On April 4, 2011, the Supreme Court decided Arizona Christian School Tuition Organization v. Winn, No. 09-987, holding that taxpayers do not have standing in federal court to challenge state tax credits for contributions to school tuition organizations that then provide scholarships to students at private schools, including religious schools.
Arizona provides tax credits for contributions to school tuition organizations (STOs) that use the contributions to provide scholarships to students attending private schools, many of which are religious. A group of Arizona taxpayers challenged these credits as violations of the Establishment Clause, arguing that the system allowed used state income-tax revenues to pay tuition for students at religious schools, some of which discriminate on the basis of religion in selecting students. After the Arizona Supreme Court rejected a similar Establishment Clause claim, the taxpayers sued in federal court. In general, the mere fact that a plaintiff is a taxpayer is not sufficient to establish standing in federal court, but Flast v. Cohen 392 U.S. 83 (1968) created a narrow basis for standing: (1) if there is a logical link between the plaintiff's taxpayer status and the type of legislative enactment attacked; and (2) if there is a nexus between the plaintiff's taxpayer status and the precise nature of the alleged constitutional infringement.
The United States District Court for the District of Arizona dismissed the suit for failure to state a claim, but the Ninth Circuit reversed, holding that the taxpayers had standing under Flast, and that the state statute violated the Establishment Clause. The full Ninth Circuit denied en banc review, with eight judges dissenting.
The Supreme Court reversed the Ninth Circuit. It held that the taxpayers had not shown any non-speculative, particular injury from the tax credit system, noting that because "it encourages scholarships for attendance at private schools, the STO tax credit may not cause the State to incur any financial loss," and that even if the plaintiffs were right in asserting that the tax credits had an estimated annual value of more than $50 million (nearly $350 million since the inception of the credits), the plaintiffs had not established that eliminating the STO tax credit would prompt the legislature to pass along any increased revenue in the form of tax reductions.
The Supreme Court held that the plaintiffs lacked standing under the narrow exception of Flast, which had allowed a challenge to a federal statute that had used government tax funds to be spent directly to support instruction and textbooks in religious schools. The Court stated that the critical aspect of Flast was the allegation that the plaintiffs' tax money was being extracted and spent in violation of specific constitutional prohibitions on such conduct. It distinguished the present case by differentiating tax expenditures from tax credits: "It is easy to see that tax credits and government expenditures can have similar economic consequences, at least for beneficiaries whose tax liability is sufficiently large to take full advantage of the credit. Yet tax credits and tax expenditures do not both implicate individual taxpayers in sectarian activities. … When the government declines to impose a tax, … there is no … connection between dissenting taxpayer and alleged establishment. Any financial injury remains speculative. … The STO tax credit is not tantamount to a religious tax or to a tithe and does not visit the injury identified in Flast." More broadly, the Court rejected any assumption "that income should be treated as if it were government property even if it has not come into the tax collector's hands." More broadly still, the Court asserted: "In an era of frequent litigation, class actions, sweeping injunctions with prospective effect, and continuing jurisdiction to enforce judicial remedies, courts must be more careful to insist on the formal rules of standing, not less so."
Justice Kennedy delivered the opinion of the Court, in which Chief Justice Roberts and Justices Scalia, Thomas, and Alito joined. Justice Scalia filed a concurring opinion, in which Justice Thomas joined, asserting that Flast is "an anomaly" that he would "repudiate." Justice Kagan filed a dissenting opinion, in which Justices Ginsburg, Breyer, and Sotomayor joined, contending that the "novel distinction in standing law between appropriations and tax expenditures has as little basis in principle as it has in our precedent."