ACS v. Winn: The Effects of Finding Tax Credits Constitutionally Unreviewable

highcourt3_23Earlier this year, The New York Times reported on Georgia’s Wilcox County High School and its segregated prom.  The article recounted the story of four female high school students—two black and two white—who fought to end decades of racial segregation in their town.  Their goal was simple: to host Wilcox County’s first integrated prom.  Taking to Facebook, the girls rallied the support of 24,000 fans whose donations and support transformed the students’ dreams into reality.  Last April, Wilcox County held its first integrated prom.

As the Times noted, Wilcox County was somewhat behind the curve.  Citing both Charleston, Mississippi and Montgomery, Georgia’s integrated proms, the articleconcluded that segregated proms have “gradually faded away” across the South.  Unfortunately, however, segregated proms are not the only form of discrimination taking place in Southern high schools.

Recently, Rolling Stone highlighted another discriminatory practice in Georgia, this one employed by private schools and targeted at homosexual teens.  Many Catholic schools in Georgia have implemented policies that allow them to refuse an applicant admission (or discontinue a student’s enrollment) for being homosexual.

When people hear these stories, they typically wonder how such policies are legal.  The answer, of course, is the state action doctrine.  In order for a court to strike down a private institution’s policy as unconstitutional, the plaintiff must, as a threshold matter, prove that the institution’s policies are intertwined with government action or government resources.

State action was not present in the case of Wilcox County because the segregated proms were organized and funded by parents in the town.  Because the proms were privately sponsored rather than school sponsored, and because they took place on private property rather than school property, the proms could not be linked to state action.  The discrimination, therefore, was beyond the reach of the Constitution.

Georgia Capitol Building

Georgia Capitol Building

But, the anti-homosexual policies discussed in Rolling Stone are a different and more complicated story.  While the schools are private and thus can implement any policies they chose, they still receive an indirect benefit from Georgia’s state government.

As a way of background, Georgia—along with 11 other states—has passed a law that grants tax credits to people who donate money to private organizations whose purpose is to subsidize students’ private school tuition.  The law’s funding mechanism works as follows.

First, a Georgia taxpayer donates money to an entity called a Student Scholarship Organization (SSO).  The SSO pools this taxpayer money in order to create vouchers, which it gives to students to use in place of tuition.  The students then use the vouchers to attend any of the private high schools that are affiliated with the SSO.  Finally, when filing her taxes later that year, the taxpayer receives a dollar-for-dollar tax credit for each dollar she donated to the SSO. For example, if a donor owed $5,000 in Georgia state income tax but had donated $2,000 to a SSO that year, then she only would owe $3,000 for that given year.

The heart of this law is the government’s decision to not tax people who donate to Georgia’s SSOs.  As a result of this decision, private high schools now receive money that otherwise would have become government revenue.  In fact, according to Rolling Stone, more than $230 million in tax credits have been awarded to Georgia taxpayers who have donated to SSOs.  This amount shows that the law has incentivized taxpayers to donate to SSOs rather than pay taxes and, therefore, has benefited participating Catholic schools.

The legal question surrounding the law is relatively straightforward: does Georgia’s decision to grant tax credits to SSO donors constitute state action?  In ACS v. Winn, a similar case decided in 2011, the Supreme Court answered this question with a no.

In Winn, Arizona taxpayers challenged a provision in the Arizona state income tax that granted a dollar-for-dollar tax credit to people who donated to Arizona STOs, organizations nearly identical to Georgia’s SSOs.  The Court refused to treat Arizona’s tax credits the same way that it treats direct government expenditures (an example of clear state action).  Instead, the Court characterized the tax credits as a decision to abstain from legislative action and therefore held that they were not state action.  Thus, the tax credits were placed beyond Constitutional review.

So, what does Winn leave in its wake?  Are courts now unable to review tax credits?  If so, can state or federal government now endorse unconstitutional policies so long as those policies are promoted through tax credits rather than affirmative legislation?


Professor Linda Sugin

In her article, The Great and Mighty Tax Law: How the Roberts Court Has Reduced Constitutional Scrutiny of Taxes and Tax Expenditures, Professor Linda Sugin addresses these issues in greater detail.  She discusses two tax cases decided by the Roberts Court, includingWinn. From a tax law standpoint, she examines the problems that arise when courts treat tax credits differently than direct government expenditures.  From a practical perspective, she identifies a range of Constitutional violations that may become unreviewable because of Winn’sholding.

Although Professor Sugin focuses on the tax issues and the Constitutional violations that may flow from the decision, it seems equally appropriate to view Winn through a broader lens.   By permitting such tax credits, Winn allows state governments to forego funding for the public schools they are meant to improve.  As a result of the Court’s decision, private schools now reap immense benefits at the expense of our nation’s failing public schools.  In doing so, the Roberts Court has extended its preference for private institutions into the world of high school education—a world that has long been considered a public service.

Tax issues aside, then, Winn appears to further one of the Roberts Court’s main goals: to reduce the role of government.   Georgia’s policy—using tax credits to provide a private solution to the problem of failing schools—is in line with the Court’s preferences for smaller government and increased roles for private institutions.  Thus, it is no surprise that the Roberts court endorses a state government’s decision to grant tax credits for donations to private schools, a strategy that continues to gain support in state legislatures.

What is startling, however, is how far Winn goes.  Upholding a law that incentivizes tax-payer donations to private schools is one thing.  But, shielding the law and its effects from Constitutional review is another thing entirely.  By doing the latter, Winn allows the government to turn a blind eye on the unconstitutional conduct of private schools that are benefiting from the passage of state laws.

Finally, by making tax credits unreviewable, Winn prevents courts from even cursorily examining a legislature’s motivation for passing such tax credits.  It is no secret that the majority of private schools in Georgia are Christian.  Is it unreasonable to suggest that the legislature of a predominantly Christian state may pass such a law for religious or discriminatory reasons rather than educational ones?  Maybe it is, but maybe it is not.  Regardless, Winn now makes it impossible to investigate the answer to that question.

This article was originally published on the Brooklyn Law School site Practicum 

Luke Taeschler is a J.D. Candidate at Brooklyn Law School, a Notes and Comments Editor on the Brooklyn Law Review, and a member of the VIS International Arbitration Moot Court team.


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