Allen V. Wright - irs tax-exempt status for segregated private school

• O’Connor 1984. Dismissed, for lack of standing, a suit by parents of black school children who claimed that the IRS had not fulfilled its duty to deny tax-exempt status to racially discriminatory private schools.

• Tax breaks for discriminatory private schools. P will generally find it hard to establish the cause-in-fact aspect of standing for a claim that tax breaks have caused some third party not before the court to injure him. The difficulty of establishing standing for such a claim was illustrated when SCt found the cause-in-fact requirement unsatisfied in a case in which parents of black public school pupils attacked the IRS’s grant of tax-exempt status to discriminatory private schools.

• Facts. Parents claimed that the tax breaks enabled discriminatory private schools to offer cheaper tuition, thus inducing more parents of white students than would otherwise be the case to withdraw their children from the public schools to place them in these private schools. These withdrawals in turn deprived the black students of their constitutional right to attend integrated public schools.

• Holding. By 5-3 vote, SCt concluded that the line of causation from the IRS’s conduct to the continued segregation of the public schools was so attenuated that the latter was not “fairly traceable” to the former. Government aid to racially discriminatory schools caused too abstract a harm to be cognizable. The impact of the allegedly improper exemption on school desegregation was too speculative a harm.

• Speculative elements. For there to have been standing, the parents would have had to make 3 showings: (1) that “there were enough racially discriminatory private schools receiving tax exemptions in P’s communities for withdrawal of those exceptions to make an appreciable difference in public-school integration,” (2) that a significant number of schools would, if threatened with loss of the tax exemption, change their policies; and (3) that a significant number of parents of children attending such schools would transfer their children to public school if the exemption were withdrawn. According to the majority, Ps had not alleged any of these three elements.

• AK Commentary. The upshot was that even if the granting of the exemptions is unconstitutional, no one can challenge this unconstitutional action in federal court. Is that a bad result? Does it mean that the doctrine should be changed?

• AK. Constitutional requirements, especially causation, are difficult to satisfy where P seeks to change state of world (e.g. desegregate schools) and action is not typical C/L action.

• Dissent - Brennan. Case has standing because it is clear that there would be at least some degree of desegregation if SC held against IRS.

• Exception to rule of no taxpayer standing (Flast v. Cohen, 1968). Taxpayer standing exists where there is a “logical nexus between the status [of taxpayer] and the claim.”

• What “nexus” requires. The requisite “nexus” will be found to exist only where two showings are made: (1) that the statute relies on Congress’ power under the Taxing and Spending Clause of Article I, §8, rather than being merely “an incidental expenditure of tax funds in the administration of an essentially regulatory [law];” and (2) that the challenged law violates “specific constitutional limitations” imposed on that Taxing and Spending power, not simply that the statute is “generally beyond the powers delegated to Congress by Article I, §8.

• Establishment Clause cases (e.g. government subsidization of religion.), passes this 2-part test. P’s claim was that a federal-aid-to-education act, by giving financial aid to religious schools, violated the First Amendment’s Establishment Clause. This Clause operates as a “specific constitutional limitation” upon Congress’ Taxing and Spending powers.

• Separation of powers. SCt has several times stated that the standing requirement reflects the idea of separation of powers:

• If bystanders could obtain injunctions from federal court, this “would have the federal courts as virtually continuing monitors of the wisdom and soundness of Executive action,” (Allen).

• This would “permit Congress to transfer from the President to the courts the Chief Executive’s most important constitutional duty, to “take Care that the Laws be faithfully executed.” (Lujan).

• AK: is this a persuasive argument? Assuming that Ps would prevail if they were granted standing, doesn’t this argument interpret separation of powers to mean that the executive has a right to break certain laws with impunity?

• USC is judicially under enforced. The standing requirement means that even if there is a constitutional violation, there may be no redress in federal court. This conclusion strengthens Sager’s claim (56) that the USC is judicially under enforced.