In Arizona Christian School Tuition Organization v. Winn, the Supreme Court upheld an Arizona law allowing a dollar-for-dollar corporate tax credit for donations to organizations supporting religious schools.  However, the Court declined to reach the underlying constitutional issue of whether the credit violates the Establishment Clause of the United States Constitution.

In an 5-4 majority decision written by Justice Anthony Kennedy and issued on April 4, 2011, the Court ruled that Arizona taxpayers have no standing to bring suit against the state challenging the program. The decision effectively overruled decades of precedent permitting lawsuits against government programs that subsidize religious institutions through tax incentives.  Normally, an individual can only sue the government by alleging a personal injury or damage.  In 1968, in Flast v. Cohen, the Supreme Court created an exception for religious subsidy cases, and allowed taxpayers to bring suit against the government challenging religious tax subsidies.  The rationale is that the individual taxpayer suffers an injury when the government wrongly uses their tax money.

The Court ruled that this exception applies only to money spent by the government to subsidize religion.  In contrast, a tax credit involves money never collected in the first place. “When the government declines to impose a tax,” Justice Kennedy wrote, “there is no such connection between dissenting taxpayer and alleged establishment.”  Justice Elena Kagan, writing her first dissent, called the distinction “arbitrary.” “Either way," she says, "the government has financed the religious activity. And so either way, taxpayers should be able to challenge the subsidy.”

While the ruling does not technically uphold the constitutionality of the Arizona subsidy, the decision strongly curtails the ability to challenge such tax -credits.  The decision was welcomed by many religious organizations and communities throughout the country as a huge victory for parental choice. A similar bill, strongly supported by Agudath Israel, is currently pending in New Jersey.