Originally published on Forbes.com Sept 5th, 2014
The New Hampshire Supreme Court has upheld a tax credit for contributions to scholarship funds. The credit to corporations against their business profits tax was 85% of the amount of contributions to organizations providing scholarships to families to pay tuition at private schools and out-of-district public school or to cover approved homeschooling expenses. On June 17, 2013 the Strafford County Superior Court ruled that the program violated New Hampshire’s constitution to the extent it allowed scholarships for students attending religious schools. Last week the New Hampshire Supreme Court in Bill Duncan et al v. The State of New Hampshire et al overturned the lower court decision.
The case had some heavyweight players on both sides including the American Civil Liberties Union, Americans United for Separation of Church and State, The Cato Institute and the Becket Fund for Religious Liberty. The section of the New Hampshire constitution that was being used to challenge the statute does not have a pretty history. It traces back to nineteenth century anti-Catholic sentiment in a state whose constitution required that you be a Protestant to hold office. The merits of the legislation were not, however, anything that the New Hampshire Supreme Court took up.
The case was decided on standing.
The personal injuries alleged by the petitioners in this case, like those alleged in Cuno and Watson, are insufficient to establish standing. The petitioners’ claim that the program will result in “net fiscal losses” to local governments does not articulate a personal injury. It “is the same, indistinguishable, generalized wrong allegedly suffered by the public at large.” Although some of the petitioners have school-aged children or are public school teachers, at best, this establishes that those petitioners have a special interest in education. Such a special interest, alone, does not constitute a “definite and concrete” injury sufficient to confer standing.
Standing is probably the primary way that potentially unconstitutional tax benefits are defended. The concept is that you need to show that you specifically are being harmed. If you think that something is just unfair, you should write to your legislature. We will soon see whether standing will work to protect the federal tax benefit that allows the mega-pastors of the mega-churches to exclude from their taxable income housing allowances that can run into hundreds of thousands of dollars.
What is probably most interesting about the Duncan decision is that the New Hampshire Supreme Court had to first engage in a great act of self abnegation, before it could dismiss this case on standing. The New Hampshire legislature had amended the state statutes in order to create a notion of “taxpayer standing”, which is what the plaintiffs in the case were invoking. The statute read in part:
The taxpayers of a taxing district in this state shall be deemed to have an equitable right and interest in the preservation of an orderly and lawful government within such district; therefore any taxpayer in the jurisdiction of the taxing district shall have standing to petition for relief under this section when it is alleged that the taxing district or any agency or authority thereof has engaged, or proposes to engage, in conduct that is unlawful or unauthorized, and in such a case the taxpayer shall not have to demonstrate that his or her personal rights were impaired or prejudiced.
The New Hampshire Supreme Court ruled that “taxpayer standing” put way too much power into the hands of the courts in a manner that was inconsistent with the New Hampshire constitution.
The requirement of a concrete personal injury also implicates Part II, Article 41 of the Constitution, pursuant to which the Governor is “responsible for the faithful execution of the laws.” To allow the legislature “to convert the undifferentiated public interest” in the “proper administration of the laws” to “an individual right by a statute that denominates it as such,” is to allow the legislature to transfer from the Governor to the courts the executive’s “most important constitutional duty,”
In this way, Part II, Article 74 of the State Constitution, in practical effect, limits the judicial role to one that is “consistent with a system of separated powers and which are traditionally thought to be capable of resolution through the judicial process.” Valley Forge College v. Americans United, 454 U.S. 464, 472 (1982) (quotation omitted) (discussing Article III of the Federal Constitution). The requirement that parties have personal legal or equitable rights that are capable of being redressed by the court “tends to assure that the legal questions presented to the court will be resolved, not in the rarified atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.”
So the New Hampshire Supreme Court never got to the merits of the tuition credit program. As described by the Cato Institute the program strikes me as something of a Rube Goldberg way of aiding families that prefer private schools and home schooling.
In 2012, the New Hampshire legislature overwhelmingly passed the Opportunity Scholarship Act, overriding the governor’s veto in the process. The law grants tax credits to corporations worth 85 percent of their donations to nonprofit scholarship organizations that provide financial assistance to low- and middle-income parents so they can choose the education that works best for their children.
Scholarship recipients must have a family income that is no more than 300 percent of the federal poverty line ($70,650 for a family of four in 2013-14), and 40 percent of scholarships are reserved for students qualifying for the federal free and reduced-price lunch program ($43,568 for a family of four in 2013-14). Recipients can use the scholarship funds to pay tuition at private schools, out-of-district public schools, and to cover approved homeschooling expenses such as textbooks, tutoring, homeschool curricula, and online courses.
The state encourages corporations to make donations to entities, by picking up 85% of the tab. The entities then hand out small grants to students after verifying, somehow, that their family income is not too high and the money will be spent appropriately. Seems pretty convoluted to me.
The New Hampshire Supreme Court declining the legislature’s invitation to expand its powers is probably what is of most interest in this decision. You can check out some of the reactions to the decision in this article.