latest Arizona challenge.

Carroll previously had turned the suit away, agreeing with the state that the challenge was barred by a 1937 federal law that says federal courts may not interfere with the “assessment, levy or collection of state taxes.”

The 9th Circuit said the 1937 law wasn’t that broad and the Supreme Court ruled that federal courts can hear constitutional challenges to state taxes despite the 1937 law.


Update
9th Circuit revives challenge to Ariz. school tax credit
Arizona Supreme Court upheld state law in 1999 in case that contested how statute was written; current lawsuit targets how law is being applied. 04.22.09

Previous
High court allows challenge to Arizona private-school tax credit
Taxpayers had tried to sue in federal court claiming that tax credits are an unconstitutional promotion of religion. 06.16.04

Related

N.Y. Catholic churches begin campaign for school-tax credits

Parishes plan to send state officials up to 1.5 million postcards calling for tax credit to offset religious- and private-school tuition. 10.16.05

Ariz. judge upholds school-voucher programs

Court finds grants to parents of disabled, foster children aren't appropriations of state money for religious worship or instruction. 06.18.07

Ariz. court strikes down 2 school-voucher programs
Appeals panel finds payments to parents violate state Constitution's prohibition of using public money to help private or religious schools. 05.16.08

Ariz. high court rejects private-school vouchers
Justices strike down programs as unconstitutional but don't decide if aid violates prohibition against state funding for religion. 03.26.09

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