Montana Officials Propose Exclusion of Religious Schools from Scholarship Program

Published November 26, 2015

The Montana State Department of Revenue heard testimony regarding a controversial proposed rule that would prevent state funds from a new tax credit scholarship program being used to pay for schools affiliated with religious institutions.

Erica Smith, an attorney with Virginia-based Institute for Justice, testified in defense of the constitutionality of the tax credit scholarship program and use of funds from the program for religious schools during a public hearing in November.

The purpose of the public hearing was to discuss implementation of a new law which will allow tax credits for donations of up to $150 a year for scholarships to private schools or to innovative educational programs in public schools. The annual limit for the program is $3 million.

Could Set Precedent

A draft of the rules by the state Revenue Department excluded religious schools from receiving funding through the program. If the rule stands, it will set a precedent calling existing Montana tax-credit programs into question, “because these programs also allow donations to go to religious groups,” Smith said at the hearing. “These tax credit programs include the college contribution credit, the qualified endowment credit, the dependent care system credit, and the elderly care credit. According to the department’s position that tax credits constitute public funds, these programs would also be unconstitutional.”

According to officials at the state Department of Revenue, religious schools were excluded in order to adhere to the state Constitution, which has provisions prohibiting direct or indirect funding of religious organizations.

Constitutional Conflicts

Smith says the proposed rule violates the U.S. Constitution.

“The proposed rule discriminates against religion in violation of the U.S. Constitution,” Smith said. “Specifically, it violates the Free Exercise Clause, Establishment Clause, and Equal Protection Clause. The department thinks that this rule is necessary to comply with the Montana Constitution. They are incorrectly interpreting their own constitution. That is very clear from all of the legal precedents.

“Even if the Montana Constitution did require this rule, it still would be trumped by the federal constitution, and the federal constitution clearly prohibits this type of discrimination,” she said.   

Smith says the rule will most likely be adopted before the end of the year, and IJ is strongly considering filing a lawsuit. 

“It should be up to parents, not government bureaucrats, to decide what is the best education for their children,” said Smith. “That’s why we care about this issue so much. It’s easy to lose sight of that when you have all these discussions about constitutions and what you can and can’t do.”  

Department officials did not comment on or rule on the matter at the hearing.

Heather Kays ([email protected]) is a research fellow with The Heartland Institute and is managing editor of School Reform News.

Image by 401(K) 2012.

Internet Info:

“Public mulls exclusion of religious schools from Montana Tax Credit,” The Associated Press, November 5, 2015:

Steve Jess, “Montana Lawmakers Debate Tax Credits for Religious School Donations,” Montana Public Radio, November 5, 2015: