April 4, 2011
Supreme Court Sharply Limits Establishment of Religion Suits Challenging Tax Laws
In a 5-4 decision, the Supreme Court today reversed a lower court decision holding that Arizona state tax credits for contributions to school tuition organizations violated the federal Constitution’s Establishment Clause. The Court did not, however, base its reversal on whether the credits – because they often benefited students at religious schools - actually violated the Establishment Clause. Instead, the Court in Arizona Christian School Tuition Organization v. Winn concluded that the plaintiffs challenging the credits lacked standing to even bring their suit because the tax credit was not the equivalent of a governmental expenditure that benefits religion. While taxpayers generally lack standing to challenge tax benefits received by other taxpayers, the Court has previously held in Flast v. Cohen that an exception to this general rule exists when a taxpayer is challenging such benefits on Establishment Clause grounds. Today, in majority opinion written by Justice Kennedy and joined by Chief Justice Roberts and Justices Scalia, Thomas, and Alito, the Court limited that exception to situations where a legislature uses its authority “both to collect and spend tax dollars,” and then held that a tax credit is best seen as allowing citizens to “spend their own money, not money the State has collected from . . . other taxpayers.”
The decision likely spells the end for a lawsuit filed in 2009 by well-known atheist Michael Newdow on behalf of several plaintiffs challenging the long-standing federal income tax exemption for pastoral housing allowances. In 2010, the United States District Court for the Eastern District of California refused to dismiss that suit in Freedom from Religion Foundation v. Geithner on standing grounds because the District Court concluded the Flast exception applied to tax benefits. That court will almost certainly now see a renewed motion to dismiss from the government defendants in that case. While the majority carefully distinguished a number of other cases, including one – Texas Monthly v. Bullock – that found a tax exemption had violated the Establishment Clause, Justice Kagan writing in dissent is almost certainly right that not only tax credits but also tax exemptions and deductions are now safe from taxpayer challenges based on the Establishment Clause even if such provisions benefit religious organizations generally. That said, and as Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, appears to acknowledge, such tax provisions likely could not escape constitutional challenge if they only benefited a particular religion.