Arizona Christian School Tuition Organization v. Winn (available here)
Arizona taxpayers sued over a statute giving tax credits for contributions to school tuition organizations (STO), which then used the contributions to provide scholarships to students attending private schools.  Because the private schools also include religious schools, the taxpayers alleged the law was a violation of the Establishment Clause. The district court initially said that taxpayers did not have standing to challenge the law, but the Ninth Circuit reversed. Justice Kennedy and the majority held that respondents lacked Article III standing because they challenged a tax credit as opposed to a governmental expenditure.
Petitioner Arizona Christian STO was not a part of the original suit but became involved as an intervenor. They are a tax-exempt charitable organization formed “for the sole purpose of implementing the private school tuition tax credit law passed and signed into law in 1997….” This suit was litigated within state courts, with a favorable ruling from the Arizona State Supreme Court in 1998. Although SCOTUS denied cert on that case, it was refiled in district court and bounced around in the federal circuit for almost a decade before this decision was handed down.
The SCOTUS precedent at issue, used by the Ninth judges to find standing, is the 1968 case Flast v. Cohen. Although taxpayers generally don’t have standing to bring a lawsuit based on government spending alone, Flast creates an exception where Establishment Clause issues arise: “Our history vividly illustrates that one of the specific evils feared by those who drafted the Establishment Clause and fought for its adoption was that the taxing and spending power would be used to favor one religion over another or to support religion in general.” Therefore, taxpayers have standing when Congress acts in violation of the Establishment Clause.
Tax Credit v. Governmental Expenditure
Based on Flast, Justice Kennedy ruled that the Arizona taxpayers “cannot take advantage of Flast’s narrow exception to the general rule against taxpayer standing.” (emphasis added) The majority spends a lot of time on the details of Flast,  finally getting around to Arizona and stating that the tax code at issue is not properly described as a governmental expenditure. There is no concrete link showing a standing injury when a taxpayer voluntarily giving money to an STO: “When the government declines to impose a tax, by contrast, there is no such connection between dissenting taxpayer and alleged establishment. Any financial injury remains speculative.” The state itself is not extracting or forcing taxpayers to contribute to religion through the STOs. The respondents did not show injury, and the opinion further holds that causation and redressability standing requirements were also not satisfied.
Justice Kagan wrote her first dissenting opinion for the Court, joined by Ginsburg, Breyer and Sotomayor. Her biggest complaint about the majority opinion is that this whole thing is a fight over standing – the merits of the case are never discussed. Kagan’s bottom line? The Arizona statute allows citizen’s taxes to fund religion and the Court shouldn’t get tripped up on procedural issues like Article III – this case deserves an adjudication on the merits. No court has ever made the distinction between expenditures and tax credits, and to do so here is against reason. What is to stop states from subsidizing through the tax system to avoid taxpayer standing and Establishment Clause violations? Nothing, according to Justice Kagan and the dissenters.
 The section of the AZ Tax Code as issue “allows Arizona tax payers to obtain dollar-for-dollar tax credits of up to $500 per person and $1,000 per married couple for contribu tions to STOs.”
 Flast requires two conditions to be met for the exception to apply: (1) a logical link between taxpayer status and the type of legislative enactment; (2) nexus between taxpayer status and “the precise nature of the constitutional in fringement alleged.”