PHOENIX -- The U.S. Supreme Court will hear arguments today over the legality of an Arizona law that lets individuals and corporations divert income taxes they owe to instead help students attend private and parochial schools.

Today's hearing follows a 2009 ruling by the 9th Circuit Court of Appeals that declared the system illegal. The judges concluded that the system, while neutral on its face, operates in a way to have the government supporting and providing favorable financial treatment to religious schools.

What the high court will do remains unclear. The mere fact that the justices agreed to review the appellate ruling suggests there is some sentiment to declaring the system legal.

But it takes only four of the justices to grant review.

At issue is a 1997 law that allows Arizonans to get a dollar-for-dollar credit on what they owe the state in income taxes for money they donate to organizations that provide the scholarships for private and parochial schools.

Individuals have been able to divert up to $500 a year or double that for couples. But legislation signed earlier this year by Gov. Jan Brewer will allow that to be adjusted annually for inflation.

In the 2009 tax year -- the most recent numbers available -- Arizonans diverted more than $50.8 million to the scholarship organizations.

A separate law, which gives similar dollar-for-dollar credits to corporations, cost another nearly $7.3 million in revenues.

In a 2002 ruling, the U.S. Supreme Court upheld an Ohio law that provided vouchers of taxpayer dollars to parents to send their children to any school they want, even parochial schools. The justices said the program constitutes true private choice, where parents decided where to use the vouchers.

What's different in this case -- and what the 9th Circuit found objectionable -- is that the organizations that accept the donations and give out the aid can decide where those scholarships can be used. And the largest organizations give scholarship vouchers to parents only if they agree to send a child to a religious school.

For example, the Catholic Tuition Organization of the Phoenix Diocese limits its funding to students attending Catholic schools. The Tucson diocese has a similar program.

And the Arizona Christian School Tuition Organization restricts its scholarships to be used at "evangelical" Christian schools.

Paul Bender, who is representing the challengers, said that makes Arizona's law skewed in favor of diverting tax dollars religious schools, which he said is precisely what the U.S. Constitution prohibits.

But Tim Keller, executive director of the Arizona chapter of the Institute for Justice, said the high court has repeatedly upheld programs where the question of where the money goes is decided by private choice rather than the government.

"Private choice is the defining characteristic of Arizona s tax credit program," he said. "The government stays completely neutral and allows donors to freely decide which scholarship organization to donate to and parents to choose the school that will best meet their children s individual needs."

Foes of the plan have argued that money diverted from the state treasury means less cash for public schools which are obligated to educate all children.

But proponents said the amount of money lost in tax revenues is far less than if the state had to educate all these children.

In 2009 the scholarship groups funded with the tax credits reported giving out 27,582 scholarships, though the average amounts varied by organization.

There is no requirement in the law that scholarships be awarded based on need, though a law approved earlier this year will require all organizations to report the number of scholarships they give to students meeting certain income limits.

Organization 2009 scholarships

Arizona Christian Schools Tuition Organization $10,398,811

Catholic Tuition Organization/Phoenix Diocese $9,170,855

Arizona Scholarship Fund $5,159,220

Institute for Better Education $4,803,063

Catholic Tuition Organization/Tucson Diocese $4,124,864

Jewish Tuition Organization $1,591,486

Tuition Organization for Private Schools $1,474,937

Arizona Private Education Scholarship Fund $1,466,820

Arizona Tuition Organization $1,237,877

Arizona School Choice Trust $1,022,823

Brophy Community Foundation $969,744

Higher Education for Lutheran Program $936,844

-- Source: Arizona Department of Revenue

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