Christianity Today

Legal scholars say a recent Supreme Court decision upholding Arizona's tax credits for scholarship donations could contain the seeds of defeat for a pending California challenge to the housing allowance enjoyed by pastors.

The 5-4 decision upheld the constitutionality of Arizona giving tax credits to those who donate to scholarships for needy students who attend private schools. In 2008 and 2009, more than 90 percent of scholarships went to students attending religious schools, according to The Arizona Republic. Consequently, some taxpayers argue that the credit is an indirect religious subsidy.

The Court tossed out that claim. It ruled that a tax credit for a private expense differs from a government expenditure. However, at the heart of its decision was the majority's finding that the petitioners did not have legal standing to pursue the case.

Opponents of the credit had relied on the 1968 Flast v. Cohen decision, which granted taxpayers standing to challenge government expenditures that violate the Establishment Clause of the First Amendment. Taxpayers are otherwise restricted from suing the government over expenditures unless they are directly injured; this helps reduce frivolous lawsuits.

The ruling sends a signal that the Freedom From Religion Foundation (FFRF) cannot rely on Flast in its current federal challenge to ministerial housing allowances, said church law expert Richard Hammar.

Notre Dame law professor Rick Garnett agrees. He noted a separate mid-April ruling by the Seventh District Court of Appeals, which dismissed the FFRF complaint that the presidential proclamation of a National Day of Prayer amounted to government establishment of religion. The Seventh Court said that since FFRF was not directly injured, it lacked legal standing.

"The ruling suggests that the Supreme Court is not alone in thinking that Flast should not be read over-broadly," Garnett said. "It is powerful, persuasive authority for the claim that the foundation lacks standing to challenge the pastoral housing exemption."

However, Douglas Laycock of the University of Virginia warns that the Arizona decision could have ominous implications.

Even though he thinks Arizona enacted a constitutionally valid program, the law professor questions the way the case was dismissed. Laycock foresees arguments based on violation of the Establishment Clause getting squelched in the future.

"I think in general it will further embolden governments to make standing arguments," he said. "It doesn't logically reach any further than tax deductions and tax credits, but it signals the majority's hostility to the Establishment Clause and their willingness to use standing to make it go away."

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Related Elsewhere:

Previous articles on churches and taxes include:

Housing Disallowance? | The housing allowance, which has provided a tax break for many American pastors for nearly a century, is under scrutiny and likely will be adjusted in coming years. (May 9, 2011)

Blaine Blind Spot | Florida reveals an overlooked front in church-state battles. (September 14, 2010)

Supreme Court Turns Down Challenge to Faith-Based Office | Ruling says taxpayers don't have standing to sue executive branch for use of funds. (June 27, 2007)