The Montana Supreme Court ruled the state’s education tax credit program violates the state constitution
Montana’s Tax Credit Program, enacted in 2015, allowed taxpayers to take a tax credit for donations to tuition scholarship funds for private school students or supplemental donations to public schools.
The December 13, 2018 decision was the first time any state’s highest court has struck down a tax-credit scholarship program, says Tim Benson, a policy analyst with The Heartland Institute.
Religious Schools Were Excluded
The Montana program allowed individuals to receive a dollar-for-dollar tax credit against state income taxes owed for up to $150 in donations to nonprofit Student Scholarship Organizations for tuition at a Qualified Education Provider (QEP). The purpose of SSOs “is to provide parental and student choice in education with private contributions through tax replacement programs,” the law stated.
The Montana Department of Revenue adopted a rule that excluded religious schools from the definition of QEPs. Parents who wanted the aid for their children to attend religious schools sued the Revenue Department.
In the five-to-two decision in the case, Espinoza v. Montana Department of Revenue, the Supreme Court ruled the state constitution’s Article X, section 6, prohibits the use of government funds to provide “direct or indirect” aid to sectarian schools.
The court additionally found the whole program was unconstitutional even though some of the QEPs are nonreligious private schools. “Because the Tax Credit Program does not distinguish between an indirect payment to fund a secular education and an indirect payment to fund a sectarian education, it cannot, under any circumstance, be construed as consistent with Article X, Section 6,” the court’s ruling states (italics in original).
The decision did not consider federal precedents, the court stated, because the state had a right to a more restrictive prohibition than the First Amendment to the U.S. Constitution against “an establishment of religion.” The court stated the First Amendment right to the “free exercise” of religion did not apply to this case.
‘A Better Education’
The Montana Supreme Court’s decision deprives students of a quality education, says Lennie Jarratt, project manager for the Center for Transforming Education at The Heartland Institute, which publishes Budget & Tax News.
“The ruling against the tax-credit scholarship program denies many underserved Montana students a choice of a better education,” said Jarratt.
The court’s decision incorrectly treats tax credits to individuals as if they were state funds, says Jarratt.
“This ruling clearly implies the court believes an individual who is allowed to keep more of their own money is really being given funds from state coffers, which means the court believes an individual’s income belongs to the state instead of the individual,” Jarratt said.
Court Against the Grain
Education tax credit programs have survived constitutional challenges in other states, says Benson.
“Before this unfortunate ruling by the Montana Supreme Court, not a single one of the 22 other tax-credit scholarship programs enacted in 17 different states had been struck down,” said Benson.
“These programs have already essentially been ruled constitutional by the U.S. Supreme Court in 2011, when it dismissed the challenge to Arizona’s program in Arizona Christian School Tuition Organization v. Winn,” Benson said.
Biased Against ‘Religious Residents’?
The Montana decision will be appealed, says Jarratt, giving federal courts an opportunity to rule on the constitutionality of state prohibitions on aid to students in religious schools.
“This case will be appealed to the U.S. Supreme Court, providing them a chance to rule on state Blaine amendments,” said Jarratt. “These are state constitutional amendments that specifically disallow any state monies from being appropriated to religious institutions.”
Benson says this is a case of discrimination against religious Montanans.
“It will take the Supreme Court to reverse this decision, and hopefully it will do so, noting how Montana is discriminating against its religious residents by blocking them from receiving public benefits,” said Benson.
Joe Barnett ([email protected]) is a research fellow with The Heartland Institute.