Kotterman v. Killian

Litigation: Litigation: Challenging Arizona’s “Original Individual Income Tax Credit Scholarships” law, the nation’s first tax credit scholarship program, enacted in 1997. Opposed to educational choice program : American Civil Liberties Union, Americans United for Separation of Church and State, Arizona School Boards Association, Arizona Education Association, People for the American Way In support: Center for Arizona Policy, Institute for Justice, Intervenors Arizona School Choice Trust, and Lisa Graham Keegan.

Outcomes: On January 26, 1999, the Arizona Supreme Court upheld the constitutionality of this tax-credit scholarship program. This decision was appealed to the U. S. Supreme Court, which, in October 1999, declined to review the case. The Arizona Supreme Court ruling was allowed to stand.

Why it Matters: With this opinion, Arizona’s Supreme Court set the stage for many rounds of litigation that followed, where opponents sued to stop the state’s individual tax credit, corporate tax credit and education savings account programs. This state court relied on Mueller v. Allen, 463 U.S. 388, 103 S. Ct. 3062 (1971), a tax credit case originating in Minnesota (see below) which continues to be good law supporting tax credit scholarship programs. This ruling in support of tax credit scholarships, which clearly identified that tax credits are not appropriations and beneficiaries are children not schools, laid a solid legal precedent for future courts.

Effects: Arizona’s Original Individual Income Tax Credit Scholarship Program serves over 32,000 students today and as many as 91,000 individuals annually contribute to scholarship granting organizations.